This week wasn’t bad at all. I’m still crossing my fingers and hoping my web site stays up.

The highlight of this week was having the opportunity to meet a You Have More Than You Think reader in person. The meeting was especially interesting for me because he’s from Sweden. I’m always eager to hear how people from other countries live. It fascinates me when someone makes a point that forces me to question the validity of what I’ve always held as truth. *Shivers*

Alright. We’re talking about personal finance. So without further delay, here are my weekly picks.

Calculating Net Worth: Does Home Value Belong There? by J. Money at Budgets Are Sexy.

I guess it was fate. J. Money’s August 18th (my 28th birthday!) post deals with how to calculate your net worth. Apparently, it’s more complicated than assets – liabilities = net worth. The debate surrounds whether your primary residence should be  included in the calculation.

What do you think? Don’t answer that question here. You can find my thoughts on this earth shattering, ground breaking, and mountain moving issue in the comment section of the post.

How to Minimize the Impact of Canceling A Credit Card by Jim Wang @ Bargaineering

I don’t like this new credit card legislation. I’m not convinced credit card companies are going to become any less slimy than they already are as a result of it. For that reason, I’m concerned that those of us who are responsible with credit will have to terminate existing relationships and take our business elsewhere. But there’s a catch: FICO®. How do you cause the least amount of harm to your credit score when canceling a credit card?

Who’s to Blame for Overdraft Charges? by Liz Pulliam Weston @ Ask Liz Weston

I ‘d like you to read the blog post on Liz’s web site. In case you’re pressed for time, I’ll answer the question of who’s to blame for overdraft charges: You’re to blame.

That is all.

Things You Don’t Need to Buy – Reducing Waste by Carla Rose @ Green and Chic

As long as you don’t get carried away, I find that greener living is simpler and more cost effective. Eliminating waste is a surefire way to increase your savings.

Although I’ve gotten more careful about the books I buy, I recently purchased annual subscriptions to Real Simple and Smart Money magazines. They were only $5 a piece. I’ve received four issues between the both of them and haven’t read one. We’ll see how the remaining ten months pan out.

Recognizing You Have A Problem by Mapgirl @ Mapgirl’s Fiscal Challenge

Mapgirl delves into one of the biggest unnecessary drains on our finances. Why is it so difficult to combat disorganization and laziness? For me, every day is a struggle.

Now for a little Arrested Development.

Photo By: MShades

The following is a guest post from Tiá Jones, MBA.

Picture it. On a blistering cold evening in the winter of 2005, I received a frantic phone call from a family member whose loan application had just been denied.

To protect the indigent, let’s refer to this family member as Larissa. Unable to obtain law school financing due to her poor credit, Larissa contacted the only relative (albeit a single mother of a one-year old son) who could solve her problem.

Other family members were undesirable credit risks, i.e, plagued by bad credit. I was the only one stupid financially stable enough to cosign a student loan of a whopping $40,000. With a 7.5% interest rate, no less.

Fast forward to 2009. Still a single mother, but a newly minted MBA, I was all fired up to purchase my first home. With a 741 FICO score, decent savings, and preapproval letter in hand, I found the perfect place. I even managed to negotiate $14,000 off the asking price. I paid for inspections, gave my landlord notice to vacate, then packed up my belongings and put them in storage.

Days before closing, I discovered there was one stipulation remaining on my file. Out of the blue, this $40,000 student loan – which, according to my inexperienced loan officer, would be a non issue – stood between me and my dream home. After a meticulous review of my file, in the same fashion and passion as Suze Orman, the underwriter sent me an e-mail:

“YOU ARE DENIED! YOUR DEBT-TO-INCOME RATIO IS TOO HIGH!”

There is a happy ending to this story. At least Larissa can call herself a lawyer now. I, however, am forced to look for an apartment rental because my son starts school in 8 days.

I won’t put you to sleep with all the gory details of this financial blooper. I fear the final tally will cause me to lose my lunch, but here’s a rough sketch of what it’s cost me.

So if my story wasn’t enough to convince you, I want to provide the top 4 reasons you should never ever cosign a loan.

1. People who need cosigners need them because the lender doesn’t think they’ll repay the loan. When have you heard of anyone with a good cosigning experience?
2. No one is worth risking your financial future (maybe your kid or spouse, but – eh – maybe not).
3. Cosigned debt is 100% your debt. If the primary borrower defaults or dies, you’ll be the one paying for it.
4. As evidenced by my experience, this debt is factored into calculations that determine whether you’ll get approved for a mortgage.

If you found this article after cosigning someone else’s debt…I feel sorry for you, but here are some things that you can do.

1. Take out a term life insurance policy on them. Their death doesn’t release you from paying off the debt.
2. Stay on them. Constantly remind them to renegotiate, refinance, and remove you off the loan.
3. Check your credit score. The loan may affect your ability to purchase large items such as a car or a home.
4. Call the lender. Find out what can be done to release you from the loan.
5. Make sure they’re making the payments on time. You might have to step in and make the payments to save your credit.
6. Don’t kill them. I thought this was worth mentioning after number 1.

Sometimes helping others achieve their dreams may cost you your own. Spare yourself the trouble, and learn from my mistakes.

Tiá Jones is President of New Legacy Services, LLC, a small business coaching and consulting firm.  Her clients include YouHaveMoreThanYouThink.org and SistersSpace.com.  When she is not trying to change the world through entrepreneurship, she blogs about event planning and all things pretty on TheHostessChick.com.

 
1. Request a free copy of your credit report at AnnualCreditReport.com. Under the Fair Credit Reporting Act (FCRA), you have a right to receive a free copy of your credit report once a year from each of the three major credit reporting bureaus: Equifax, Experian, and TransUnion.  AnnualCreditReport.com doesn’t provide a FICO score with your free credit report.  However, you can obtain your FICO score and credit report at myFICO.com. Unless you’re in the market for a loan, you probably don’t need to know your FICO score.  So, I suggest you save your money until you do.

 

 

2. Dispute inaccuracies on your credit report in writing. If you received a copy of your credit report electronically, then dispute errors online directly with the bureau that’s recording the erroneous information.  If not, use the form provided with the hard copy of your credit report or use the sample dispute letter on the Federal Trade Commission’s website as a guide for drafting your own.  Some common credit reporting errors are as follows: 
   • Accounts that don’t belong to you
   • Delinquencies that are misreported such as late payments or charge-offs
   • Bankruptcies that are more than ten years old
   • Unpaid judgments that exceed the greater of seven years or your state’s statute of limitations
   • Paid judgments or tax liens that are more that seven years old
   • Hard credit inquiries, i.e., applications for credit, you either didn’t authorize or that are more than two years old
   • Paid liens or judgments that are listed as unpaid
   • Duplicate collections whereby an original creditor and a collection agency report the same account in collections

 

3. Pay your bills on time. In an effort to stick it to your lender for charging you a late fee, you might consider skipping a payment altogether.  Don’t do that.  Not only will you have to pay interest on the late fee and the remaining unpaid balance, but FICO doles out a far greater punishment to borrowers who pay their bills at least 30 days late.  According to Liz Pulliam Weston, author of Your Credit Score, Your Money & What’s at Stake, a single late payment could cause your FICO score to drop 100 points. If forgetfulness causes you to pay your bills late, have the minimum payment automatically paid from your checking account or charged to a credit card.  Don’t try this if you’re prone to overdrawing your account or exceeding your credit limit.  Remember to pay off the remaining balance on revolving accounts by setting up an e-mail or text alert through Google Calendar or Mint.

 

 

4. Keep balances on your revolving credit accounts low. Use less than 10% of your credit limit.  Some people say 30%, but let’s err on the conservative side.  My credit score dropped eight points when Bank of America cut my credit limit in half.  During the time, I was definitely using less than 30% of my total credit. 
   The FICO formula doesn’t care that you pay off your balance in full every month.  Your credit report usually reflects the outstanding balance on your last statement.  If you’re in the market for a loan, payoff your revolving credit accounts completely, and don’t incur any new charges until after you’re approved for a loan.  If that makes you nervous, then continue as you were but make sure your payments are posted to your account before the statement closing date.

 

 

5. Don’t close revolving credit accounts. Contrary to popular belief, having a lot of available credit does not negatively effect your FICO score.  Actually, those open lines of credit may be helping your score.  A few months ago I received a letter from Citibank stating that they were going to shut down one of my credit cards due to inactivity.  I hadn’t used the card in years.  If I new then what I know now, I wouldn’t have called Citi and closed the account.  Although the $1,300 limit was a small portion of my total available credit, this was my second oldest account.  Generally, a longer credit history positively impacts your score.  The FICO formula considers the age of your oldest account, the age of your newest account, and the average age of all your accounts.  Closing my second oldest account makes my credit history look much shorter than it is.  As a result, my FICO score took a hit.  Don’t make the same mistake I did.

 

 

6. Use CreditKarma to monitor your credit.  It’s the only reputable company I know that will provide you with a truly free credit score.  Although CreditKarma doesn’t provide a FICO score, it does give you an indication of what’s happening inside your TransUnion credit report.  A steep decline in your score could signal to you that something funky was reported to the credit bureau.

 

 

7. Shop for credit within a 14 day period. Applications for credit, i.e., hard inquiries can have a negative effect on your FICO score. Fortunately, your FICO score takes into consideration the reality that people search for the best interest rates. WARNING: This only applies to rate shopping for auto, student, and mortgage loans. FICO is less forgiving when it comes to revolving lines of credit.

 

 

8. Refinance cosigned debt. In the event you made the unwise decision to cosign a loan for someone who clearly wasn’t a worthy credit risk for the lender, see if you can prod the primary borrower to pay off the loan you have together with a loan for which you’re not responsible. For instance, if your former spouse was awarded the family vehicle in the divorce settlement, the loan will still show up on your credit report and affect your credit score if your name is on the loan. This might be a stretch, but your ex may be willing to release you from the obligation by refinancing the loan in they’re name only. Unless they really hate your guts, there’s probably no harm in asking.