Tuesday, August 28, 2012

Improve your Credit Score

Credit scores are the most important factor that determines the success of your credit application whether it be the Home Loan, Auto Loan, Credit Card or even Utility connection. Commonly, lenders use these scores - and the information within our credit reports - to determine loan rates and credit worthiness of the applicant. Increasingly, employers and landlords are using them to decide whom to hire or rent to. A bad Credit Score or default on couple of credits can have impact for long term on your credit report.



But how do the credit bureaus come up with this number? What determines whether your score is 500 or 850? It's not as complicated or mysterious as you might think. Here's the breakdown of the factors that make up your credit score:

1) Your Payment History - (35%)

This takes into account how well you've paid back all of your loans. Making the credit payments on time will keep this factor healthy. It also takes into consideration any past due loans and how far past due you are on those payments. Most of the lenders give 30 days period for making the payment and if you make the payment in that time,this factor works in your support.

Being more than 60 days past due will hurt your score. The more delayed you are, the more you are denting your credit score.

2) Current Amounts Owed - (30%)

Here, the credit bureaus are looking at not only how much you owe in total, but also the balance on your credit cards in relation to your total credit line as well as the remaining balance on your installment loans in relation to the opening balance. Maxing out credit cards and slowly paying down the balance will hurt you in this category. By many estimates it is assumed that having more than 50% in Credit card Dues than your max limit can have negative impact on your credit.


3) Length of Credit History - (15%)

Credit bureaus and creditors want to see how long you've had loan accounts. While making your payments on time for the first year you've had credit certainly will help, doing so for twenty years carries much more weight. Another important factor is your oldest credit. The longer your credit history is, more confident the lenders will be about their assessment about you. If you are a parent, you should try to start your Childs credit when he is eligible. This will help him to build the credit when he really requires to use it.

4) Recent Search for New Credit - (10%)

Opening accounts frequently especially in the last 12 months can have negative impact on your credit score.

When you're applying for loans, lenders want to know if you've recently opened other loan accounts that could change your ability to repay your outstanding debts. Each time you apply for a new credit account, an inquiry from that lender shows up on your credit report. Too many inquiries in the same timeframe can impact your credit score for up to a year. This shows that you have financial problem and looking for credit.


5) Types of Credit Used - 10%

This category factors in the mix of different credit accounts that you currently have including revolving lines (credit cards or lines of credit), installment loans (auto loans or personal loans), and mortgages.

If you are looking to build a credit history, it may be advisable to take a small loan on your car and pay it on time. This may impact your credit score when you apply but will help to build up your score eventually.

  Keep these factors in mind as you manage your credit and loan accounts.

Saturday, December 17, 2011

Analogy between Career path and driving a car


Have you ever thought that there is so much similarity between career path and driving a car?

In our career, we all have long term goals which we want to achieve before we retire and we work hard to achieve them. We complete our education and join the job to achieve those long term goals. Similarly when we drive the car, we have a destination to reach. All of us have different destinations to go like different long term goals that we have set in our life. We drive to reach the destination.




The drivers and Cops:

In our career we meet different types of people, some are smart, some are harsh, some very enthusiastic and some not very much concerned about the career. On road we find drivers who follow the driving rules, drive as per the speed limit driving cautiously like the good colleagues we have in our organizations. We also find some rash drivers on the road, who drive recklessly without caring for others, not following the rules and want to reach the destination faster by increasing the speed and crossing others. They are similar to the rough colleagues we have in our organization. Like reckless drivers, they are not liked by most of the people but they go on doing the same. What do you when you see such people in your organization? You either ignore them, try to move away from them in different department or different project, confront them or raise the alarm to the senior management. Just the same way you behave on road when you see a reckless driver. You either change the lanes, or honk (confront them) on them complaining that they are doing wrong and can affect others. Very few people raise the alarm to the senior management which is similar to reporting the reckless driver to the Police. So we realize that Cop is similar to the senior management or your boss who ensures that you are doing your work properly and not causing trouble to others. If the cop catches someone who is driving recklessly he gives him a warning if it is the first time, gives him a ticket or in extreme case cancels/suspends his driving license (forbidding him to drive). The similar action is taken by the manager when he finds an employee who is not following the rules and regulations of the organization. If the manager receives the complain for the first time he may just give a warning to the person and leave him. If this is repeated, he put this as a comment on the appraisal due to which he is affected monetarily (no promotion, no hike, no bonus) similar to cops giving a ticket to the reckless driver. In extreme case depending on the mistake of the employee, the company may suspend / rusticate him similar to the cop suspending / cancelling the driving license of the reckless driver.

Analogies




Milestone for the Destination:

If the long term goal in your career is to reach a level in the organization that is X levels above the start, by analogy you can divide the distance between your source and destination into x milestones. Between each milestone, there can be different speed limits similar to the career path where the person will be required to show certain level of expertise and spend some years before being promoted to the next level.

Many times in our career we feel that we have stagnated and try to change the company to grow faster similar to the way we behave on roads. We change lanes assuming that we cannot go any faster on our current lane but after we change lanes we realize that the first lane has started moving faster and we regret our decision. People have the same feeling when they see the colleagues in the old organization growing faster than they are growing in their current organization. So there is an analogy between changing companies and changing lanes.

Knowledge about Route:

Now let’s talk about the knowledge of the path to destination. When you are driving the car and you are going to the destination for the first time, how do you know the path? You look the path on Net (e.g., MapQuest, Google maps etc.) and remember them, take a printout and refer them on the way after every milestone or have a GPS and follow the directions specified by them. On the similar lines we have the mentors (GPS) in our career who guide us to our final goal and we follow their advice. Going deeper we will find if the GPS is old, it may not know about the new roads or may not take us to our destination by the shortest path. On the similar lines, if the mentor is not knowledgeable and has not been updating his knowledge about the changes taking place in the industry, he may not be able to guide us on the right path.

Many people think of their long term goal and feel that they know how to reach there (from experience of others) and start working on the same. They don’t analyze themselves at every stage of their life because they are confident that they know the path and are on the right track. They represent the people who have looked at the map once and start their journey. The people who have taken the printout of the map and refer them after each milestone are the people who after each level in their career analyze their goal and see if they are on the right path. If they realize that they are on the wrong way, they take action to correct the same and get on the right path. Very few people prefer to stop and ask the way. On the similar grounds, very few people in the corporate world prefer to discuss their goals with anyone else.




The CAR:

All of us want to have a car that has strong engine, good brand name, and nice look. The Engine of the car represents the knowledge and qualification we have acquired before started our career. The more knowledgeable you are, the more confident you can be and can reach the goal faster. Similarly if you have a car with a strong engine, you are confident that you will reach the destination without and disruption. But having a strong engine doesn’t always mean that the car will not break. On the similar lines if a person is intelligent, knowledgeable and has strong educational background doesn’t mean that he will not have hard life in his career. The only difference will be that the probability of occurrence will be less and he will be able to cope up with the situation. Good brand name refers to the reputation of the University that you pass out which helps you to network with other people.

The Roads:

Roads are similar to the organizations in which we work. The big organizations are similar to the freeways and the small organizations are like the Streets. As freeways have more roads, more no of cars and higher speed, similarly in bigger organizations, there are large no of people working in multiple departments. The benefit of working in a big organization is that you can switch departments and have lots of opportunities within the same organization. On the similar lines when driving on a freeway where there are many lanes you can switch back and forth between different lanes depending on the speed you want to drive.




1 Each driver has a destination to reach Everyone has the long term goal.

2 The person should follow the driving rules and the signs on the road Everyone should comply by the rules and regulations of the organization.

3 The person driving recklessly will be punished The employees misbehaving in the organization will be punished

4 It may appear that by changing the lanes or changing roads, you may reach faster but that may not be always true. It may appear that by changing the job profile, changing companies, you may achieve your goals faster but that may not be always true.

5 It is always beneficial to have a GPS who can guide you from time to time It is always beneficial to have a mentor in your career path who can guide you

6 You require to have a driving license to drive You require a Skill set / Qualification to perform the job



Unemployment Benefit should not be extended

The U.S. Senate voted on Saturday to extend a payroll tax cut for two months in legislation.

The measure also would extend long-term unemployment benefits for another two months.



Senate Agrees to Extension of Jobless Benefits, Tax Cut.



Do you think that the Unemployment benefits should be extended?

I say no to that. The government extends the Unemployment benefits thinking that this will pour more money in the hands of people who will spend more which in turn will stimulate the economy.

But does this really happen.

Yes, there are lots of benefits of having the unemployment benefit. It keeps people going without being broken. Helps them to avoid being broken etc etc...

But if we see the flip side of it, there are countless.

There was a study conducted on the people who have been receiving the unemployment benefits.

It was found that significant percentage of people who have been receiving the unemployment benefits don't want to go back to the work force. They like it the way it is going right now. Don't do anything and government will pay all your bills. Many of them may be vacationing on the beach most of the time.



They wont turn up when called for an eligible opportunity because that will result in them working to get the same or similar amount they are getting without doing any work.



There are 3 Mn open opportunities in the country with 12 Mn unemployed. Why can't people spend time to get trained so that they can be eligible for the 3 Mn opportunity.



This will be a big problem when the unemployment benefits will stop. Those people will really have nothing to spend and will take economy to the stage that they are afraid of. To make the situations worse, the people will be incompetent to join the workforce.



The second point is that the Unemployment benefit is substantial. It ranges between $1500- $2000 for most of the people. make it somewhere around 20-25k per year. This is 50% of the mean/ median income in US. Also it is significantly more than the person who is working at minimum wage earns.



What does this mean? If I am getting the unemployment benefit, I have no financial motivation to apply for an opening in walmart,target, JC Penny or McDonalds. I may be making more money from my unemployment benefit that earning in those jobs. I do see lots of stores in the neighbourhood who have been carrying the board of "Help wanted" for weeks.



The third problem is that the government is trying to socialize the system by collecting the money from the people who are working their asses off and paying to those who are not. I am not against the unemployment benefit but against providing it for years. If I am making 25-35k in my current job, I am not very motivated in delivering my best. Even if I lose my job, I will be paid 60-70% of my current earnings in the form of unemployment benefits. I can go for a vacation and still receive the check. Waw. the idea just excites me.



The other problem is that the government is anyhow badly in debt. The government should understand the basic concept of " A dollar saved is a dollar earned" and in fact in this case it is more because the government has to pay interest on the borrowed money so the 8th wonder of the world (I consider "The power of compounding as the eighth wonder of the world") works great. We get more in debt and we borrow more and pay with the borrowed money. This will be the biggest ponzi scheme in the world.



So, the government should think before extending the unemployment benefits further. It is will have negative impact on the society in the long term.