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Top 5 Biggest Financial Mistakes

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We have all done it at some point in our lives. We see something we really want and buy it. The cost of the item is irrelevant as we just want instant gratification. We splurge and buy this item without thinking of how this can create a bad ripple in our finances. This is what originally sunk me into a horrible financial situation. But anything can be overcome with time. You have to take ownership of your finances and monitor them. Here are my 5 biggest financial mistakes I’ve made.

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Financial Mistake #1 – Sub Prime Auto Loan

This was by FAR the worst mistake I’ve made with my credit. I needed a newer vehicle as my vehicle at the time started “misbehaving”. So I went out to a few dealerships and was denied due to my lack of credit history (even though I did pay off my car at the time). While looking online, I found this advertisement for a dealership in a town nearby where it stated “everyones approved”, so I took my chances. I originally was going to purchase a brand new car, but held back as the monthly payment was WAY too high. I then saw the most beautiful Honda Accord I’ve seen and had to get it. It was selling for only $12,000. I took my chances and purchased this vehicle.

What I failed to do at the time was look at the fine print. My monthly payments were $398 per month…for a 48-month term! That means I will be paying an additional $7000 in interest alone during the duration of the loan. That is insane! Luckily the car is still running to this day (I have a much better luxury car now as my main), but I would NEVER recommend getting a sub-prime auto loan unless you intend to pay it back within a year to minimize the financial damage/loss.


Financial Mistake #2 – Auto Title Loan

If you ever need money in a crunch, do not, I repeat, do NOT get an auto title loan. I had an emergency financial situation come up where I needed a large lump sum of money. I discovered a title loan place nearby and decided to take my chances. While I didn’t have the best car and my credit was not the best, I was able to get a $1000 loan. This loan was then tied to my vehicle, meaning if I default on my loan, they can literally take my car. I was confident I would be able to pay it back in no time.

Little did I know, the monthly payments were basically INTEREST ONLY! I was paying dang near $100 a month thinking I was making a dent in the total amount. The principal was basically unchanged! This was alarming and scary as I didn’t have much money to spend on bringing down the principle after making the payments (was a “broke college student” at the time). Luckily in my case, I ended up doing a side gig and paid off the account in 3 months. Had it not been for that side gig, I would have surely had my car repossessed by this company based on their Yelp reviews. Stay away from Auto Title Loans!


Financial Mistake #3 – Credit Card Debt

When you get your first taste of credit, you try to tell yourself to use it only for essential items. If you’re young or not financially well off, this rarely ever happens. When put in use, you will use it like cash even at times when you technically have the money to cover the expense in your bank account. Then you make the minimum payment on your card, which doesn’t’ nearly cover the amount used for the month. All of a sudden, your credit card is maxed. Then you apply for more credit with a different company or apply for an increase in credit, repeating the same cycle.

Yes, I did just that. I was at a point where my expenses were more than my income, so I needed “bill security”, which for me was credit that can be applied to my monthly bills. I opened up three lines of credit for that particular purpose. The only problem is I seldom used the cards for the intended purpose. I used them for food, snacks, gas and travel expenses. I racked up a ton of credit card debt in only a 6 month timespan! That is very irresponsible and unfortunately all too common. I have sense got my credit card debt below the golden 30% (aiming for under 10%), but try to avoid spending what you don’t have. It’s common sense, but we all at some point neglect credit cards and don’t use them for their original intent.

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Financial Mistake #4 – Student Loans

I know you’re wondering why I included this on here. Well if you’ve done like me, you didn’t handle your loan responsibly. Every year I would be eligible for student loans, but would shy away as I had other funding and felt I could handle the additional expenses. I went back to college after my undergrad as I wanted a different bachelors and applied for a loan. The smart thing to do would be take out what is needed. The wrong way to go about student loans is to take out much more than what you need for educational expenses.

I did this for about 3 years straight and racked up some massive debt. I would always take out an additional $1000 dollars just for what I will call “leisure” and blow it on some fancy electronics or something typically out of my comfortable price range. Why did I do this? I have no idea, but if I could revisit my college days and redo one thing, I would avoid taking out too much money in loans if at all possible. it may not hit you at the time you’re taking the loan out, but it will comeback at you full force!


Financial Mistake #5 – Food

While I had the income of a peasant, I would eat like a king. This is not smart when you’re spread financially thin as is. imagine eating out every day or every other day, buying the non value-menu items and sometimes going to fine dining establishments. This is fine if you’re in a career or have a really good source of income, but for a college level or person who hasn’t quite started earning a great deal of money yet…this can be a MAJOR problem. It’s not just about the cost. Eventually your food pallet becomes so refined that you need that quality of food to be satisfied. This doesn’t come cheap.

I would recommend grocery shopping as much as you can. This will save you a ton and the quality of food you eat only cost time (that is if you buy quality brands). Making food is essentially half to a third of the cost of going out in my case. I was averaging $20 a day on food only when I used to eat out daily (approximately $600 a month). Now I can spend what averages to about $6 a day and still be satisfied. This is a major savings when viewed from any angle. All it cost is additional time.


We All Make Financial Mistakes

At the end of the day, we all make mistakes. We are smart in are chosen fields, focusing on details to grow strengths that will help us in that field. This attention to detail should be applied to your spending/budget as well. It will help you immensely in the long run. If you want to know what it took for me to get out of my financial crisis, check out THIS article showing how I increased my credit score 200 points in under a year. I also have THIS article that explains everything involved in a credit dispute. Lastly, if you want to check your credit at no cost with no hidden fees, visit Credit Sesame. Thank you for visiting The Credit Dojo and have a great day!

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Is it Advisable to Pay Off Collection Items?

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Pay off collection items

The majority of consumers appear to believe that if they pay off collections, their credit scores will improve and become better. A shocking truth has emerged: this is not actually the case. Just so you’re aware, negative items can remain on your credit reports for a maximum of seven years, and your credit score will only begin to improve once the negative item has been removed.

What are Collection Accounts and How Do They Work?

Collection accounts are entries on a credit report that indicate that a debtor has fallen behind on previous obligations. Original creditors may have sold the defaulted debts to a debt buyer or may have assigned the debts to collection agencies after the default occurred. It should come as no surprise that the collector’s ultimate goal is to work on the client’s behalf in order to have the defaulted debt collected from the debtor or as much of it as possible.

The majority of the time, these collection accounts are reported to credit reporting agencies. According to the FCRA, or Fair Credit Reporting Act, these are permitted to remain on credit reports for up to seven years from the date of the initial debt’s first delinquency.

The Consequences of Paying Off Collections on Your Credit Score

The ramifications of completely paying off collection accounts will not disappear in an instant, however. You will still need to wait until the statute of limitations has expired before this information can be removed from your credit report. As previously stated, this will typically take approximately seven years. Fortunately, information from the past will have a smaller impact on your credit score.

Despite the fact that paying off collections will not improve your credit score, there are several ways in which you can take advantage of this situation:

Credit card or medical bills can result in debt collection lawsuits, which you can avoid if you take the proper steps.

As a result, you will be able to avoid paying interest fees to debt collectors. A debt collector is constantly selling and buying accounts, and he or she may continue to charge you fees and interest on the accounts that have been purchased.

In the event of a settlement or payment in full, the credit report will reflect this. When it comes to lenders, it can have a positive impact because they are likely looking beyond your credit score and instead of looking at your credit history and other factors. Comparing those who successfully repay an extremely past due account to those who never managed to do so, the former will demonstrate greater financial responsibility.

You will eventually be able to benefit from the most recent FICO Score model. Despite the fact that the FICO 9 is still in the early stages of implementation, the vast majority of lenders will eventually adopt it. Medical bills will be given less weight in this model, and paid accounts will be completely ignored when it comes to collections.

According to the law, the majority of negative credit information, such as collections, should be removed from credit reports over time. The fact remains that attempting to settle or pay off your debt as quickly as possible will be in your best interests. Not to mention the fact that, in contrast to older models, the newer models for credit scoring do not take into consideration collections with zero balances. If you don’t think you’ll be able to handle it on your own, you can always enlist the assistance of professionals who can simplify the entire process for you.

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How Bad is an Eviction and How Long Does it Stay on Your Credit?

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eviction on your credit report

Every time someone mentions a record during an eviction, what they are really referring to is a background check as well as your credit report and history. In general, an eviction will appear on your credit report for up to seven years.

That is correct; you read that correctly. It will be there not for 7 months, but for as long as 7 years, according to some estimates. Eviction is, therefore, a major issue in this community, and it is treated as such. Landlords, in particular, are wary of renting to tenants who have a history of evictions on their records. If you are ever evicted, this fact will follow you wherever you go for the next seven years, no matter how hard you try to forget it.

For landlords to know that you have been evicted in the past, there are two ways to find out.

If the reason for your eviction was non-payment of rent, your landlord may have forwarded this account to a collection agency, which will then appear on your credit report as a result of your actions.

When the courts were involved in your eviction, the case judgment is considered public record, and landlords who use tenant-screening services will be able to see this information if they conduct a background check on the tenant in question.

Is it possible to have an eviction removed from your credit report?

Anything that is accurate on your credit report will remain on your report for seven years. If there is ever a mistake, you will have the opportunity to contest the decision.

This error will be removed from your credit report if you can provide proof to the credit reporting agency that a mistake was made. If you were successful after being served with an eviction notice, you should provide proof of your victory to the reporting agency. There are landlords who will attempt to evict people even if they do not have a legitimate or acceptable reason to do so.

How Can You Find a Place to Rent if You Have an Eviction on Your Credit Report?

It is important to understand that just because you have an eviction on your credit report does not necessarily mean that you will be unable to rent for the next seven years. However, even though your report contains an eviction, there are still several options available to you for finding a place to live in the meantime.

Take the initiative.

Inform the property manager or landlord of your intention to evict them prior to submitting your application and explain your circumstances to them. Even if the eviction took place years ago and you have maintained a good tenant record since then, there is a chance that the landlord will rent to you again.

Look for someone who will sign on as a cosigner for you.

It is possible for you to obtain a rental unit if you have a co-signer who has good credit and can vouch for you. Your parent or another person with good credit can serve as your co-signer. If, on the other hand, a payment is not made on time, your landlord has the right to and will almost certainly ask for the money from your cosigner.

Pay in advance if possible.

A high probability of obtaining a rental unit exists if the landlord recognizes your willingness to pay the rental value in full upfront for a period of 3 to 6 months.

What’s the bottom line?

It is preferable to avoid being evicted in the first place if you want to avoid having any eviction information on your credit report.

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Why did House Prices Go Up in 2020 During the Pandemic

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The pandemic brought with it a lot of surprises, one of them being the rise in house prices. The US economy plummeted with millions of Americans finding themselves out of work and without food. No one would have predicted that at the time when times were hard for everyone, home prices would become overheated, mortgage rates would skyrocket, and the supply for houses would not meet the demands and consumer confidence in the housing market was reducing. The housing market was booming.

Right at the beginning of the pandemic, no one was willing to buy a house or even sell one. This was because of the uncertainties of the time brought about by Covid-19. In a span of a few months, most day-to-day activities were confined to the available properties. Houses became a key asset and prices began to rise.

The US real estate market in context

The American real estate market suffered a huge blow as a result of the 2008 financial crisis. The recession saw the prices of houses fall by a big margin and the world’s largest real estate market was affected in ways no one would have imagined. This was as a result of subprime mortgages that were given in large numbers to help as many Americans as possible to become homeowners. Homeowners found themselves mortgages that were higher than the value of their houses. By 2013, the market was showing signs of recovery. From 2018 to 2019, the market began to fall slightly.

For many Americans, owning a home is very important to them as it allows them to build up their wealth, make it easy for them to access credit, and be able to save more as they no longer have to pay rent. A large percentage of homeowners rely on mortgages to acquire homes after raising the down payment from their savings or with money from their families. It was expected that the pandemic would lead to foreclosures especially since the economy took a downward spiral at the start of the pandemic. Many people also lost their source of income and were unable to keep up with their mortgage payments.

The most expensive real estate in the USA is found in San Francisco, California. San Francisco has a booming economy fueled by the presence of tech companies like Apple, Facebook, Intel, and Tesla that have their headquarters in the nearby Silicon Valley. The city also has been at the forefront in matters progressive culture which attracts more people to relocate to it. As a result of the thriving tech economy that brings billions of dollars into the city, and rising housing demand, the city is the most expensive place to buy a house in the US. On average, the price per square foot is $1,100.

Why do house prices go up in general?

The value of a house is usually expected to depend on the demand for living in a particular area, but things like recessions and pandemics are known to have an impact that can either be positive or negative. House prices go up when the supply does not meet the demand. One of the key factors that affect the supply has to do with the regulations that restrict the number of housing units that can be built. For example in a single-family zone, it’s illegal to build townhouses or apartments, or condos on any spaces designated for single units and parking minimums must be met. This forces contractors to make provisions for parking spaces even in places where it’s unwarranted.

Some local governments allow groups of people to block developments they feel will have a negative impact on the overall value of the entire estate. These local zoning regulations are making it impossible for most Americans to move to better estates due to the shortage of housing.

Why did house prices go up during the pandemic?

The price for houses is determined by the existing demand and supply dynamics. The fewer the number of houses available, the higher the prices for the available units would be. If the number of buyers is fewer, then the house prices would be lower. The prices went up because the pandemic affected both supply and demand. A lot of people were in a rush to take advantage of the falling mortgage rates which made it easier to acquire homes at a cheaper price.

As a result of the falling mortgage rates, houses were not staying on the market for long. Among those who bought the homes were first-time homebuyers or those who were buying a second home. These put a lot of pressure on the market as were not putting another home on the market as they took one out of it. In some instances, others chose to refinance their mortgages based on the lower rates instead of acquiring a new home.

Because of the pandemic, people who had plans of listing their homes did not do so and those who had listed their homes took them off the market. As a result of the social distancing rules at the height of the pandemic, not many people were willing to show their houses.

Home developers did not anticipate a surge in the demand for housing during the pandemic. A number of them had let go of their employees and had shut down. At the same time, prices for materials like lumber also added to the construction costs alongside the scarcity of skilled workers.

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Why did House Prices Go Up in 2020 During the Pandemic

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Why did House Prices Go Up in 2020 During the Pandemic

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The pandemic brought with it a lot of surprises, one of them being the rise in house prices. Read why did house prices go up in 2020 during the pandemic.

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Jason M. Kaplan, Esq.

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The Credit Pros

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