The 11 Most Commonly Asked Credit Questions

1. How can the credit card companies raise my interest rate if I’ve paid my bills on time? What can I do about it?

It used to be that credit card issuers could raise your rate, even on existing balances, at any time and for any reason. Thanks to the Credit CARD Act, a federal law, they can no longer do this. They can, however, raise your rate on your outstanding balance if you are more than 60 days late with a payment and they can increase the interest rate on new purchases, but only if they give you 45 days advance notice so you can cancel your account.

As for what you can do, the best thing is to try to negotiate a lower rate. Call your card issuer and suggest you will take your business elsewhere if you can’t get a better deal. This works best if you have other credit cards with available credit lines, since the issuer will no doubt review your credit report to decide whether or not to work with you. It’s always worth a try, though. As author Marc Eisenson says, “Not asking is an automatic no!”

If you can’t negotiate a better rate, try transferring your balance to another card — either one you already have, or a new one.

2. A debt collector has contacted me about an old debt. Do I have to pay it?

Maybe; maybe not. Every state has a statute of limitations, which governs how long the creditor or collector has to sue you. If this debt is too old, and they try to sue you to collect, you can raise the statute of limitations as a defense. That means they don’t have much leverage in terms of forcing you to pay. And that gives you more leverage to negotiate a settlement — or just to tell them to leave you alone. For more information, and to fully understand your rights, check with your state attorney general’s office or a local consumer attorney.

If the debt is too old, you can simply write to the collection agency, indicate that you believe the debt is outside the statute of limitations, and instruct it to stop contacting you. Send your letter via certified mail and keep a copy for your records.

If you are worried about your credit report, keep in mind that collection items may only be reported for up to 7 1/2 years from the date you fell behind with the original lender, regardless of whether they are paid or not.

3. What is the ideal number of credit cards to carry?

It depends on what you mean by “ideal.” Most people will be just fine with two major credit cards. One should be a low-rate card for times when you must carry a balance, and the other should be a card with a grace period. No annual fee is ideal, unless you plan to use the card heavily to earn some type of reward. If that’s the case, weigh the cost of the annual fee against the freebies you will earn.

If you are asking about the ideal number of credit cards to obtain a strong credit score, two is a good number as well, though you can have many more and still maintain a strong credit rating. Generally, it’s a good idea to have at least four credit accounts of different types (for example, a mortgage, car loan, a major credit card and a retail card). Keep your credit cards active by using them periodically. It’s good to pay your bill in full each month to avoid finance charges.

Finally, if you have a lot of credit cards already, don’t close them in the hopes that it will boost your credit score. Your score may actually drop if you close old accounts.

4. My child has a lot of debt. What is the best way to help?

The best way to help your child is to give him or her some financial literacy materials to learn about how to manage debt.

But my guess is that you may be writing because he or she is asking you for a consolidation loan to help pay off the debt and, while you want to be helpful, you are not sure that’s the route to go.

First, trust your instincts. If you think your child has trouble handling money, then it is likely you will just be enabling him or her to go a bit longer without having to shape up. Even if your child is truly in deep straits, your loan is unlikely to solve the problem. He or she needs crisis intervention, not a loan.

If you simply can’t say no, then do one of two things:

1. Give a gift rather than a loan. You’ll never have to worry about whether you will get paid back and there will be no hard feelings if you aren’t.
2. Agree to lend the money only if your child will agree to sign an official loan agreement. It would also be a good idea to have them set up automatic transfer of the payments  to your checking or savings account from your child’s. There will be no wondering about whether a check has been mailed.

5. My spouse/parent died and I discovered a lot of debt. Do I have to pay it?

In most cases you are not responsible for another person’s debt when they die, unless you are a co-signer on the account. If, however, that person was your spouse and you live in a community property state (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, Wisconsin), debts incurred during the marriage are considered community property and you are likely responsible for them.

When a person dies with outstanding debt, the creditor will first look to any co-signers and then to the estate for payment. The creditor may not bother to pursue the debt if it is a small amount, but there is no guarantee.

If you are feeling pressured to pay a debt you are not responsible for, or if you are not sure whether you have to pay your deceased relative’s debt, you may want to contact an estate planning or consumer law attorney.

6. I don’t have the money to file for bankruptcy. What can I do?

I am retired and Social Security is my only income (or I am on disability and have no income except Social Security Disability). That barely even covers my monthly rent, utilities, medicines, medical co-pays, food, etc. I am being hounded for credit card debts and the debt collectors are calling day and night.

It sounds like you have little income and no assets. If that’s the case, it may be that you are “judgment proof.” That means that even if someone tried to sue you, there wouldn’t be any way to force you to pay. Creditors generally cannot seize Social Security payments to pay debts. In addition, most retirement accounts (IRAs, pension plans, etc.) are also protected from creditor claims. If you are judgment proof, there may be no reason to file for bankruptcy.

You may want to talk with a bankruptcy attorney to assess your situation, especially if you have assets such as a home or money in bank accounts outside of retirement accounts.

If you are judgment proof, you will likely be able to stop the creditors or collectors from contacting you by simply writing a letter indicating that you have no income other than Social Security payments and no assets. Explain that you have no way to pay them and ask them to stop contacting you. At that point, they likely will stop. Keep copies of your letters, send the letters certified mail, and keep copies of any correspondence you receive. If you are sent any papers that indicate they may be trying to sue you, contact a consumer law attorney immediately.

7. Will checking my credit report hurt my credit score?

No. When you check your own credit report through a service that sells credit reports directly to consumers, you create what is called a “soft inquiry.” These inquiries are listed when you review your own credit report, but they are not shown to creditors and do not affect your score. 

It’s a great idea to review your credit report on a regular basis, so go for it.

8. How many points does an inquiry take off your credit report?

There is no set number of points that will be deducted from your score for a single inquiry. The same inquiry from the same lender at the same minute can affect two people’s credit reports differently.

In general, inquiries are a small part of your credit score (less than 5%), and the stronger your score, the less likely one or two inquiries are to have an effect on your score.

Nevertheless, be very careful about applying for new credit, a cell phone, insurance, or anything that might result in a credit check if you are in the process of getting a mortgage. Sometimes a score drop of just a few points can drop your score below the range for the rate you are trying to get.

9. My ex-husband was supposed to pay this account, he didn’t, and it damaged my score. Now what do I do?

Joint accounts can create problems long after a marriage is over. Even though your ex-spouse is supposed to pay the bill according to the divorce decree, you are still on the hook for the debt to the lender if you are a co-signer. That’s because your divorce decree is an agreement between you and your ex. It doesn’t erase the original contract you had with the lender.

As far as your credit is concerned, the late payment will likely be considered accurate, since the account is still yours until it is paid off, closed, or refinanced into your ex-spouse’s name. Once in a while, a creditor will agree to remove the late payment from the innocent spouse’s credit report, but may require that it be paid off first.

Talk to your divorce attorney to find out what can be done in terms of forcing your ex to live up to the terms of the divorce decree. If he doesn’t have the assets to pay off the debt now, you may want to ask whether he can be required to make payments to your attorney, who can then make sure the payments are made. As long as the account remains unpaid, however, and he pays it late, your credit will be damaged.

10. I co-signed an auto loan for my daughter. When I tried to refinance my mortgage, I found out she has been paying it late, and it has hurt my credit score. What can I do to get that information removed?

Sorry, you’re likely out of luck. If there is one piece of advice we can give about co-signing, it is this: don’t do it. When you co-sign, you are agreeing to be fully responsible for the debt. And by law, if the issuer reports debts to a credit-reporting agency, it must report that information under the co-signer’s name as well as the primary account holder’s.

That said, the lender might be willing to remove those late payments if you will bring the account up to date and/or pay it off. If it does agree to “re-age” the account, get it in writing. Of course, by contacting the lender, you may find that you are inviting the creditor to contact you if your daughter gets behind again, whether or not your credit report is cleared. After all, you are the co-signer.

11. I’m deep in debt and have a terrible credit score. What should I do?

While it may not seem like a blessing right now, your lousy credit score may be a plus. It will keep you from digging the hole deeper with a “consolidation” loan. It’s time to focus all your effort on one goal — getting rid of that debt. I would first encourage you to get a free debt consultation to determine whether a credit-counseling program will work for you.

Even with bad credit, you may be able to get your interest rates lowered that way. And you’ll get advice to help you build money management skills. If it turns out this type of program won’t work for you, you may need to talk with a bankruptcy attorney.

Either way, once your debt is no longer an issue, you can begin to rebuild your credit. We have seen consumers significantly improve their credit scores in less than two years when they worked at it. Good luck!

Image: iStockphoto

Is Your Mortgage Going to Hurt Your Credit?

There’s a misconception that applying for a mortgage causes your credit score to drop each time, but that’s not actually the case. The sole act of having your credit report pulled when submitting a loan application does not instantly cause a reduction in your credit score, but it will impact you eventually. Here’s the deal …

When you apply for a mortgage loan, you authorize a mortgage company to obtain the most accurate comprehensive detailed financial credit report available. More than any one-score credit report, auto loan credit score or a personal crediting reporting service score, a financial services provider credit report isking in the lending world. It includes three different credit scores — one from each major credit reporting agency, and the lender will use the middle of the three scores for determining your loan eligibility.

The federal government encourages borrowers to be savvy by shopping for mortgages to compare rates and fees. A lender’s rates and fees only hold water with a credit report in hand from that individual mortgage provider, coupled with the consumer’s financial documentation. This is why your credit score is not penalized immediately when you apply for a home loan, with one caveat – that you complete your comparative price shopping generally within 30 days. The multiple inquiries from those 30 days are grouped and considered one inquiry that impacts your score once the 30 days are up.

Mortgage Credit Reports & Hard Inquiries

Applying for a mortgage does show up as a credit inquiry on your credit report. Having too many total credit inquiries over time may result in a slight drop your score because it looks like you’re shopping for credit, demonstrating a possible inability to manage your liabilities. However, it does depend on the type of credit you’re shopping for – typically a credit score looks differently at loans for which you need to comparison shop, like mortgages, student loans and auto loans. If you have multiple inquiries for one type of loan within a 30-day period (or so), the credit score will generally count them as one inquiry.

Let’s look at what may hurt your score, though — for example, a credit pull such as a mortgage inquiry, followed by a car loan inquiry, followed by a credit card inquiry or two, or any other forms of credit in addition to applying for a mortgage. If you are not shopping or looking for any other form of credit other than a mortgage, though, your credit score shouldn’t be lower due to an inquiry when you get a quote from Mortgage Company B after getting a quote from Mortgage Company A a week ago.

Why Scores May Be Different Among Mortgage Companies

Let’s say you’re applying for a mortgage with a direct lender and your middle credit score is 740. Being a smart customer, you decide to do your due diligence by also comparing another mortgage company and your credit score is now 739. The one-point drop in score should not be immediately attributed solely to result of pulling credit, but rather the credit picture as a whole.

It all boils down to when all of your accounts are reporting to the credit bureaus with current activity. If you have several credit cards, for example, and each one of these accounts report to the credit bureaus at different times of the month based on your spending, payment and balance activity, that could change the scores generated between the mortgage companies you’re considering using for your mortgage loan.

Credit Reports Are Not Universal

Each credit report is only for use with that lender to whom you applied. Mortgage tri-merge credit reports are not transferable among lenders — nor is it reasonable to assume that your credit scores from each bureau are going to be exactly the same with a different lender. Each time you apply for a mortgage or want actionable rates and fees, you have to agree to let the mortgage company pull your credit report. Pulling credit and generating a score is only to procure mortgage-pricing accuracy. Moreover, if there’s anything related to your credit history that could be problematic, this can be taken care of upfront to prevent a surprise from popping into the process later on that could threaten the deal and/or financing terms.

Items That Can Hurt Your Credit the Most When Getting a Mortgage

If your score changes after applying for a mortgage, the culprit for any credit changes can more than likely be tied to one or more of the following items:

• Late payments on any of the following: Any loans or credit cards in the past 36 months (the more recent, the bigger the effect on the score).
• High utilization of credit: The available credit lines you do have (i.e. credit cards) are above 25% of your credit limit. Keep you spending under 10% ideally.
• Age of credit: If you’re doing it right, keep at it and over time your credit will rise, and the age of paid-as-agreed credit bolsters your scores — all of them.

Before you get ready to shop for a mortgage – and a home to buy – it’s important to start checking your credit several months ahead of time. You can pull your free annual credit reports to look for inaccuracies or other problems you need to address. Your credit will have an impact on your interest rates, which can affect how much house you can afford. Knowing where you stand ahead of time can help you better plan a course of action.

Can You Get a Perfect Credit Score?

So you’re a little ambitious — competitive, maybe — and the idea of a good credit score seems a little, well, tame. You want a perfect credit score. But is that even possible?

Shantai Dixon is hoping so. She wrote recently on the Credit.com blog:

Is it possible to get a credit score to reach “perfect” (850 score) if there has already been a blemish to the score?

When I asked her about what she’s trying to accomplish, she said she has no specific reason for wanting a perfect score; she’d just like to know if it is possible. “I’m 28 and have had a credit card for about 7 years,” she wrote in an email. “I’ve been relatively responsible with it but several months ago I had an issue in which the card company didn’t apply my automatic payment to the card correctly. Therefore I was late on a couple of payments. I know it’ll take a while for that to not show up on my score but I’d like to hope that after several years of good payment history, low to no balance and a variety of credit that I can attain an 840/850 score, up from around 700.”

Is the goal of a perfect score possible? Yes. Probable? Maybe not so much. A perfect score is elusive, but not necessarily for the reasons you may think. It’s the goal itself that makes it hard.

Which Score?

The first question you’ll have to ask yourself is “Which credit score do I want to be perfect?” At any given moment there are dozens of scores that could be created about you. While they all take into account similar factors, such as payment history, debt, inquiries and the age and mix of credit accounts, they all weigh them a bit differently. So even if you achieve a top credit score with one model, you’ll probably fall a few points short with a different one.

Think of it like a target goal to fit into size 6 jeans. Which size 6? As anyone who has spent a frustrating afternoon in a fitting room can attest, a specific size can mean something quite different depending on which brand you’re trying on.

An Elusive Goal

Spend some time learning about credit scores, really learning about them, and you’ll soon learn they can be a whole lot more complicated than you imagined. As mentioned, there are all these different scores and different versions of scores customized for industries such as auto lending or insurance. Plus even within the credit scoring models there are multiple “score cards” — consumers who are grouped together and essentially compared with one another. You and I could apply for the same credit card at the same time, and the impact of that new account (and the inquiry into our credit file) may be different. That means whatever you do to try to “game” your score may — or may not — have the impact you expect.

A Moving Target

Credit scores are created at the moment they are requested, based on the credit report data available at that time. If a balance is updated, an inquiry is added (or drops off) or the age of an account changes (which happens all the time), your score can change. For most of us, that’s not a big deal; a few points in either direction won’t generally make a big difference. But when you’re aiming for the top, even a small step in the “wrong” direction can take you off course for a while.

Why Try Anyway?

Is trying to achieve a perfect credit score an exercise in futility then? Is Shantai wasting her time? Are you, if you have the same goal? Not necessarily.

Really delving into learning about the factors affecting your credit scores can help you better understand the nuances of what makes for a high credit score. The difference in lifetime interest costs for someone with excellent credit versus someone with good credit can be tens of thousands of dollars. (You can use this lifetime cost of debt calculator to find out what it means for you.) So even if you get a few tips that help you raise your score from one category to another — from good to excellent — for example, it may be a worthwhile investment of your time in terms of the money you’ll save over your lifetime.

If you decide to go for it, it helps to pick one score to track over time. If you get your scores from various sources, then your results may be confounded by the different scoring models used. 

As for Shantai, if she continues on the track she’s on, she’ll no doubt see improvement as the negative information on her reports becomes older. She may not get to 840 or 850, but she could potentially get to the 800s, and that would mean she shouldn’t have any trouble qualifying for very low rates and other benefits such as insurance discounts.

The bottom line is, as long as your credit score is high enough to get you what you need, trying to tweak your score into the flawless range may not be necessary. But if you want to go for it, why not?

Your Biggest Credit Report Complaint May Be Getting Fixed

Today the three major credit reporting agencies — Equifax, Experian and TransUnion —agreed to a settlement with the New York Attorney General’s office to overhaul the national credit reporting process to better serve Americans. The agreement includes changes to the credit report dispute process, how some negative information can appear on credit reports and oversight of the creditors that provide the information included on credit reports.

There’s a lot going on here, and the changes announced today will take time to implement (the agencies have three years to do so). A lot of details remain to be seen, but here’s what we know so far.

What to Expect

Changing the credit report dispute process would address one of the biggest consumer gripes with the credit reporting agencies — that it’s challenging to remove inaccurate, damaging information from credit reports.

Or, as New York Attorney General Eric Schneiderman said in his remarks to the press about the changes, “The credit reporting system in America that we’re addressing today suffers from inaccuracy and, oftentimes, outright injustice.”

The credit reporting agencies have agreed to employ specially trained personnel to review disputes and supporting documentation, in effect giving consumers the ability to challenge what is now an automated dispute process.

It’s perhaps the most noteworthy effort outlined in this agreement with the credit reporting agencies: About 10 million consumers have reported paying more for or not being able to access products like loans or insurance because of credit report inaccuracies, according to a 2013 report from the Federal Trade Commission. That’s about 5% of consumers with credit reports claiming adverse action because of report inaccuracies.

The agreement tackles another huge consumer credit issue: medical debt. It’s similar to credit report inaccuracies in that it can seriously damage a consumer’s credit and often appears on a credit report unexpectedly. Medical debt will no longer be reported until 180 days after it was incurred, allowing consumers more time to resolve the bill with their healthcare providers and insurance companies.

Another thing consumers might like to hear: Small fines may no longer have the ability to wreck your credit. Things like traffic tickets or government fines — “consumer debts that did not arise from a contract or other agreement by the consumer to pay,” according to the Consumer Data Industry Association, which represents the three major credit bureaus — will no longer appear on credit reports.

The Unanswered Questions

This agreement does not signify overnight change. The bureaus have three years to implement the new policies outlined in the agreement — it’s called the National Consumer Assistance Plan, by the way — and it’s important to keep in mind that Equifax, Experian and TransUnion are three separate companies. Changes may roll out at different times, and consumers should look to each bureau for information on how they’re taking action.

From a consumer credit standpoint, it’s unclear when the benefits of these changes will take shape. Though the promise of a better dispute process may be welcome news to anyone who has suffered from data reporting errors, mixed files or identity theft, it might be a while before they can benefit from the coming improvements.

“The timeframe is generally is 6 to 36 months. … A lot of it is front-loaded in 6 to 18 months,” said Norm Magnuson, of the Consumer Data Industry Association. “A lot of it, I think, is still being put together.”

There are a lot of unknowns about when and how these changes will take place, but if they’re carried out as planned, millions of consumers stand to benefit from them. Before and after this agreement takes effect, it’s important to carefully review the information in your credit reports and immediately address any errors you find in them, because as millions of Americans know all too well, those errors can be quite costly. Consumers can check their credit reports for free once a year from each of the three major credit reporting agencies.

How to Tell If a Credit Card Has a Good Interest Rate

Finding a credit card can be just as personal a process as shopping for any other consumer good, whether it be clothing, a car, a home, or anything else: It must suit your needs but also fit in your budget. When it comes to credit cards, cost is most often determined by interest rates.

Like many consumer products, whether the price is “good” is subjective. What makes a credit card’s interest rate good or bad for you depends on several personal factors.

Decide What Kind of Card You Need

One of the first things to consider when credit card shopping is how you’ll use that card. If you plan to pay every statement balance in full, the annual percentage rate doesn’t matter much, because you won’t be accruing interest on your purchases anyways. You still need to know what your APR is — you should be familiar with the terms of any credit product you have — because even though you never intend to carry a balance on your card, you need to know what it would cost if you did.

If you plan to use the card as a financing tool, prioritize finding a card with a very low interest rate. It’s pretty simple: The longer you carry a balance on that card, the more the purchases will cost you, and that directly relates to your APR. (Here are a few of the best low-interest credit cards to help you shop.)

Your Credit Score Is the Key to Your Best Rate

When you shop around for a credit card, you need to have a general idea of your credit standing, because that will affect the interest rates for which you qualify. Once you know where you stand you can see what sort of cards and interest rates that gives you access to.

If you have excellent credit, you may be able to qualify for cards with a 0% promotional financing period. Single-digit ongoing APRs are also available if you have great credit. That doesn’t mean you’ll only have access to double-digit APRs if your credit isn’t great, but you may have to pay an annual fee to offset the lower rate.

The Internet is a great resource for finding cards, based on your credit standing, and the best way to find your most affordable option is to do some legwork: Get your credit score, and use that information to see what sort of interest rates are offered to people with similar scores. How do you tell if a card’s APR is good? It’s good if you think you can qualify for the card, and the rate is lower than ones offered by other cards you might be able to get. Issuers’ websites often say what credit tier the card is designed for, but you can also use online credit card comparison tools like this one to explore many options in one place.

The research is important, because there is no “best interest rate” out there. Every consumer has different options, based on his or her individual credit history. With that history in mind, it’s important you apply only for credit you can reasonably expect to be approved for, because applying for credit results in a small, temporary drop in your credit score. The less often you do it, the better.

5 Bad Money Habits You Can Break Today

When it comes to bad financial habits, there are some serious ones that can cost you thousands of dollars. Which of these habits are you guilty of committing?

1. Spending With Credit Cards When You Can’t Afford It

Credit card interest rates are regularly well above 10%. That translates into a lot of interest charges if you don’t pay off your credit card every month. Worse yet, many people get stuck in a cycle of credit card debt – a habit that seems to just not go away.

Many people make what they consider to be “educated” guesses as to whether they can afford to put new clothes or high-tech gadgets on their credit cards. The problem is that those who do often don’t really know their future expenses.

If you’re living paycheck to paycheck, even small emergency expenses can be enough to make you late on your credit card payments. And if you’re late once, it’s so easy to push off paying your credit card debt until you’re really hurting. Furthermore, late payments can hurt your credit, and if your credit score drops low enough it can mean higher interest rates for you in the future. 

Unless you’re entirely sure you can pay off your credit cards every month, you may want to seriously consider not using them.

You may be asking, “Hey Jeff, I’m not sure how to stop using credit cards – I can’t afford to live without them!”

That’s a difficult situation, no doubt. In that case, you’re going to have to look at both your income and expenses to determine where you can make improvements so you don’t have to depend on credit to make ends meet.

2. Not Tracking Your Transactions With a Budget

One of the best advantages of tracking your transactions is that you can see very clearly where you spent your money over time.

Try tracking your spending for a month (there are free budgeting software programs that can help with that, too). If you haven’t ever given a second thought to spending, this exercise will certainly help you do that.

When the month is over, categorize and add up your expenses. Many people overspend on the following categories:

• Groceries
• Clothing
• Entertainment
• Eating Out

These are categories you should monitor carefully.

Once you know how much you’re spending in your categories, make a few goals. Try lowering how much you’re allowed to spend in your problem categories incrementally, month by month.

Over time, because you’ve been tracking your categories and paying attention to your spending habits, you’ll find you can lower your budget category allocations – saving you thousands of dollars.

3. Waking Up Late

I’m convinced that waking up late affects your finances. Allow me to explain.

All of us are pressed for time. If you’re like many out there, you dread the alarm clock and reach for the snooze button too many times (that is, more than zero times).

But I bet there’s something you’d love to do if only you had more hours in the day. Maybe you’d exercise, start a side business, or take some online classes. These are all activities that can either directly or indirectly result in more income.

For example, if you take some online classes, you can learn a useful and marketable skill that can earn you a raise, promotion or a better job.

Personally, I found that by waking up early I can have a few morning routines that get me pumped for my day ahead. The later I wake up, the less productive I feel, and the less productive I am.

You can also fill those early morning hours with some of those activities you always wanted to get to but never could. You just might find that even if you don’t consider yourself to be a morning person, you could become one.

Instead of focusing on ways to improve your finances through just financial means, look at your entire life – it’s not as compartmentalized as it may seem and can have profound consequences on your money.

4. Consuming to Hopefully Find Contentment

Something deep down in me cringes when I hear businesses call people “consumers.” Sure, people consume, but that’s not all they do. But maybe businesses sometimes refer to people as consumers because that’s what so many do too often: they consume.

Ask yourself if you consume more than you produce. Is your goal in the morning to wake up and say, “I wonder how I can please myself today?” Or, is your goal to serve others?

Albert Einstein was quoted in the June 20, 1932 New York Times as saying: “Only a life lived for others is the life worth while.” There’s so much wisdom to that.

But there are other benefits to serving others above ourselves, as well. Have you noticed that when you’re busy serving others and making money, you spend less? Perhaps you’ve noticed the reverse.

Don’t consume to seek contentment. Contentment isn’t found in consumption, it’s found in servanthood. Follow this advice, and you’ll likely keep more cash in your wallet, too.

5. Using Investment Accounts as Emergency Funds

It happens from time to time. I’ve seen a few of my clients raid their investment accounts to pay for emergencies. Sometimes, it even becomes habitual. I understand why they do it, but the tax penalties can be high.

Also, if you use your investment accounts as emergency funds, you’ll lose all that potential earning power when you have to dip into it for emergencies.

A better plan is to have a high-yield savings account nicknamed “emergency fund” and not touch it unless there’s a true emergency. And don’t fool yourself, you really do need an emergency fund.

There are a whole host of emergencies that can crop up when you least expect it: lawsuits,medical bills, job loss, the list goes on and on.

Here’s one habit you should get into: taking extra money you’ve earned every month and pouring it into your emergency fund. You may even put monetary gifts you’ve received into your emergency fund until you’ve filled it up (I recommend three to eight months’ worth of expenses).

Say Hello to More Money

Bad financial habits aren’t always easy to correct. I’ll be honest with you, it’s often very difficult. It requires a shift in the way you think about money.

You might have some bad financial habits right now you don’t know about. Brainstorm! Find every last one if you can. You can break a bad habit in less than a month if you stay focused.

Do it. It’s worth it.

The Credit Approval Process & What to Expect

Here is a closer look at the approval process for credit cards, loans and mortgages.

Credit Cards

The fastest way to get approved for a credit card is to apply online. Many issuers offer instant approval to online applications. So you may know whether you have been approved for a credit card within minutes of applying. You can also apply by mail or phone. Once approved, it is likely a credit card will be sent to the mailing address that you listed on your card application within 10 business days. And if you need the card in a hurry, you can pay a fee for the expedited delivery of your credit card. If you are turned down for a credit card, an issuer will send you a letter explaining why you did not qualify for the credit card.

Loans

Applying for a car loan or personal loan is an easy process, with many lenders offering online applications. And you can find out if you are likely to be approved before you apply by asking about minimum credit standards required for the loan. Some lenders list credit qualifications, such as minimum credit scores, right on their websites.How quickly you are approved for a loan depends on the lender. But you may receive your approval within 24 hours or even within the hour. If you are turned down for a loan, a lender will send you a letter explaining why you did not qualify.

Mortgages

Getting pre-approved for a mortgage will speed along the homebuying process. After you complete the pre-approval process, you may be asked to supply some additional supporting documents. Once all the necessary documents are submitted and reviewed you will receive one of four possible decisions on your home loan — approved, approved with conditions, denied or suspended.

If your loan application is suspended it means more documentation is required before a lending decision can be made. If your loan application is approved with conditions, there are specific criteria that you must meet before you will receive the full approval of your loan. And if your mortgage application is denied, you will receive a notice in writing explaining the reasons why.

The best way to take the surprise out of a credit application is to check your credit score before applying.