The 8th Wonder of the World
To quote Albert Einstein, “Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.”
What did he mean by this?
Assume at age 31 you start saving $2,000 a month for your retirement and you do so until you are age 65. Earning 9% interest you will have accrued over $470,000. Not bad for a $70,000 investment over 35 years.
However, if you had started saving the same $2,000 when you are 22 and did so only until you were 31 you will have over $579,000 and will have only invested for 9 years.
This is the power of compound interest. In this example the person who started saving at age 22 and did so for only 9 year will always have more that the person who started at age 31.
It’s never too late.
Don’t let this discourage you. Though it is always best to start young, it is never too late to prepare for retirement. Some money in retirement is better than no money in retirement. Consider taking some time to visit with a financial advisor who can help you put a customized retirement plan together to make sure you are on track.
What Impacts Your Credit Score?
How your credit score is calculated may seem like a mystery at times. It is not your marital status, where you live, or how much money you make that determines your credit score rather, your credit score it determined by the following five elements:
Paying all of your bills on-time is probably the most important thing that you can do. Failure to do so will result in adverse items showing up on your credit report that will impact your score.
This is often referred to as your utilization or how much of your available credit do you have available. What is important is what is reported on your monthly statement. For example, even if you pay your account off in full each month, if you have a $1,000 credit limit and your statement shows an outstanding balance of $500, you would have 50% utilization which is higher than optimal. If possible try to keep your utilization below 30% and being below 10% is even better. Maxing out your credit is seen as a negative by the credit bureaus.
Length of Credit History
For someone just starting out only time will help you improve in this category, however, if you have had credit for a while you may not want to close your oldest credit account. A long history of credit is considered a positive by the credit bureaus.
Applying for new credit can have an impact on your score. For this reason it is probably not the best idea to regularly apply for new credit. Rather, if you are shopping for a new car loan, home loan, or better credit card, it is best to do it all over a 10-14 day window rather than spreading it out over a period of time.
Types of Credit Used
Rent-to-own credit options may be looked at negatively while having a mortgage may be looked upon as positive. Having different types of credit can be good but do not overextend your-self.
You can find more information at myfico.com.