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Credit

Recently, when visiting MyFICO.com, I looked up the question, “How do I go about building my credit history.” This website that’s the authority on credit scores gave me two options:

  • Apply for and open a new credit card.
  • Open a secured credit card.

Wait a minute…does that mean that in order to get a credit history, I have to get a credit card? After a bit of research, I was pleasantly surprised to find out the answer is NO! While you will need a loan in order to build a credit history, that loan doesn’t have to come from a credit card company. There are several ways to build a credit history and get a credit score without getting a credit card:

  • Borrow from Yourself – This is the easiest method to establish your own credit history without a credit card. Buy a Certificate of Deposit (CD) from a bank. Then take out a secured loan against the CD for the same amount of time. Put the money you borrowed in a high-yield checking account. Then use the money you borrowed to payback the secured loan. You’ll be establishing a credit history and earning interest on your checking account and CD. There are some downfalls to this method. You need the starting capital to fund the CD. You could end up paying more interest on the secured loan than earn through your CD and checking account; however, it’s probably less than what you’d pay in fees and interest if you used a credit card. Just make sure to weigh the true costs before going down this road.
  • Federal Student Loan – There are several requirements to be eligible for federal student aid however, an established credit history isn’t one of them. As long as you’re going to a school that participates in federal student aid programs and meet the other requirements, you can take out a federal student loan. The interest rate for a new subsidized and unsubsidized loan generally has a fixed interest rate of 6.80%, which is substantially better than a typical credit card interest rate. The only catch is that your lender may not begin reporting the loan until you begin paying it back. So if you wait until after college to begin paying back your student loan, it could take years to establish a credit history.
  • Co-signing a Loan – Many banks will provide a loan if you have a co-signer with a good credit history. However, it may be difficult to get someone to co-sign on a loan, because of the inherit risk associated with it. If you’re lucky enough to get a co-signer, make sure that you make timely payments because with this method, it not just your credit history at risk. Your payment history will also affect the co-signer’s credit history. An alternative is for you to be the co-signer. If you know someone that has a high credit score, is responsible and taking out a loan, you can “game the system” by being their co-signer. As they make timely payments on their loan, they’ll be helping you establish a credit history . Be warned, if they default or make late payments, this will negatively affect your credit score.

While you’re building a credit history, it’s a good idea to keep an eye on your credit report. You can sign up for a credit monitoring service or get your free annual credit report at AnnualCreditReport.com. Make sure to review what’s listed and dispute any credit mistakes. If there are mistakes with more than one credit bureau, you’ll need to address them separately.

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This is a guest post by Adam Jusko. Adam is the founder of credit card comparison and advice site IndexCreditCards.com. Follow him on Twitter @Indexcreditcard

Earlier this year Barack Obama signed into law the Credit CARD Act (CARD standing for Credit Card Accountability, Responsibility & Disclosure). In general, it forbids or revamps many credit card industry practices that were designed to charge higher fees and interest. A handful of the laws are already in place, the rest going into effect by February of 2010. Go here to see a full list of the changes to come.

While the new law is consumer-friendly, don’t let down your guard. Yes, the new laws protect you from the most egregious credit card practices. But if you’re someone who plays loose with credit, they won’t protect you from yourself.

Let’s look at the changes that just went into effect, to understand some of the new protections — and how a lazy consumer can still screw up:

  1. Credit card issuers must give 45 days notice before raising interest rates, up from 15 days previously. The new laws ensure that you will have more time to make new arrangements should your credit card company hike your rate from 9% to 19%.
    • Don’t screw it up: Use the longer period to pay your debt and/or get a lower interest card, not as a longer window to procrastinate. Also, open your mail – getting 45 days notice is no better than 15 if you’re not paying attention when the news comes through.
  2. Credit card issuers must send bills 21 days before they are due, up from 14 days previously.
    • Don’t screw it up: Some people will pay at the last minute (and get charged late fees) no matter how much time they are given. Use that extra week to make sure your payment gets there in plenty of time, not as an extra week to procrastinate
  3. If your interest rate is hiked, you now have the right to reject the changes and pay off your balance at the old rate (although you won’t be able to use the card anymore).
    • Don’t screw it up: If you reject an interest rate hike, you still have to pay off the card! Don’t just open new lines of credit in order to make new purchases and put payment of the old, closed account on the back burner. Because if you get an interest rate hike on your new card, you could get stuck with multiple closed accounts and no option for further credit.

    While the new laws bring needed changes, they won’t change human nature. I believe that many of the same people who got themselves into credit card trouble before will continue to do so. They’ll live on the very edge of the rules (whatever those rules may be) and afterward point the finger everywhere but where it belongs: at themselves.

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vault

I don’t talk a lot about what I do but my About Me section of this site I mention that I am a Certified Information Systems Security Professional, Certified Information Systems Auditor, and Offensive Security Certified Professional. You can infer from that what you will but lets say security is an important part of my life. Security makes my wife crazy but it makes me comfortable. For the most part people are annoyed when they are “required” to change their password or use an RSA token to logon from home. These are just a few of the things corporations due to protect their intellectual property and businesses from compromise and theft.  Very few people actually take these principals and apply them to their home life which is a problem in America which not enough people are working to resolve.  Those same principals which your employer uses to protect their sensitive information can be used to help you protect your identity and prevent identity theft and fraud.

Shredding your documents

Seriously this should be the first thing you do with every credit card offer you ever get, shred it. Don’t throw it away, just shred it and then recycle it. People really do dig through garbage and find stuff. You may think they don’t do crazy stuff like that, but they really do. A good hacker, or even an ok one, is going to scope out their target and dig through their garbage. If for no other reason you can learn what the person does, what they like, and what groups they belong to. If you are throwing out gardening books and magazines then I can infer that you like to garden and I can then use that as an “IN” when conducting a social engineering attack against you. I can use that information to convince you that I am also a gardening aficionado and get additional facts about your life and you that could allow me to further assume your identity.

Wireless Access

This is my biggest pet peeve, DO NOT be that guy in the neighborhood with the wide open wireless access point sitting in your living room serving out your internet connection to the entire world. You might think to yourself nothing bad could happen, or even better, “who would want anything I have.” These are just crazy thoughts. People are constantly looking for easy access to the internet to perform nefarious acts. So while your wide open internet may not cost you anything, there is a good chance it could be costing someone else everything and when that happens the FBI will be knocking on your door.  If your are thinking about leaving your wireless unsecured think about how you would explain to the FBI why your computer just hacked that DOE database while you were at work. Along those same lines WEP encryption is the same as leaving your network open so either go with WPA or go with nothing. If I can get access to your WEP secured network in less than an hour you had better be certain someone else can do it a crap ton quicker.

Password Management

We live in a networked world where everything we do requires us to have an id and a password to get it done. It covers both our personal and our professional lives to a point where event the brightest minds in the world can’t keep up with every password they have.  This typically results in people using the same password for every account they possess. This works from the users standpoint but it also means that a single compromise of only one account password could result in the collapse of all of your financial accounts. Passwords are the simplest form of authentication and you shouldn’t take them lightly because hackers still look at these as the low hanging fruit. Each of your online accounts should have a separate password associated with it and each password should be complex and not consist of easily guessable words or phrases. If your childs name is Ethan and he was born in 2003 then the your password should not be Ethan2003. If you think I won’t know that about you then you had better have been doing a damn good job at the first tip I gave. Vary your passwords and use uppercase, lowercase, symbols, and numbers in your password. There are plenty of ways you can come up with complex passwords and if you have a hard time keeping track you can use a program like KeePass to keep track of them.

The Internet

This is my biggest vice and could at some point be a downfall. The Internet is like the wild west of the old days, the rules are constantly changing and the sherriff is mostly drunk.  We, as bloggers, provide a giant amount of information about ourselves to the world for scrutiny. The information you post on sites like facebook, myspace, twitter, blogs, and other social media can provide an exorbitant amount of information which hackers and identity thieves can use to build a social profile of you that makes social engineering attempts seem much more plausible.  If you can gather enough information about a person and their likes, dislikes, and life you can use that information to further convince them that what you are doing is a genuine endeavor.

Photo: (Anonymous Collective)

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Budgeting 101 – Know Your Spending

April 15, 2009

This is the first part of a three part series on budgeting I plan to run for the next three Wednesday’s.  I will discuss what I feel are the three critical pieces of budgeting, 1.) Know Your Spending, 2.) Creating Your Budget, and 3.) Tracking and Reassessing. Creating a budget is the first step to […]

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April ’09 Update

April 2, 2009

Ahhh here we are again. Here is my monthly net worth update. It has been a better month with all of my Assets increasing accept the house, and all my debt decreasing. My wife got a bonus so we paid off the furniture, I will have the other $576 gone before mid month which will […]

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