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Tuesday, January 30, 2007

FICO Credit Score Back Up to 760: Big Yawn...

Some good news and some bad news this month. First, the bad news.

The mother of my child moved out into her own condo, so, even though I am enjoying the extra space, stress relief and the freedom, I have agreed to pay $300 per month in child support.

$300 per month is too high, in my opinion, considering the circumstances. First of all, the mother of my child has a full time job with excellent benefits. She doesn't have to make car payments on her car (as I do), because she owns it, thanks to me. When her car broke down a couple of years ago, I gave her my very reliable and well-maintained car, and I bought another used car for me. Her insurance payments are very cheap as well -- less than $500 per year.

Now, don't get me wrong: I'm not trying to make a big deal out of my car donation, because it's really not that big a deal to me. I'm just laying down the facts here, and I think it's important to note the source of her assets.

Another reason why I feel that $300 per month is too much: our child -- I'll refer to her as TK from now on -- is in preschool, and I am paying for her tuition, which is $135 per week, or $540 per month.

Furthermore, it's not like TK is with her mother all the time. I pick up TK from school, and she spends all day with me every Friday (her preschool is 4 days per week), and she stays with me every other weekend.

Now, considering all these factors, I thought that $200 per month plus TK's tuition payments was fair. We debated the issue for about half an hour -- without any shouting, which was a welcome surprise -- and, in the end, I acquiesced and agreed to $300 per month. The way I see it, the bottom line is that we are in a critical transition period right now, and I really don't want to do anything to exacerbate the tensions that inevitably manifest themselves when a home is newly broken; my daughter can be surprisingly mature at times, but she's also very sensitive. My baby girl means a lot to me, so as long the money I'm providing is being used for food, clothes, weekend outings and trips to the hairdresser, I'm OK with it (I don't think I'm being a miser, but if you think I'm just being a cheap bastid', then feel free to post your comments below. I'm open to all rational arguments!)

So I'll be paying TK's mother by check tomorrow, and from February on I'll be making payments via a prepaid debit card, so that I can track all spending online. I'm not just being paranoid. When TK's mom was living with me, she would order stuff from QVC and the Home Shopping Network sometimes. Did I have problem with the spending? No, not at all. What did bother me, however, was the way she would spend money on items, then totally trash them or even throw them away a few weeks later. That kind of nonsense just boils my blood. That kind of spending is, in my opinion, a sign of a serious psychological problem -- possibly depression -- but that's a subject for a another blog.

I was hoping to fatten my savings account this year, as I'm getting too old to have such a puny balance in my savings account. But I guess I'll just have to work harder, and chase the dollar with even more zeal in order to maintain myself and my obligations.

One way I'm saving money is by using space heaters instead of the electric heating system that's installed in my place. My apartment's built-in heating system is a real hog at 8 kilowatts. When I got my first electric bill back a few years ago, it was a staggering $600 (December used to be a cold month in the Northeast U.S.) so I was highly motivated to find another heating solution (I was also motivated by my breathing problems, which are almost always exacerbated by built-in heating systems, no matter how well they are cleaned.) I turn my space heaters on when I need them, or when the nights are really cold, and this works very well for me. My heating bill now averages about $157 during the winter months, much less during the warm months, which is pretty darn good considering that I work from home (my computers actually produce enough heat to keep my home office toasty most of the time; of course, my office gets a bit too sticky during August, and I sometimes have to (grudgingly) power up my portable air conditioner.) I usually turn all my space heaters on full blast when my daughter is staying with me, as she has a habit of stripping down and running around the house with just her panties on.

I have to laugh at myself sometimes when I'm home alone. I'm so keen about saving money that my office is often the only warm room in the house during the cold months. This makes for some very eye-opening trips to the bathroom: who needs coffee when you've got freezing cold floors and toilet seats.

It's funny: when I was in high school, I never imagined that I would grow up to become the kind of person who thinks about money every day, but that's who I am now. I don't think an hour goes by without me thinking about ways that I can boost my income by another $10,000 per month, or ways that I can reduce my daily living expenses. Oh well.

OK, and now for the good news.

One of my businesses did surprisingly well during the holidays, so for February and March (it takes a while for my earnings to filter through to my bank account), I'll have some extra cash to play with.

As noted above, I don't think I'll be able to play catch-up with my savings situation, because my pending windfall has already been earmarked. I'm going to

  • Maintain a decent quality of life.

  • Take care of my familial responsibilities.

  • Pay down my personal and business debt.

  • Send my father $1,000 (he recently had surgery and needs some cash. I can empathize: I had a tonsillectomy back in April of last year.)

  • Maybe, just maybe, take a small, working vacation (my last real vacation was in 1999.)

Putting money into savings now doesn't make sense to me. My savings account is at a great bank, but the yield is not very competitive, as is the case with most brick-and-mortar banks. Putting money into saving while paying an average of 8% on my debts isn't the smart way to go, in my opinion. Overall, I would still be "leaking money" via interest payments if I opted to go with such a plan.

But I am very tired of my personal credit card debt. I'm bored with it. I'm sick of it!

My FICO® credit score, provided by TransUnion, jumped back up from 753 to 760 last month, and it stayed at 760 this month (boring!) My credit score hasn't experienced a serious jump since September, 2006. I'm itching for the kind of fix that only a 10+ point jump to my FICO score can provide.

Yep, my credit score is good enough that I could easily qualify for yet another 12-15 month 0% balance transfer offer, which would allow me to avoid paying interest on my personal credit card debt for another year or so. But, the bottom line: transferring my debt via a 0% APR deal is just moving my debt around, and I'm tired of it. The banks and credit card companies have made some good money off my debt, but it's time to turn off the music and kick everybody out: the party is over. I now have the power to eliminate all of my personal credit card debt and some of my business credit card debt, and that's exactly what I'm going to do.

Here's what my current debt situation looks like:

My Debt: January, 2007

Paying off my personal credit card debt should give my FICO credit score a huge boost, and should get me to my goal of an 800+ credit score sooner than I had originally planned (If bringing a personal credit card balance of $5,800 down to zero doesn't boost my FICO score above 800, then I will certainly lose faith in the system.)

At first, I was thinking of paying off my car loan. It would feel great to own my vehicle and get my title back into my fireproof safe where it belongs. It would also be great to get rid of the almost $390 per month I pay on my car loan; that's money that could ease the stress of my nascent $300-per-month child support payments. But the APR associated with my car loan is 6.25%, which is pretty good considering that the national Prime Rate is 8.25% right now. I'm paying higher than 6.25% on some of my other debts, so paying off my car loan is out, for now.

I then considered paying off my student loan debt. When I consolidated my student loan several years ago, I got an APR of 8.25%. Lots of people are consolidated at half the APR I'm paying these days, which makes me feel like I'm getting ripped off. But my student loan payments aren't stressful, and my credit card debt is more of a priority for me.

So, by March of this year, I will have completely wiped out my personal credit card debt, wiped out the debt on Business Credit Card #1, and made some major progress (i.e. cut the balance in half) with the debt on Business Credit Card #2. Business is kinda' slow right now, but if my new marketing push is successful, I plan on making some large payments toward my student loan and my car loan, so as to eliminate at least some of the interest I'll pay on those loans.

That's it for now. Remember: comments are always welcome.

Here's an updated image of my charted credit score:

Updated Chart of my FICO Credit Score - January 30, 2007: Back to 760

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Thursday, November 02, 2006

FICO Credit Score Stalls Out @ 760: What A Buzzkill!

Nothing exciting to report this time.

My FICO® credit score recently updated, and, as I expected, my FICO score didn't budge and is still at 760. Though I was expecting no change, I had gotten hooked on watching my score rise each month, so the fact that my score has leveled off is...well...a buzzkill!

Why no rise this time around? Well, it's quite simple: I didn't make a sizeable payment on my Citibank credit card last month (my Citibank card is the only consumer credit card I have with a balance right now. I have a balance on two business credit card accounts, but payments to those account don't affect my FICO score.) I've had to shift my priorities a bit as I prepare to live alone again, which will happen in about two months.

What does a 760 FICO score mean? For what I've learned, it means that I'm a 2% credit risk in the eyes of Fair Isaac (750 -799 range.) 800 or higher translates to a 1% risk of default, while a score between 700 and 749 translates to a 5% risk of default.

Here's what's really frustrating about having a 760 score: I recently learned that my car insurance company -- State Farm -- bestows their customers with the coveted "top tier" rank once an insured driver's FICO score rises above the 770 mark. So I'm a mere 10 points away from getting the best possible deal on car insurance! Bah! Jut doesn't seem fair. You can bet the shirt on your back that my insurance agent will be getting an urgent call from me just as soon as my score crosses the 770 threshold. Yep.

I need a new buzz, a new fix. In order to get the 11 point jump I desire, I think I'll need to make a payment of at least $500 on my Citibank credit card. I have no idea how I'm going to squeeze it out of my budget right now, but I'm sure I'll think of something.

That's it for now. I'll report again on my FICO-related adventures next month. Stay tuned!

As is the tradition at this particular debt blog, here's an updated image of my charted credit score:

Updated Chart of my FICO Credit Score - November 1, 2006: Stalled at 760!

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Sunday, October 01, 2006

FICO Credit Score Hits 760: Now 40 Points Away From My 2008 Goal

Exciting news: my FICO® credit score recently updated, and is now 760, a new record. I was expecting a bump of around 10 points this month, but I got 15, so I'm quite pleased. My goal is to get to 800 by the fall of 2008, but at my current pace I may be able to pull it off by the end of 2007, or even earlier.

But I also have some bad news to report today. My financial situation is about to take a turn for the worse. My baby girl started preschool recently, and the fees are steep: $134 per week, and that's for a four-day week! The fact that I'm not paying for baby sitting anymore offsets the pain, but it still hurts. Furthermore, my home situation has deteriorated to the point where I will probably be returning to the bachelor life by early next year, and that means no help with the rent and other household bills.

It's a good thing we never married; situation would have been much costlier, in both time and resources, and few things boil my blood more than wasting my time and my resources!

Will I be able to maintain my present standard of living? I think so. I won't be able to put as much as I would into my saving account every month, but I can live with that for a while. I may have to cut back on my credit card payments a bit: instead of paying 3 times the minimum due I may have to cut back to double the minimum, but that's nothing to panic about.

I'm actually quite relieved that my home situation is changing now, because I've made great progress with my debt over the past 2-3 years. Returning to the bachelor life 2 years ago would have been much harder to deal with, no doubt.

I'll cut back on eating out, which means that the owner of my local Chinese restaurant will lose some serious business for a while, but they are always busy (great food and service) so I'm sure the establishment will still be there when I'm ready to return.

Fresh fruit in the morning? Sure, I can still afford it, but I'll have to skip the ripe, precut cantaloupe for a spell (10 times better than coffee as a morning powerbooster, for me anyway.) My local supermarket charges a real premium for paring and slicing the best fruit, so I really should have broken this habit some time ago, especially now that the baby is in preschool and I really should be doing the paring myself. Yup, looks like its back to canned pears for a while.

Living alone will have its advantages. I'll be able to devote a lot more time to work, and the extra productivity will certainly result in more income. Power consumption will be cut in half (I think), so that means a reduced electric bill (it's all electric -- no gas -- where I live.) Of course, there's the reduces stress (<--I won't bore you with those details!) Will I get lonely? I highly doubt it. I'll still be hanging out with my daughter on a regular basis, and I look forward to socializing again -- this will help to add some much needed flavor to my routine. I am very American in that I like to immerse myself in my work, and I am also fortunate in that I very much enjoy what I do, so loneliness and boredom shouldn't be an issue. To put it simply: I accept that change is a normal part of life, and I feel very fortunate that the life modifications I am about to experience probably won't be as traumatic as I've seen in other households (my own parents went through a messy divorce years ago.) I count my blessing each and every day, a habit I recommend to all. As is the tradition with this particular debt blog, I will close with the charted progress of my FICO credit score. I hope to report only good news in next month's blog entry. Thanks for reading.
Updated Chart of my FICO Credit Score - October 1, 2006: 760

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