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Book I: Taking Charge of Your Finances
Your FICO score can range from 300 to 850. The higher, the better: A score
of at least 720 is considered to be very good. If your score is well below 720,
you may still qualify for credit from some creditors, but you'll be charged a
higher interest rate and you may not qualify for as much credit as you would
like. Likewise, insurance companies may be willing to sell you insurance, but
you'll probably pay extra for the coverage and you may not be able to pur-
chase as much insurance as you would like. When you have a low FICO score,
some landlords will not rent to you, and you may not qualify for certain kinds
of jobs, especially those that involve handling money.
You can raise your FICO score by improving the state of your finances. For
example, your credit score will go up if you
Pay down your account balances.
Begin paying your debts on time.
Build up your savings.
Minimize the amount of credit you apply for.
Correct problems in your credit histories.
Comparing Spending and Income
Now comes the real measure of the state of your finances: figuring out how
your total spending compares to your total household income. You may be in
for a shock. Are you ready?
Gathering the necessary materials
To complete this exercise, you need a pad of paper, a pen or pencil, and a
calculator. You also need the following financial information:
Check registers
Bank statements
Receipts for major purchases not made with a credit card
Credit card account statements
Other expense records for the past 12 months
You also need records of your income for the past 12 months, such as pay
stubs and deposit slips or direct deposit information. If you're self-employed,
you need your business records.
