For the month of January, Listen Money Matters is getting back to the basics with a month focused on the debt and the importance of credit.

 Over the course of the month, the guys will cover the fundamentals of credit, debt reduction plans and talk to an awesome guest about a tool he created to help keep you out of debt.

 What is affected by your credit?

 Well, everything really. Your credit score is a number that reflects your credit risk level. If you are looking to borrow money for any reason – to purchase a car, get a mortgage or to take out a student loan, your credit score will determine how much that loan will cost you.

 If you have a low credit score, you will have a harder time getting a loan, and when you do qualify for a loan, the interest rates will be very high. Compared to people with good credit scores, your monthly payments will be more per month to pay off a loan of the same value. Bottomline, having bad credit will cost you.

Having good credit history is not just about being able to buy things. Sometimes your credit history is considered by potential employers. According to the New York Times, 47% of employers check your credit score.

Landlords absolutely look at your credit score, and it plays a big part in approving you to rent a home. The cost of insurance rates can be higher if the insurer pulls your credit data to calculate your insurance risk score. Even some utility providers may be required to provide a down payment for service for people with bad credit history.

What does good credit get you?

A cheaper life. The better your credit history, the cheaper it is to borrow money. When you have large loans like a mortgage or student debt that you will be paying off for years, those interest rate savings could add up to thousands of dollars in the long run.

Let’s say your mortgage rate is 4.5%. An increase of only 1% will increase your living costs by 12% per month. On the other hand, a decrease of 1% will decrease your living costs by 12.8% per month.

Having an excellent credit score will give you access to better credit cards with awesome rewards and no fees. Sometimes you can even get perks with your bank by upgrading to better accounts without ATM fees or minimum balances.

Most importantly, using credit cards protects your cash. If your debit card gets lost, stolen or there is fraud, you can kiss your money goodbye in most cases. When your credit card gets stolen, the credit card companies money is gone, not yours. If you report it immediately, the bank will nine times out of 10 resolves it in your favor pretty quickly.

When it comes to protecting your money, it is definitely using credit cards compared with cash, checks or money orders are numerous.

Action List

* Sign up for CreditKarm.com, Credit.com or both. Find out your credit score and see why your score is what it is.

* Get a list of all of your credit card accounts on file and request that each one increase your limit. Call them, do it automatically online, get it done. Don’t be greedy; small incremental increases make a difference.

*  Take inventory of all of your debt, their amount and their interest rates. This month we’re creating you a debt reduction plan.

* Listen to next week’s episode where a simple, free automation will increase your credit score by over 5%.

There can be a lot of emotion around credit and debt but having credit is important. These days, everything in life is tied to it and if used correctly life will be cheaper and easy for you if you have good credit.

Understanding the how the credit process works will help you manage it and make it work for you.

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