Banking 
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How To Use Safe Deposit Boxes

When I was a kid, there was always this mystique about safe deposit boxes. My parents never had one so the only experience I had with them involved television shows or movies. The scenes were always of bank robberies, of masked men and women running into a smoke filled room filled (after they blew open the door of course!) with hundreds of these boxes all stacked up nicely and neatly in their little cubbyholes. Inside each was a little treasure chest of riches and these crooks were here to take them.

It wasn’t until I was an adult did I realize that they typically held more pedestrian items such as important paperwork (car and house titles, marriage licenses) rather than sexy uber-valuable jewelry one could fence.

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 Banking 
6
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WaMu CD Rate Update: 5.00% APY, 12-Month CD

WaMu ATMUpdate: The 5.0% APY Online CD is no longer available and the rates quoted in this article are out of date – read this list of best CD rates for current rates.

A month or so ago, Washington Mutual (WaMu) offered a 5.00% APY 12-month CD, one of the best interest rates on a 12-month CD available (I wrote a post listing the best CD rates available, updated weekly). ING Direct’s 12-month CD is 4.00% APY and HSBC Direct’s 12-month CD is 3.70% APY, WaMu is offering a rate that’s a full point higher for the same term. (If you check Bankrate’s list of CDs, the national overnight average is 3.69% APY, WaMu’s CD isn’t even listed)
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 Personal Finance 
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190 Bowery: Don’t Judge A Book By Its Cover

190 Bowery - Home of Jay Maisel

On the outside, it looks like graffiti-covered dump.

On the inside, 190 Bowery in Manhattan is a six-story, 72-room, 35,000 square foot single family home that is absolutely gorgeous. It was once the home of Germania Bank and was built in 1898.

Jay Maisel, a well-known photographer, bought the building forty-two years ago for $102,000 and has lived in it since with his wife Linda and daughter Amanda. When he got it, it “was knee-deep in garbage and coated in soot.” He said his parents cried when they found out and that “Every single thing that can come out of a human body has been left on my doorstep. But it was more disgusting than dangerous.”

The slideshow is a collection of eleven beautiful photographs covering every floor of the building. The home is estimated to be worth at least $30 million. There are more photos in this interview with Jay Maisel (interview).

The 72-Room Bohemian Dream House [New York Magazine] (hat tip to Kottke.org)


 Credit 
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5 Credit Questions with Fair Isaac’s Barry Paperno

Following my guest post on my good friend JD’s Get Rich Slowly about How to Prepare for Buying a Home, I was contacted by a PR firm asking whether I’d be interested in talking with Barry Paperno, consumer operations manager at Fair Isaac. Fair Isaac is most well know for developing the FICO score, otherwise known as your credit score, which is probably one of the the most important numbers you need to know prior to getting a mortgage. Since it was relevant, I shot over five questions for Mr. Paperno and he was kind enough to answer them (I’m emphasized parts of his answers that I feel are valuable).

jim: Barry, could you give us a little background about yourself and your role at Fair Isaac?
Barry Paperno: Prior to joining Fair Isaac in 1995, I served as Operations Manager with Experian, running their San Francisco Bay Area consumer assistance office. There we provided credit reports and counseling to consumers, investigated disputed credit items, and corrected credit reporting errors. At Fair Isaac, I’ve helped educate lenders, credit bureaus, and consumers on FICO scoring; while managing customer service operations for myFICO.com. I currently head up training and consumer education programs for Fair Isaac, and manage the FICO Forums online community at myFICO.com.
jim: What are some simple steps consumers can take to improve their credit score?
Paperno: Other than the obvious step of paying bills on time, reducing credit card debt is the single best step people can take to help their score. A scoring factor called “credit card utilization” plays a big part in FICO scoring. This calculation, expressed as a percentage, looks at the proportion of balances to credit limits on your credit cards. While the general rule is “the lower the better,” the ideal utilization percentage is under 10%.
jim: What is the biggest mistake people make when it comes to their score?
Paperno: By not educating themselves about credit reports and credit scores well in advance of applying for credit, people often make the loan application process much more stressful than it needs to be — particularly if errors on the credit report are resulting in a lower than expected FICO score. It’s important to understand that the credit bureau investigation process for correcting errors typically takes about 30 days to complete, and that your FICO score can’t change unless the credit information used in the score is corrected. So, if you’re going to be applying for credit, check your credit report and FICO score early on, so that if there’s an error you’ll have time to get the necessary corrections made.
jim: What are some common misconceptions people have about their credit score?
Paperno: A couple of the most common scoring misconceptions are: 1) if you pay off your credit card balances in full each month you will always have good score; and 2) if you have too much available credit your score will suffer:

  1. For most people, paying off their credit card balances each month is a great way to ensure a high score. For those who tend to max out their cards before paying them off each month, however, it’s a different story. The credit card balance showing on your last monthly bill is typically the balance that the lender will report to the credit bureau, so that’s what will show up on your credit report as the account’s balance. If your “credit card utilization” percentage is high as the result of having charged up to the limit before paying it, your score could be hurt. The solution here is to either make sure you have enough available credit so that your normal credit card activity doesn’t hurt your score, or cut back on your charging habits.
  2. The “conventional wisdom” for many years, particularly among mortgage lenders, was that too much unused available credit could indicate a high level of future risk to a lender if the borrower were to use that credit at a later date. As a result, for years people have been advised to close credit cards as one way to reduce this potential risk and raise their FICO scores. While it’s not hard to understand the rationale that went into this thinking, the results of extensive research conducted by Fair Isaac show that, on the contrary, a high amount of unused available credit is actually helpful for your score — along with a good payment record, low percentage of “credit card utilization,” and a sufficient length of credit history. My recommendation here is to simply leave those unused credit cards open.
jim: Do you have any recommendations for young people just starting to develop a credit history?
Paperno:
  1. Always pay everything on time, use your credit cards moderately so their balances stay as low as possible, and open new accounts only when necessary.
  2. Be aware that you don’t need a lot of credit to have a good FICO score. All you need is one account on your credit report that has been open for at least six months and that you have used at least once within the past several months.
  3. If you’re looking to obtain your first credit account, a “secured” Visa or Mastercard that’s reported monthly to the credit bureau is an excellent way to start developing a credit history. It works just like a bank card, with the difference being that the potential risk to the lender is reduced. The lender will set your available credit line equal to an amount you place on deposit in a savings account. This deposited amount can then be used as collateral for the debt should you fail to make the monthly payments. A secured card, when paid as agreed for a period of time, often later converts to an “unsecured” account with a higher credit limit and no deposit requirement.

Summary

The main takeaways that I got from interviewing Barry was that the majority of your score is determined by sound credit management – pay on-time, don’t get too extended, simply be responsible. However, at the edges, such as getting your score that extra ten points, depends on optimizing some of your decisions. For example, one of the more recently popular credit tips involving not canceling unused cards, a tip Barry mentioned. Keeping them open means your utilization is lower (which is good) and runs counter to the advice even the professionals would give.

Another idea, one that is intuitively obvious but often overlooked, is the fact that you could have mistakes on your report and those mistakes take up to thirty days to correct. If you need a loan within thirty days, it could be using a score that reflects inaccurate or incorrect information. This makes sense to people, it’s simply a matter of remembering it!

Remember, you get a free copy of your credit report from AnnualCreditReport.com from each of the credit bureaus every single year. It won’t include a score but it will include your history, which you can verify as correct. If you want your score, many hardcore credit score watchers from the likes of CreditBoards.com (quite possibly the most popular credit related forum with nearly 75,000 members) really like myFICO.com.


 Government 
82
comments

How to Get Out of Jury Duty (Legally)

Summons for Jury DutyOne of my friends has been asked to be on a jury multiple times in the last few years (I don’t know the exact details) and was wondering how she could potentially be legitimately excused. Turns out, it’s not as difficult as it sounds (neither is fulfilling your duty, as most people don’t get selected for juries).

Rule #1: Never lie. Don’t be a fool, the odds say you’ll just have to sit in a room and waste a day watching news, don’t make things worse by lying. Plus, most places will let you bring a computer into that waiting room so bring one or a book or something semi-productive to do instead of watch TV. It’s not that bad, plus you get lunch.

So, still want out?

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 Banking 
7
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WaMu Increases Online Savings Account Rate to 4.0% APY

Washington MutualWaMu failed and was acquired by JPMorgan Chase, if you don’t have an account yet, I recommend going with FNBO Direct or one of these high yield savings accounts.

Washington Mutual sent me an email today indicating that they will be increasing their high yield savings rate from 3.75% APY to 4.00% (at midnight tonight, if you read this on Monday), which will beat all the banks on my list of best online savings accounts by at least half a percent (FNBO Direct is second with a 3.50% APY interest rate).

Nothing else will change about either the Free Checking or the Savings account offer, you can read my brief WaMu review to learn more about the accounts.

There have been concerns lately that WaMu was facing some liquidity concerns (mostly in the chaos that was last week, but the FDIC did send a MOU) but they are FDIC insured up to the same $100,000 as every other insured bank. WaMu benefits from the fact that its short term financing can come from deposits, rather than short term borrowing, so it’s not as exposed as investment banks. If the liquidity issue still concerns you and you don’t trust that FDIC will make you whole (it will), your next best option is FNBO Direct with a 3.50% APY rate or opening a CD somewhere else. I haven’t read a single thing about them having problems and they too are FDIC insured.


 Personal Finance 
10
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New Lincoln Penny Features Four Rear Designs

The U.S. Mint announced the four designs of the new penny to debut next year on Abraham Lincoln’s birthday, February 12th. They will be rolled out in three month intervals, starting Feb. 12th, with a Lincoln commemorative silver dollar released in 2009 as well. It’ll be the first time in fifty years that the penny will have changed and each of the four rear designs will show milestones in his life:

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Log Cabin design, his birthplace

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Indiana rail splitter design, where he worked as a young adult

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Illinois State Capitol design, where he served as a representative

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Half-finished US Capitol design, representing his work to build/preserve the Union

If you’re a fan of trivia, you’ll be happy to learn that Abraham Lincoln was the first person to appear on a regular US coin in 1909 (the penny of course). Here are 49 other fun facts about money.

Lastly, some want to see the penny abolished all together!

New Lincoln penny designs unveiled [CNN Money]


 The Home 
0
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How Much House You Can Afford?

Farm House with Rising SunMore than one reader has emailed me in the last month asking how much house I thought they could afford in our sinking housing market. One reader, Chester (not his real name), lived in California where home prices still seemed like they were in the stratosphere despite lowered prices, and the other (Wilson, also not his real name) lives in the Washington D.C. region where demand has kept home prices relatively stable. In both cases, I think the question of “how much house can you afford” is independent of the local real estate market and more a product of their spending habits and local cost of living.

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