HOW ARE CREDIT SCORES CALCULATED

When I moved to Canada in 2015 my family insisted that after getting my government IDs , that I open up a bank accounts ( checking and Credit card ) and start building credit. Building what? Because back in the Philippines credit score doesn’t exist and having a credit card can be considered as esoteric.

One of the immediate misconceptions that I noticed is that you should be spending to build credit which is absolutely false. You don’t have to spend unnecessarily just to prove to the bank that you’re using you’re credit card and be rewarded by bonus credit points, besides it’s not the bank that computes your credit score.

So why is it important to have a “good credit?”

Having a good credit would avail people with better interest for mortgage or car loans, and some employers and even apartments would now require credit checks to see how responsible you are with your finances. From the employer’s perspective, if you have a terrible credit score it also means that you are unreliable, so better try with a different company.

Knowing someone’s credit score may not be a bad idea before considering a romantic relationship with that person. I met someone working for a bank and she’s with someone who had a terrible credit score when they first met, which she’s not aware of. Long story short, because of the guys terrible credit score it prevents them from mortgaging the house that they want and it limits the jobs that the guys can apply for until he fixed his credit score. After some time fixing the guys credit score, they are in the house that they wanted and living happily ever after.

WARNING! Not all stories have happy ending, credit score can affect your life in ways you never imagined. Be cautious.

Here are the five pillars of your credit score and their corresponding percentage on how much it affects your rating;

  • PAYMENT HISTORY 35% 315/900
    Your credit history includes information about how you have repaid the credit .” Now here’s a tricky part, paying your credit on time and in full is good for your credit score, however, the financial institution a.k.a the bank is not making money out of you if you’re always paying on time and in full, that’s why they may not be thrilled to increase your credit limit. And if you ask for it, they will do a hard inquiry that will negatively affect your score and not a guarantee of anything.
  • CREDIT UTILIZATION 30% 270/900
    This is also known as the 30/30 rule. You should only use 30% of the limit per credit account. Let say you have 3 credit cards and two of those cards have $2,500 limit and one with $5,000 limit. Tho your total credit limit is $10,000, you technically can use 30% of that limit which is $3,000. However, it should be spread out in proportion to all your three cards to avoid a negative impact on your score. If you must spend $3,000, your should split it $750,$750, and $1,500 respectively. Or just pay the debt immediately.
  • CREDIT HISTORY 15% 135/900
    This section of your credit file details how long your credit accounts have been in existence. The credit score calculation typically includes both how long your oldest and most recent accounts have been open.” So let’s say you had your first card five years ago and considering to open a new credit card, Your first card is five years old and the new one will be 0 years and your history will be divided in to two, that makes your credit history 2.5 years old.
  • PUBLIC RECORDS 10% 90/900
    Those who have a prior history of bankruptcy, or have had collection issues or other derogatory public records may be considered risky. The presence of these events may have a significant negative impact on a credit score.

    Bankruptcy stays on your Equifax credit report for 6 years after the discharge date, or 7 years after the date filed without a discharge date. If a second bankruptcy is filed, then the first re-appears on your Equifax credit report, and both bankruptcies remain for 14 years after the discharge dates. 
  • INQUIRIES 10% 90/900
    Anytime an individual’s credit file is accessed for any reason, the request for information is logged on the file as an inquiry. Inquiries require the consent of the individual and some may affect the individual’s credit score calculation. The only inquiries which may impact a credit score are those related to active credit seeking (such as applying for a new loan or credit card). These inquiries are known in industry jargon as “hard pulls” or “hard hits” on your credit file. The hard inquiry may be the leading indicator, the first sign of financial distress that appears on the credit file. Of course not every inquiry is a sign of financial difficulty, and only a number of recent inquiries, in combination with other warning signals on the credit file should lead to a significant decline in a credit score. Your credit score does not take into account requests a creditor has made for your credit file or credit score in order to make a pre-approved credit offer, or to review your account with them, nor does it take into account your own request for a copy of your credit history. These are some examples of “soft inquiries” or “soft pulls” of your credit.

source: Equifax

If you want to know your credit score without negatively affecting it, I suggest CreditKarma. DISCLAIMER: I’m not affiliated to any of the companies, but would welcome endorsement opportunities 🙂

WHY YOU’RE NOT RICH

A lot of people envy the rich and the intellectual elites of the modern world of technology and automation. You’ll probably wondering why despite of having good grades at school or people you know that are valedictorians and achieve a lot of academic recognition and yet they are struggling financially.

If you’re not wondering, that’s a greater problem.

Getting an academic recognition or achievement is the actual motivation of those people who achieve such accomplishment. Though they want to be rich or acquire substantial amount of wealth is their ultimate goal, not everyone are on the right track despite of their diligence and determination it will not bring them to their desired destination.

The ultimate formula for financial success is solve the problem of enough number of people then the money would follow. Solve a problem of a billion people and charge them $1 each then you just made yourself a billionaire.

One of the obstacle of those people who dream and fail or at least not yet there yet is that they are limiting their options to those things that they enjoy or comfortable with with their current skills and intellectual aptitude. This applies to myself, despite of my “perceived” awareness where the world is leading to because of AI and automation, I should be learning coding or engineering to make myself relevant to the different world we’re gonna live in the future.

An average American reads a book a year and an average CEO reads 50+ books a year. This is the reality that people are conveniently dismissing, it’s probably because it’s easier to protest and complain than to pick up a book. However, reading book is not a direct causation for financial wealth. I know people who reads more than one book a year but not significantly ahead of the game or at least vs those who only read one book or no book.

The problem lies, which i’ve noticed in the quality of books they are reading. To be rich you have to serve other people but when you consume materials to get you through boredom or for purely entertainment and pseudo intellectual stimulating activity, you’re being the market, someone is solving your problem instead of the other way around with no financial return on your side.

Even materials about self improvement can harm your progress financial success if it consume so much of your time than necessary. Time that you could have used in execution towards your goal. This probably the reason why some billionaires end up making stupid mistakes like Jeff Bezos sending his nudes, and some would have failed or failing family life. These people bury themselves with work to the state of obsession which is necessary to achieve such success. But just like anything in life, everything has a price. The inevitable dichotomy we are all subject to, even the ultra rich.

On the other side are those who mastered self-improvement, the person with lots of friends, the authority of TV shows and classic novels etc, but broke. but that’s all in history on the rise of these influencers who looks like having the best of both worlds, but not really. The price that they’re paying if they not being authentic is the false sense of self and the unsustainable lifestyle that they set up for themselves that would bite them in the butt when the tide turns around. And there are some trading their privacy for fame and ephemeral adulation.

The constrains of time always put us in a situation that we have to choose between things. Study and pursue your goal or go out and have fun? Sleep or party? Work or be with your love ones?

In the it is a matter of prioritization and the narrative that runs inside your million years old brain. Non negotiable.

AV NOTES: DISTANCE MEASURING EQUIPMENT (DME)

DME provides the distance to the station in terms of nautical miles (NM) and *ground speed. Direction will be provided depending on the the equipment partnered with the DME.

DME can be stand alone devices or they can be co-located with an NDB or a VOR, a DME built in a VOR is called VORTAC and the military version of this is called TACAN.

With the TACAN the pilot will not be receiving the information from the VOR because it’s on a channel that is not accessible to General Aviation aircraft but DME information can be accessed.

When DME is co-located with a different equipment e.g. NDB, channels will be different when tuning from one equipment to another for direction and distance purposes. When co-located with another equipment doesn’t mean that they are built in together unlike VORTAC or TACAN.

DME technically operates in a UHF frequency, however, its frequency can be paired with a VOR, ILS, or Localizer frequency. The receiving equipment in most aircraft provides for automatic DME selection that coupled with VOR or ILS receiver. Hence, selection of the appropriate VOR or ILS frequency will automatically tune the DME.

Since DME operates in a UHF frequency, like VOR it is also line of sight. If you’re too low you might not receive signal from the DME.

DME Slant Range = DME distance2 – Altitude AGL (in NM)2 = True Distance to DME2

With adequate altitude the pilot is going to be able to receive DME information at distances over 200nm and DME will have and ERROR ±0.25NM OR 1.25% of the distance whichever is greater.

Slant range error is prominent when HIGH and CLOSE to the station. An aircraft directly over a DME station at 6,100 AGL, the DME equipment will indicate 1 NM.

The DME antenna can be mistaken for a transponder antenna looking like a shark’s fin located on the belly of the airplane, since DME is on the ground.

*Modern DME can also provide ground speed information, ground speed will only be be accurate if you’re heading directly to the station. Flying a perfect DME arc will indicated a “0 kts” ground speed.

ATC will sometimes use DME when requesting pilots to establish a hold, DME can also be use to figure out exactly where a specific intersection or point is along an airway.

AV NOTES: MULTI-ENGINE RATING

Since you’re already a pilot it is implied that you know how to fly planes. That’s why Multi-Engine training focus more on the emergency procedures heavily. Knowing the limitations and flow during an emergency is highly valued. and once mastered will give you your Multi-Engine rating that will bring you closer to your dream job.

Vmc – Minimum control speed
With the critical engine inoperative it’s marked with red radial line on most airspeed indicator. The minimum at which directional controls can be made under very specific set of circumstances.

During an engine failure, speed must not be lower than the Vmc otherwise the plane would stall.

P-Factor ( Asymmetric blade effect)
On level flight or on the ground, each prop will create the same amount of thrust due to identical angle of attack. With increase angle of attack, the descending blade will have higher angle of attack VS the ascending blade.

Critical Engine
Is the engine with the propeller turning towards the fuselage, some multi-engine aircrafts have both engine turning towards the fuselage ,eliminating the critical engine.

Single Engine Failure
Airplane will yaw towards the dead engine. Correcting with the rudder will make the plane turn if dead engine is not raised. To ease rudder correction raise the dead engine but no greater than 5 degrees.

When one engine quits, we lose 50% of power and 70% of performance due to additional drag.

Smaller ruder will have smaller angle of attack. When rudder stalls, the yaw will drastically increase.

Now imagine you and your friend are pushing a plane on each side, if you or your friend cheat on the pushing, it acts just like a dead engine. The person who is actually pushing the plane will find the plane turning to the other side because of the unequal force being applied to remain straight. On air with a multi-engine, to correct this, you’ll have to minimize the power of the good engine to minimize the yaw and the pressure on the rudder (your foot) and raise the dead engine no greater than 5° for directional control.

Maneuvers

Clean Stall

  • CALL (Cabin, Altitude, Location, Lookout) check
  • Throttle to 15″
  • Stabilize Plane
  • G-GUMPS (Gear / flaps up, Gas on both, Under carriage/ three light green(confirm with the outside mirror), Mixture, Prop, Switches)
  • Throttle Idle
  • Increase Angle of Attack
  • Once you feel the buffer and hear the stall horn, recover the plane

Recovery

  • Full power
  • Regain Altitude
  • Cruise Check (20″ MP, 2300 Prop,Cowl flaps closed, Fuel pumps off, Lights off, Gauges green)

Approach to Stall (Landing Configuration)

  • CALL (Cabin, Altitude, Location, Lookout) check
  • Throttle to 15″
  • <140 kts Gear down
  • G-GUMPS (Gear, Gas on both, Under carriage/ three light green(confirm with the outside mirror), Mixture, Prop, Switches)
  • <111 kts Flaps 25°
  • Throttle Idle
  • Maintain heading and altitude
  • Increase Angle of Attack
  • Wait for the first sign of stall (buffer / horn)

Recovery

  • Full power
  • Nose to Horizon
  • Flaps up
  • Confirm positive rate of climb
  • Gear up
  • Regain Altitude
  • Cruise check

Flight at reduced Airspeed (NOT SLOW FLIGHT)

  • Throttle to 15″
  • G-GUMPS (Gas on both, Under carriage/ three light green, Mixture, Prop, Switches)
  • Trim
  • <111 kts flaps 25°
  • Hold altitude and heading
  • Bleed speed to 80 kts
  • Throttle 17″
  • Pitch for 75 kts
  • Trim

Recovery

  • Nose to horizon
  • Throttle 20″
  • Flaps / Gear up
  • Trim
  • Cruise Check (20″ MP, 2300 Prop,Cowl flaps closed, Fuel pumps off, Lights off, Gauges green)

Steep Turn

  • Lookout
  • Trim
  • Airspeed and Altitude are stable
  • Call your speed ( During flight test if indicated airspeed is 130 kts, tell the examiner you will do the maneuver at 120 kts. *Load factor will slow the airplane down during turn, this will reduce power correction.)
  • Turn 30°
  • Pitch up before going to 45°

On Reverse

  • Turn 20° before the limit
  • Pitch down
  • Turn 30° to the opposite side
  • Turn 45°

TIMELESS FINANCIAL ADVICE FROM THE RICHEST MAN IN BABYLON

Babylon existed 4,319 years ago, these advice were found written on tablets. And it’s interesting how despite of the millennia our world and their world is separated, the advice written on those tablets are still relevant till this day.

This only proves that no matter how many times the Earth revolves around the Sun, human nature, our biases and our tendencies remain the same.

I hope these advice would help you propel in your journey towards financial freedom.

  1. START THY PURSE TO FATTENING
    “If thou select one of thy baskets and put in it each morning ten eggs and take out from it each evening nine eggs, what will eventually happen?”

    This is not new financial advice but probably the most ignored, to keep 10% of thy income REGARDLESS. Most people would argue that they are struggling to make both ends meet with their current income, then what more if they would put 10% aside every paycheck?

    This is a case of what I called financial Parkinson’s law; expense expands so as to consume the budget available for spending.

    It is feasible and you will survive. Just imagine if your government decides to increase your tax by 10% more, will you not adjust? will you not survive? This is completely the same aside from the fact that this time you are taxing yourself and the money will be set aside for your future self.

  2. CONTROL THY EXPENDITURES
    “What each of us call as our necessary expenses will alway grow equal to our income unless we protest to the contrary; Confuse not the necessary expenses with thy desires.”

    Frugality is the most misused and abused word in the world of finance today. Billionaire Warren buffet is known for being notoriously frugal, however, frugality is not the sole reason why he’s a billionaire. And let me repeat it, “Frugality alone will not make you rich but it can prevent you from being broke.”

    Frugality + multiple sources of income + some luck = Wealth.

    Being frugal is not being cheap but wise. It is the act of paying less and getting the same result.

    Dress to keep you warm, food for nourishment, house for shelter, car to bring you from point a to point b with peace of mind etc. Function first then aesthetic and pleasure second.

  3. MAKE THY GOLD MULTIPLY
    Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.” – Albert Einstein

    Due to the COVID-19 pandemic, more people are now engaging to stocks trading around the globe. Trading at the stock market is a good avenue to invest and enjoy the benefit of compound interest, if you know what you’re doing. On the other hand it can also lead to someone’s financial disaster.

    S&P500 prior to the 2008 crisis increased on average 10% annually. If you invest $100 yearly for 20 years and received 10% increase annually for 20 years. After investing $2000, you will end up with $5,727.50 or 186.37% gain.

  4. GUARD THY TREASURES FROM LOST
    “Gold in a man’s purse must be guarded with firmness else it’ll be lost; thus it is wise that we must first secure small amounts and learn to protect them before the gods entrust us with larger.

    Study carefully before parting with thy treasure, each assurance that it may be safely reclaimed. Be not misled by thy known romantic desires to make wealth rapidly. Before thy loan it to any man, assure thy self of his ability to repay and his reputation for doing so.


    Lending money becomes tricky and hard when it’s someone close to us that’s asking for help. However, be clear whether you’re lending money and expecting it to return or you’re giving money away to help out (tolerate) your love one. If you will be resentful if the person fails to return what he/she owes you, it is far better to say no from the start.

    If you’re working to earn money, remember that you traded your time for every dollar you earn. Giving away your hard earned money is like giving away your time, a commodity that you can never earn back.

  5. MAKE THY DWELLING A PROFITABLE INVESTMENT
    Most people’s greatest investment would be their homes, which I think is not really accurate. If you’re not aware yet, your house is domesticating you and it doesn’t appreciate all the time. Look at 2008 for reference.

    But again if you know what you’re doing, you can leverage your equity on your mortgage to acquire additional properties that will generate income and pay for itself.

    Unless the you the homeowner is doing this, your home is more of a liability than an asset.

  6. ENSURE A FUTURE INCOME
    Provide an advance for the needs of thy growing age and the protection of thy family

    Investing on rental properties, stocks or annuities etc. will ensure future income but would require some knowledge and effort on your side but will definitely worth it. Liquidation of some estate and living modestly would make anyone’s retirement more pleasurable.

  7. INCREASE THY ABILITY TO EARN
    The more you learn the more you earn.” -Warren buffet

    If you look closely, COVID-19 teaches a lot of lessons and one of those is that no job is safe during a pandemic and that a pandemic can happen and last this long despite of the technology that we have today.

    It’s either we adapt or perish. Adaptation means learning new skill, new trade or new field. Things we conveniently delegate to professionals before in exchange for a good sum of money. Now since most people’s livelihood is in jeopardy, people don’t have the means to pay that it forced them to learn new things and do things on their own.

    During times of prosperity however, if we would adapt this kind of mindset and become a sponge or a learning machine, not letting our profession limit our identity, the sky is indeed the limit in terms of our earning capacity.