Tag: Financial Education

 

How to Rebuild a Damaged Credit Score

There are many avenues that lead to damaged credit. You might have missed a few payments on an important loan. You might have opened too many credit cards. You might have even defaulted on a mortgage or car loan.

However you got here, your personal credit score is damaged, and it’s likely affecting your life in several negative ways; you might find yourself turned down for loans, getting worse rates for mortgages, and/or being rejected for apartment applications. Fortunately, you don’t have to stay in this situation forever. With the right techniques and the proper commitment, you can rebuild your credit score from the ground up.

How to Rebuild a Damaged Credit Score

Step One: Understand Your Score and Look for Errors

First, you need to understand what affects your credit score, and how those factors manifest in your final number. There are actually a few different types of credit scores, but your FICO score is by far the most common. Your FICO score is affected by the following factors, in order of most important to least important:

  • Payment history. The biggest percentage of your FICO score depends on your payment history—in other words, do you have a long history of making your payments on time? Late and missed payments can accrue quickly, devastating your credit score, while consistent, on-time, in-full payments can strengthen it.
  • Amounts owed. Your credit score will also consider how much money you owe, across all your accounts, including your mortgage, car loan, student loans, credit cards, and other sources of debt. The more you owe at any given point, the lower your credit score will be, especially if you have a high debt-to-income ratio.
  • Length of credit history. Though less important, credit reporting companies still want to know how long you’ve held your various sources of credit. The longer you’ve had your accounts active, the better, because it sets a precedent for your patterns of behavior.
  • Credit mix. Your credit mix is also important. In other words, what types of credit do you have open, and how many accounts do you have open? Having 12 credit cards doesn’t look too good while having two credit cards, a mortgage, and a student loan looks much better balanced.
  • New credit. What percentage of your credit is “new” (i.e., opened within the past several months)? The newer your credit mix is, the more inherently risky or volatile it will be considered.

You can check your credit score once a year from each of the three major credit reporting companies (TransUnion, Equifax, and Experian) at AnnualCreditReport.com and see a breakdown of how you’ve performed in each of these categories. With that information, you’ll know which areas you need to improve on most.

While you’re doing this, be sure to check for any errors that may be negatively and unfairly affecting your score, such as lines of credit you don’t remember opening up, or missed payments that were erroneously recorded.

Step Two: Commit to Avoiding New Credit (and New Debt)

Your first real step in making a better credit score is stopping the bleeding—in other words, not making your credit score any worse than it already is. Try to keep most of your current accounts open (especially the oldest ones), since account history plays a role in shaping your credit score, but make it a point not to open any new accounts unless absolutely necessary. This will help you keep your ratio of new credit low, and decrease your temptation of tapping into those new loans or credit cards.

While you’re at it, avoid taking on new debt, if possible. Don’t buy a new house or a new car, and don’t rack up new debt on your credit cards. This is a relatively easy step to take, so long as you can make ends meet, and it will set you up for success when you start rebuilding your credit score.

Step Three: Set Up Reminders for Payments

The most important factor for your credit score, unfortunately, takes the longest time to build or repair—your payment history. If you want your credit score to increase, you’ll need to make all your due payments on time, and preferably, in full, for several months to a few years. The best way to do this is to set up automated reminders, to let you know when a payment is coming up, and when that payment is officially due. That way, you won’t have to worry about remembering to make those payments—you’ll get a handy prompt to do so.

Step Four: Start Reducing Your Debts

So far, you’re not opening new credit or taking on new debt, and you’ve got your payments covered. Now, your job is to start reducing your current debts:

  • Consolidate what you can. Debt consolidation isn’t always a good idea in pursuit of a better credit score, but it could be valuable in reducing your monthly payments. For example, if you have one credit card with an interest rate of 30 percent and another with a rate of 20 percent, transferring to the 20 percent card can save you a ton of money, especially over the long term. It can also make your payments much simpler and easier to remember.
  • Negotiate your rates. Take the time to renegotiate some of your interest rates, especially on credit cards. If you’re trying to take a proactive role in eliminating your debts, you’ll be surprised to learn how much you can reduce your interest rates and monthly payments just by asking. The worst they can say is “no.”
  • Restrict your budget. Start a budget if you haven’t already, and take a good, long look at it. Chances are, there are several items you don’t truly “need,” such as trips to restaurants and bars, entertainment purchases, and ongoing subscriptions. If you want to get serious about paying off your debts, you’ll need to treat these with a scrutinizing, minimalistic eye. Cut everything you don’t need, and find lower-cost alternatives for what you do need.
  • Focus on high-interest debts first. Interest rates compound over time, forcing you to pay far more money than you need to when paying off a debt. That’s why it’s important to focus on your highest-interest debt first, paying that down before moving to your lower-interest debts. This won’t improve your credit score faster, but will reduce the total amount of money you spend to eliminate your debts.
  • Acquire new sources of income. If you still need help paying off your debts, your best option is to acquire a new source of income (or two). Depending on your skill set and current sources of income, that could mean anything from taking on a new part-time job to starting a side gig selling crafts on the internet.

Step Five: Establish Better Long-Term Habits

After you’ve eliminated or reduced the majority of your debts, you can start building better long-term habits, to keep your credit score inching higher and prevent another disaster:

  • Pay everything you can on time. Never take on more credit card debt than you can feasibly handle, and pay all of your bills on time. If you set up automated reminders when establishing better payment habits, keep them on, and do your best to never miss a payment.
  • Keep a good mix of credit. You might be tempted to close out your credit cards if you’ve been frustrated by credit card debt in the past. However, it’s better to keep those accounts open. Keep a good mix of credit, and use those lines of credit on an occasional basis so the activity can contribute to your new credit score. Good sources of debt, like student loans and mortgages, can get you something truly valuable and give you payments you can use to build your score at the same time.
  • Establish an emergency fund. Many people end up in debt because they can’t afford to pay for an emergency, such as a car repair or a medical bill. Proactively prevent this by creating an emergency fund of several thousand dollars, or a few months of expenses, and only tap into it when you really need it (replacing it as soon as the emergency is over). That way, you can avoid going into more debt, and make your finances more consistent.
  • Check your credit score periodically. You can check your credit score for free once a year, but you can also get your credit score for a low rate from other providers. Checking your credit score won’t affect your credit much, but it’s still not something you should do weekly, or even monthly (especially considering your score won’t change that fast). That said, it’s good to keep an eye on your score to check for inaccuracies and see how it’s progressing—so consider checking in once or twice a year to monitor your progress.

Damaged credit doesn’t mean you have to give up a reasonable lifestyle, and it doesn’t mean there’s no hope for your financial future. It may take months, or in some cases years, to get your credit score back in good order, but your efforts will be worth it whenever you apply for a loan, make a major purchase, or attempt to make a major life change.


This article originally appeared on Due.com.

 

What Are Money Orders and How Do They Work?

Money orders are a popular option to send money and make payments, but unless you have used them before, money orders may seem like a foreign concept. In practice, money orders are a way to turn cash into a check without a bank account. You can get a money order from a bank, some grocery stores and big-box retailers, and even the post office! Follow along to learn more about money orders, how they work, and when you may consider using them.

What is a money order?

A money order is a financial instrument that works like a check. But unlike a personal check, a money order is considered “guaranteed funds.” This is an important distinction for some businesses. Landlords, for example, don’t want to get stuck with bounced check fees from new tenants. Requiring money orders for a deposit or first months rent, or any rent after a history of bounced checks, is relatively common when renting a home.

Money orders are typically available for amounts up to $500 or $1,000. Over that amount, you’ll need to head to the bank for a cashier’s check, a similar instrument used as a guaranteed check for larger dollar amounts. Because they are guaranteed, you’ll need to fund a money order up-front. That usually means handing over cash or swiping a debit card. Most stores will not sell a money order to someone using a credit card.

Depending on where you grew up, money orders may be unfamiliar. For the most part, this may be because money orders are more common in low-income communities. The sad reality is that low-income or low-credit renters are more likely to hand their landlord a bad check. To compensate, a large portion of the low-income community may be forced to pay extra to use money orders to protect their landlords even if they have no personal history of writing bad checks.

Money orders cost anywhere from around 50 cents to a few dollars each depending on where you buy them.

Why would I use a money order?

In most cases, you shouldn’t need to use a money order. If you already have a bank account, you can do nearly the same thing for free when you use a check. Until my late 20s, I never needed a money order for anything! When a landlord asked for my rent and deposit in money orders when I moved to Portland about five years ago, I had to do a little legwork to figure out where to even get a money order, and I used to be a bank manager! That is how rare money orders are to some people.

Other situations where you may want to use money orders, if you don’t have a checking account, would be to send money to someone in the mail. If you don’t have a bank account, you can’t send money with a free transfer or payments app, so you’ll need a non-electronic payment method. Money orders are more secure than cash, are written to a specific depositor, and don’t include your bank account number if you are looking for a safer alternative to a personal check.

These features also make money orders common for scammers. If you are ever asked for a money order by someone you don’t know in person, don’t send it or hand it over unless it is a verified, reputable business.

Where can I get a money order?

You can usually get a money order at a bank, though banks tend to charge more for money orders than some other providers. If you need a cashier’s check, your only option is a bank. You may have to go to your bank, though some banks are willing to issue money orders to non-customers with cash for a higher fee. At a bank, you should plan on paying around $5 for a money order.

Outside of the bank, the best two places to get a money order are your local Walmart store or a local United States Post Office branch. Both Walmart and the Post Office offer money orders at some of the best rates out there. Walmart charges just 70 cents for a money order up to $1,000. The post office charges $1.60 or less depending on the amount.

You can also go to a money transfer agent like Western Union or MoneyGram. You can find these types of transfer centers at many retail stores, grocery stores, pharmacies, and convenience stores. Plan on spending around $1 per money order at these locations.

A cheap way to send funds

At the end of the day, money orders act as an inexpensive option to send money. Even if you have a bank account, money orders may come in handy on occasion. For $5 or less, you can send a secure, guaranteed check. That’s what these payments are all about.


This article originally appeared on Due.com

 

5 Money Questions Every 35-Year-Old Should Ask Themselves

Everyone has that magic moment where they decide to double down on their financial health — or risk meeting long-term life and money goals. After all, wealth rarely builds itself. If you’re unsure of how to get or stay financially fit, here are five money questions every 35-year-old should ask themselves.

1. What is my credit score?

Your credit is uber-important to your financial health, as a solid score qualifies you for better rates on home loans, insurance policies, cell phone plans and more. That’s why credit monitoring isn’t one-and-done. In fact, you should check your digits regularly, ideally once a month, not just right before you apply for a loan. Added incentive to stay on stop of your credit standing: Errors on credit reports, along with instances of identity theft, are more common than you may think.

Fortunately, you can check your credit reports from the major bureaus for free every 12 months via AnnualCreditReport.com and you can monitor your credit score sans charge via certain credit card issuers or certain personal finance websites, like Credit Sesame.

2. What is my net worth?

Your net worth is the sum of your assets (investments, savings, home equity), minus your liabilities (mortgage, credit card debt, student loans). It’s also probably the best gauge of your financial health at any given time. If your liabilities outpace your assets, you’ve got some work to do — and you can prioritize what debt or issue to tackle first. If your assets outpace your liabilities, you can explore the best ways to put your money to work.

Your net worth is also a great benchmark when you’re ready to put a financial protection plan in place. Case in point …

3. How much life insurance do I need?

If you have dependents — or plan to have dependents — life insurance is a key component to your family planning … well, plan. A policy allows your loved ones to cover their expenses and liabilities were you to pass away while they are still reliant on you. It can also cover big-ticket items in your family’s future, like college tuition. Life insurance rates increase as you age or develop health conditions so it’s important to get coverage when you are young and healthy.

Most people are best-served by a term life insurance policy, which covers you for a set number of years, then expires, though there are a few instances that call for whole life insurance, which lasts until you die and comes with a forced-savings component. Policygenius can help you compare and buy life insurance, starting with a tailored online recommendation.

4. Am I paying myself first?

That’s a fancy way of asking if you are saving enough for a rainy day? Basic rule of thumb says everyone should bank at least three-to-four months of expenses away in emergency savings.

If your cash-on-hand falls short of that stat, try auto-depositing a small amount of your paycheck into a high-yield online savings account. Those dollars will eventually add up. You can also tap a budgeting app or tool to find places to pare back. This simple budgeting spreadsheet, for instance, has line for “savings contribution” all ready for you.

5. Do I need to save more for retirement?

Most people do. In fact, a recent survey from Northwestern Mutual found one in five Americans (21%) have no retirement savings at all and nearly half (46%) haven’t taken any steps to prepare for the likelihood that they could outlive their savings. That’s unfortunate, because there are a few easy ways to boost your nest egg.

Start by upping your 401(k) contributions, even by as a little as 1%. (A small increase can make a difference, thanks to compound interest.) Where possible, take advantage of other employer-sponsored benefits to lower your taxable income, like flexible spending accounts, commuter benefits and health savings accounts. Bonus: HSAs often double as de facto supplemental retirement account because you can make penalty-free withdrawals for any reason once you turn 65.

Finally, consider opening a Roth individual retirement account. Here’s why.


This article originally appeared on Policygenius.com.

 

Make These 3 Money Moves to Protect Your Family in 2019

With a new year comes new goals. A new year is also an ideal time to reevaluate your financial situation. Whether you are looking to pay off debt, increase your savings, or create a new budget, there are plenty of ways to improve your financial situation in 2019.

But here’s an often overlooked financial consideration that you should take into account: insurance. Security is absolutely priceless, and you never know when tragedy can strike. Are you and your family prepared?

As we move toward 2019, take the time to research insurance options to protect you and your family, To get started, here are three essential money moves to position yourself for potential emergencies and life challenges.

1. Get term life insurance

No matter who you are or what your financial situation is, life insurance is important.

According to the Life Happens 2018 Barometer survey, over 35 percent of households would feel financial impact within one month if the primary wage earner passed away. But, according to the same survey, only three in five people have their own life insurance policy or a policy through their job.

And that’s not all. According to the Life Insurance and Market Research Association, it appears that even those who do have life insurance feel insecure with their overall coverage level. Nearly 40 percent of Americans state that they wish their spouse or significant other had more life insurance coverage. In addition, more than half of married millennials would like more life insurance coverage for their spouses or partners, according to the same survey.

Where to start? Think about purchasing term life insurance. This type of insurance is relatively inexpensive for most families. It’s also easy to understand. In a nutshell, term life insurance provides coverage for an agreed-upon period – or term – of time. For example, if you should pass away during your policy period, your insurance company pays out the benefit to your designated beneficiaries. With term life insurance, you choose how long you want your policy to last. Common term lengths are 10, 20, or 30 years. Also important to note: Once the term is over, the policy expires. Yet, for an affordable price, term life insurance provides peace of mind and a financial security blanket for your family.

TIP: Check out Ladder

If you don’t currently have term life insurance, there many ways to purchase it, including through life insurance companies and insurance comparison sites. One option is the term life insurance company Ladder. Ladder makes life insurance easy because you can apply for it directly online without having to deal with insurance brokers. Ladder offers life insurance at affordable rates with a price lock guarantee. And, best of all, it only takes five minutes to apply to get insured!

2. Purchase renters or homeowners insurance

Tragedy can strike home at any time. Are you prepared?

You never know when a pipe could unexpectedly break, or your neighbor sets off the sprinkler system in your apartment building, ruining everything. Be prepared and protect yourself and your loved ones by getting homeowners or renters insurance today.

TIP: Check out Lemonade

For starters, check out Lemonade, a new type of renters and homeowners insurance that prides itself on transparent payment options and quick payment of claims. Renters insurance rates start at just $5 per month, and $25 a month for homeowners insurance. Plus, any money that you pay that doesn’t get funneled into claims will be donated to a charity of your choice. Pretty sweet (no lemonade pun intended!)

Lemonade currently offers renters, condo, and homeowners insurance in New York, California, Illinois, New Jersey, Nevada, Georgia, Pennsylvania, Maryland, Arizona, Michigan, Connecticut, and Washington D.C. They offer renters and condo insurance in Texas and Rhode Island, and renters insurance only  in Iowa, Wisconsin, New Mexico, Ohio, Oregon, and Arkansas. Additional states and coverages are rolling out every year.

3. Don’t forget auto insurance

Bad things happen to car owners all of the time – and it can cost you an arm and a leg, even if you are not at fault. Even one small accident, like getting rear-ended, can cost you thousands of dollars if you don’t have the appropriate insurance.

Fortunately, car insurance can put your mind at ease during or after an accident. It can also be expensive. In fact, the average annual cost of car insurance paid in the United States was more than $941 in 2018, according to a study by ValuePenguin. And, depending on where you live, your state could be one of the more costly ones. Louisiana takes the medal for the state with the highest car insurance rate, costing insured residents an average of $152 a month. That’s $1,824 a year – ouch!

TIP: Check out Root

Luckily, insurance companies like Root are on a mission to make car insurance more cost-effective. Instead of just basing your rate on your driving record, Root uses an app to track your driving. Your real-time driving habits then determine your rate. If you are a responsible driver, you’ll receive a better quote. Because of this, you can save as much as 52 percent on car insurance with Root.

Give yourself the gift of security

You certainly can’t put a price-tag on security. You also shouldn’t have to spend a ton of dough to feel financially stable. So, this year, save money and protect yourself and your loved ones by making sure you have insurance.

 

Money Lessons from Your Favorite Holiday Movies

The most wonderful time of the year is almost here. You’re bound to see holiday cheer spread everywhere, especially in the movies.

It seems like everywhere you look, there are holiday movies. These fan favorite films are repeatedly played on television, in theaters and even used in advertising. But, we bet you didn’t realize that there are valuable money lessons in your favorite holiday movies. It’s true.

From tidbits about the importance of saving extra cash to curbing your spending habits, you’ll get a kick out of the financial lessons these holiday movies can teach you. Take a look at some of our favorite holiday films – and the lessons they continue to teach us.

Dr. Seuss’ “How the Grinch Stole Christmas”

Lesson: The holidays remind us to be kind and not materialistic

Dr. Seuss’  classic book was turned into both an animated and live-action movie. While you can argue all you want about which version is your favorite, there is no doubt that both movies can teach viewers a valuable lesson: Be kind.

The main character, The Grinch, alienated himself from Whoville, the community where he grew up. He ends up pretending to be Santa but instead of delivering gifts to the village of Whoville, he ends up stealing gifts and decorations. The Grinch was then shocked to see Whoville bond together to celebrate the holiday, even when they all lost a great deal. Eventually, The Grinch has a change of heart, and ends up celebrating Christmas with the others in Whoville.

The lesson learned here is that you don’t have to get caught up in the materialism of the season in order to celebrate. According to the National Retail Federation, the average American spent over $967 on holiday spending in 2017. That’s a whole lotta dough! The Grinch serves as a good reminder that the holidays are about more than gifts and decorations. The holidays are about being together and being kind to others.

“A Charlie Brown Christmas”

Lesson: You can enjoy the holidays without splurging

Ah, Charlie Brown. Poor Charlie is a character who constantly finds himself going against the status quo. During the Christmas season, all of his friends (and his beloved dog Snoopy) are writing their extensively long Christmas lists.

Instead of focusing on himself during the holiday season, Charlie volunteers to direct the Christmas play. To set the scene, Charlie must purchase a Christmas tree. After spending an evening looking at expensive, trendy (at the time) aluminum trees, he ends up purchasing a sad, tiny fir tree. He brings it back to the play and all of his friends laugh and ridicule Charlie for picking out such a pathetic, sparse tree.

But, after bonding together and getting creative, Charlie and his friends are able to turn the tree into a big, beautiful holiday centerpiece.

Charlie Brown reminds us that we don’t have to succumb to trends and buy the shiniest new toy. With a little elbow grease and love, you can turn even the strangest item into something beautiful.

“A Christmas Carol”

Lesson: Be generous

“A Christmas Carol,” originally a book by Charles Dickens, outlines the life of Ebenezer Scrooge, a classic character who is downright pessimistic, selfish and rude. A business owner, he makes harsh decisions and pushes everyone away.

After a series of strange dreams, Scrooge is haunted by Christmas past, present and future. Ultimately, he awakes to a new perspective on life, and becomes extremely cheerful and generous. He turns a complete 180, and his life is improved for the better.

“A Christmas Carol” goes to show you that focusing on just yourself won’t get you far. Generosity wins – time and time again.

“White Christmas”

Lesson: Always save for a rainy day

The story of “White Christmas” includes two ex-army men turned singers and dancers: Phil Davis and Bob Wallace. Davis and Wallace find themselves following two potential love interests to Vermont, where they all stay at a failing ski resort owned by their former Army general. The ski resort is failing due to a lack of snow, which ultimately results in a decrease in guests.

The rest of the movie goes on to show their attempts to save the struggling resort by performing their singing and dancing act.

Fortunately for us, the story of “White Christmas” reminds us of the importance of an emergency fund, particularly if you are a business owner. Don’t fall into the statistics. A survey by BankRate states that just four in 10 Americans have savings to rely on in the event of an emergency.

Emergency funds are vital for your overall financial wellness – whether you own a failing ski resort or not. Furthermore, “White Christmas” serves as a reminder to get creative when times are tough. You might just surprise yourself by doing so.

All in all

No matter what your financial situation is, it’s possible to enjoy the holiday season without spending a huge wad of cash. Remember, material gifts will soon be forgotten, but the memory of the holiday season can last a lifetime.

 

8 Reasons You Need to Pay Attention to Your Credit Score

Your credit score affects so many important aspects of your life, from your personal finances to your ability to work and live where you want. Having a good credit score can also save you hundreds or thousands of dollars annually in interest, insurance premiums, cell phone plans and more.

It pays to monitor your credit score on a regular basis so you know where you stand. Here are eight reasons you need to pay attention to your credit score.

1. It helps you qualify for a loan

Lenders take a hard look at your finances before they extend you a mortgage, auto loan, personal loan or other form of credit. They may review your income, the information in your credit report and your credit score.

If your credit score is too low, your loan applications could get rejected. It’s a good idea to monitor your credit score, and build your credit when necessary, to make sure it falls within a desirable range. Curious what constitutes a good credit score? Check out our article on credit score ranges.

2. You can get better credit cards

There are credit cards out there for just about every type of credit score. But the better your score, the better the credit cards you can qualify for. If you want a premium credit card — or just a solid cash back rate with low fees — you’ll probably need a credit score in the good-to-excellent rage.

3. The better your score, the lower your interest rates

Your credit score doesn’t just help lenders and creditors decide whether to do business with you. It also helps them determine the interest rates you’ll pay on their financial products. Generally speaking, the better your credit score, the lower your interest rates for loans and credit cards. Low interest rates can save you hundreds or thousands of dollars in the long run.

4. You could net cheaper insurance

Did you know that your credit score actually helps determine how much your insurance costs? Whether it’s car insurance, life insurance, homeowners insurance or health insurance, people with poor credit tend to pay higher monthly premiums.

Insurance providers don’t see the same credit score as traditional lenders. Instead, they see a credit-based insurance score, which looks at a combination of your insurance history and certain items in your credit report. Some states don’t allow certain types of insurers to use your credit score to determine their rates, so check your local laws.

5. Negative items could appear on any credit report

A dip in your credit score is a telltale sign that a negative item has landed on your credit report. This could mean you forgot to pay a bill, you have an account that went to collections or you declared bankruptcy. It could also mean that due to an error or even identity theft, inaccurate information is landing on your credit file. (Here are a few other ways to tell your identity has been stolen.)

If the negative item is legitimate, it’s helpful to know how it’s affecting your credit. If it’s incorrect, you should try to have it removed from your credit report ASAP by disputing the item with the credit bureaus.

6. You’re looking for your dream apartment

To avoid renting to someone who won’t pay their rent, landlords and property management companies often require credit checks for potential renters. While the fairness of this practice is open to debate, the fact remains that a poor credit score can prevent you from getting into your dream apartment. If you know your credit score ahead of time, you can take steps to improve it before you submit a rental application.

7. You’re on a job hunt

Some employers perform credit checks on job candidates before extending a job offer. While they can’t check your credit score, they will pull your credit report (though they won’t see the same information a lender or creditor would).

Not all companies do this, and several states have laws prohibiting the practice or limiting how much information the employer can see. But it’s a good idea to know your credit score and check your credit report before you begin a job hunt so you at least have an idea of how you might look to potential employers.

8. You’ll learn more about credit

Even if your aren’t planning to apply for a loan, take out an insurance policy or find a new job, it’s a good idea to be familiar with your credit score. You can look out for dips or watch it improve over time, and be prepared the next time someone is about to check your credit.

You can pull your credit reports for free every 12 months at AnnualCreditReport.com. Those reports won’t come with your credit score. You can purchase them at the time for a nominal fee. However, you can check your credit score for free each month on credit websites, like Credit Sesame, or via certain credit card issuers.

Looking for more life hacks? We’ve got a roundup of 25 apps or tools that can make life easier.


This article originally appeared on Policygenius.com.

 

4 Financial Decisions You’ll Need to Make in Life

When it comes to building a life you love, a host of choices can play a role. If you take care of your body through regular exercise and healthy nutrition, for example, it’s more likely you’ll enjoy good health. If you strive to do your best work your job, you have a better shot at a raise or a promotion.

But when it comes to money, the “right” thing isn’t always cut and dry. Many financial questions have more than one good answer. You’ll likely need to make some tough choices. Here are four of the biggest financial decisions you’ll have to make in life — whether you want to or not.

Roth vs. traditional IRA

While traditional workers typically save for retirement in an employer-sponsored account like a 401(k), most people have the option to invest more money in a traditional individual retirement account or Roth IRA. In 2018, you can invest up to $5,500 across both types of accounts (or $6,500 if you’re ages 50 and older). (Want a bigger nest egg? Try these five ways to save more for retirement.)

Which should you choose? According to financial adviser and retirement podcast host Benjamin Brandt, you should consider two factors — time in the market and future taxable income.

Brandt says a Roth IRA can be appealing for young investors since funds invested have tremendous potential for compounding growth. And since funds invested in a Roth IRA are after-tax dollars, retirees can take withdrawals tax-free starting at age 59 ½.

Some investors deduct contributions to a traditional IRA may be better off with this option, particularly if they are older and believe they will earn less in retirement than in their working years, says Brandt.

With a Roth IRA or traditional IRA, you’re either paying taxes on your contributions now or later. The right option can vary, so consider the pros and cons before you decide.

Buy or lease a car

Another important financial decision has to do with one of the most popular depreciating assets Americans buy — their automobiles. You can buy a car if you want, but you also have the option to lease a car. While leasing doesn’t allow you to build equity, it protects you from paying for major car repairs that can destroy your budget or decimate your emergency fund.

Still, leasing is typically a poor financial decision, says San Diego financial planner Taylor Schulte.

“Although it’s nice to have a new car every few years and potentially deduct a portion of the payment through a business, leasing a car means you will forever have a car payment dragging down your monthly savings rate,” he said. “If you want the best deal, spend time finding a reliable used car that fits your needs or attempt to ditch the car altogether.”

Schulte says that, between public transportation, ride-sharing programs, and ride-hailing companies like Uber and Lyft, there are more alternatives to owning a car than ever.

Credit or debit

Another financial decision you’ll need to make can have a lifelong impact on your finances. Should you use credit cards for convenience, rewards and consumer protections? Or should you stick to debit and avoid the temptation of overspending and debt?

Schulte says credit cards can be a solid choice for consumers who have proven they can actively use a credit card and pay off the balance each month. But the opposite is also true.

“If you miss payments and pay interest and penalties, you will quickly offset any benefits the card might be providing,” he says.

If you’re prone to take on debt, miss payments or overspend when you use credit cards, you’re better off skipping them and sticking to cash or debit instead.

Term life or whole life

Chances are, you need a certain level of life insurance to cover your final expenses and debts when you die. If you have kids, you’re the breadwinner in your home, or you have considerable debts, you may need 10 times your annual income or more in coverage to feel secure.

You need to choose which type of life insurance to buy. While there are many different variations to choose from, most people buy either term life insurance or whole life insurance. While term life insurance lasts for a specific term (usually 10 to 30 years), whole life lasts, as you might guess, your whole life

While whole life insurance may seem like a good idea, these policies are often expensive. That’s why most people are better off with a high-quality term life insurance policy that replaces their income in the event of their death.

On the flip side, a whole life insurance policy could make sense in some situations. Make sure to weigh the pros and cons and compare costs (and the opportunity costs of buying expensive whole life instead of term) before you decide.


This article originally appeared on Policygenius.com.

 

7 Simple Ways to Improve Your Credit Score

Unless you possess a magic wand or supernatural powers, improving your credit score isn’t something you can do in the blink of an eye. But here’s the good news: a better credit score is in reach — it just takes a little planning to get there.

What if you don’t have time to monitor your credit and finances every second of the day? No problem. Follow these 7 tips for a better credit score, with minimal hassle.

1. Open a Chime Account

An estimated 62 million Americans have a thin credit file, according to Experian. This means that they don’t have enough credit history to generate a credit score.

If you have no credit history at all, you’ll have to start somewhere. Opening a Chime account can help. You can open a checking and savings account by downloading the Chime mobile app. From there, you can set up an automatic deposit to savings. This will help you grow a cash cushion that you can use as a deposit for a secured credit card. This deposit doubles as your credit limit. You make purchases with your new card and your account activity shows up on your credit report.

According to Jill Caponera, consumer savings expert at PromoCodes.com, this can help you build your credit with one caveat: Make sure “you’re paying more than the minimum balance due and submitting your payments on time.”

2. Automate Your Bill Payments

Payment history accounts for the largest share of your credit score. And, putting bill payments on autopilot can help you avoid late payments, which can cost you major credit score points.

“Automating your bill payments can be super helpful, especially if you’re forgetful, busy or something unexpected happens,” says James Garvey, CEO and co-founder of credit-building app Self Lender.

Garvey knows about this first-hand. He launched the app after several late payments seriously dinged his credit score. “I was surprised such a simple mistake could have such a big impact,” he says.

3. Use Alerts to Manage Due Dates and Balances

If you don’t want to automate, you can stay on top of payment due dates by scheduling payment alerts for your credit cards and loans. When you get an alert, you can then set up a payment.

To schedule bill payments from your Chime spending account, log in to the Chime mobile banking app, navigate to the Move Money section, then choose Pay Bills from the drop down menu. You can schedule Chime Checkbook payments, or set up direct debit payments by providing billers with your Chime deposit account number and bank routing number.

Alerts can help you keep track of your balances and how much of your available credit you’re using. In other words, alerts can help you manage another aspect of your credit score: credit utilization.

“Credit utilization ratio is the amount of available credit you’re using,” says Randall Yates, CEO of mortgage marketplace The Lender’s Network.

“The lower your credit card balances, the higher your score will be,” says Yates.

4. Increase Your Credit Limits

Paying down your balances can free up available credit and improve your utilization ratio. But, debt payoff can take time.

Bumping up your credit card limits may be a faster way to see score improvement. The trick is to avoid charging up to your new credit limit. Garvey says a good rule of thumb is to try to keep your credit usage at 30% of your total limit or less.

“Assuming you have a good payment history, asking for a credit limit increase can be a good way to lower your credit utilization ratio, which can positively impact your credit score,” Garvey says.

5. Sign Up for Free Credit Monitoring

Free credit monitoring services, like those offered by Credit Sesame and Credit Karma, can help you keep tabs on your credit history as you work towards improving your score. You can also get a free credit report every 12 months from the three major credit bureaus at Annual Credit Report.

Monitoring your credit can help inform you of errors or inaccuracies on your credit report. For example, you can spot any changes to your credit report and therefore figure out what’s contributing to up and down movements in your credit score, says Nathalie Noisette, founder of credit counseling service Credit Conversion.

6. Dispute Credit Report Errors If You Find Them

An incorrectly reported balance or inaccurate gaps in your payment history can hurt your score in a big way.

You can, however, do something about errors by disputing them with the credit bureau that’s reporting the information. Noisette says she’s worked with clients that have seen their scores increase by 30 to 50 points after successfully disputing an error. If you’re not sure where to start with a credit report dispute, the Federal Trade Commission has a handy guide you can follow.

7. Pay Off Your Cards but Don’t Close Your Accounts

If you’ve successfully zeroed out the balance on one or more of your credit cards, you’ve definitely earned the right to a victory dance. Just don’t shut your account down completely if you’re trying to improve your credit score.

“Doing so could have a negative impact on your credit, as it will lower your available credit limit and raise your credit utilization ratio,” Caponera says.

And, if you end up needing a credit card down the road, you may have to apply for a new one, which could hurt your score since inquiries for credit shave off a few points each time.

The better option? Keep the card open and use it to make a small purchase every month, then pay off the balance, Yates says. This keeps the account active so your credit card company doesn’t shut it down and it’s an easy way to continue your positive payment history streak.

Improving Your Credit Score Doesn’t Have to Be Complicated

Raising your credit score doesn’t involve any secret formulas or hacks. It’s all about patience and knowledge. It’s key to know which habits have the most impact on your score, such as paying bills on time and keeping your credit card balances low.

By following the tips here, you can put positive habits into regular practice and watch your credit score improve over time.

 

Everything You Need to Know About a Secured Credit Card

A credit card can make paying bills or shopping for the holidays super convenient. But getting approved for one isn’t always a lock if you don’t have years of responsible credit use under your belt.

According to Experian, 62 million Americans have a thin credit file. Essentially, this means that they don’t have enough information on their credit report to calculate a credit score. Experian also found that 37 percent of Americans have credit scores that put them in the fair or very poor borrower category. And, a poor credit score can indeed can lower your odds of getting approved for a credit card.

Fortunately, you’re not completely shut out of the credit card game if you have thin or poor credit. Secured credit cards can give you purchasing power, while also helping you build your credit score.

What’s a Secured Credit Card?

It’s simple. A secured credit card is a card that requires you to offer up a cash deposit as collateral. The deposit is an insurance policy for the credit card company in case you default on paying back your balance.

The amount of the deposit varies, depending on the card. Typically, your deposit doubles as your credit limit. So, if you open a secured credit card account with a $500 deposit, your credit limit would be $500.

As you make purchases against that limit, your available credit shrinks. There are some secured credit cards that allow you to put down a smaller initial deposit. Some also let you increase your credit limit by adding to your deposit after opening your account.

But Wait…What Happens to Your Deposit?

After you make your deposit, the credit card company holds onto it. There are two ways you can get it back.

The first way to get your deposit back is to graduate to an unsecured credit card. Your credit card company may review your secured card account periodically. If you’ve established a record of using your card responsibly, it may switch you to an unsecured card. In that case, your deposit is refunded.

The other way to get it back is to close your account. But, you’d have to pay off your balance first. Otherwise, the credit card company could keep part or all of your deposit as payment.

Secured Credit Cards vs. Unsecured Credit Cards

The biggest difference between secured credit cards and unsecured cards is the cash deposit, mentioned earlier. Unsecured credit cards don’t require one.

Secured cards and unsecured cards work the same in terms of how you use them. When you make a purchase with an unsecured card, your credit limit is reduced by that amount. Your available credit increases when you make a payment.

Whether a card is secured or unsecured doesn’t matter to the credit reporting bureaus. Your account activity can still show up on your credit reports.

Building Credit With a Secured Credit Card

Secured credit cards can be a great starter option when you’re trying to establish your credit score. They’re also helpful for rebuilding credit if your score takes a serious hit because of something like bankruptcy or foreclosure.

FICO credit scores, which are most often used by lenders, are based on five factors:

  • Payment history (35%)
  • Amounts owed (30%)
  • Length of credit history (15%)
  • Applications for new credit (10%)
  • Types of credit used (10%)

That’s pretty straightforward. So how do you use a secured credit card to build (or rebuild) your score?

It’s all about your habits. Based on those five factors, the two most important things you can do with your secured card are:

  • Pay your bill on time each month
  • Keep a low balance

Making sure you pay on time is as easy as scheduling payments through the Chime mobile banking app. You just need to give your credit card company your Chime Spending Account number and routing number to set up an ACH payment.

Staying on top of your balance is simple too if your secured card has an alert feature. This lets you set a balance threshold you want to stay under. The alert lets you know when you’re getting close to that amount and this way you can pause any new charges.

Those are two easy peasy ways to give your credit score a boost. Another pro tip: The longer your account stays open, the longer your credit history grows. This can also help your score.

Using other types of credit, like a personal loan, is another way to boost your credit. Just don’t go overboard applying for new credit, since inquiries can take a few points away from your score.

Secured Credit Card APR and Fees

Every secured credit card is different when it comes to the fees and APRs they charge. Here’s a good rule of thumb to remember: lower credit scores usually equate to higher interest rates. If you’re starting from scratch with credit, you may be looking at a higher APR.

Remember, secured cards can come with more than one APR, and you may have different APRs for:

  • Purchases
  • Balance transfers
  • Cash advances

The fees you pay can also vary. Some secured cards charge an annual fee; others don’t. Some may also charge a monthly service fee, or a fee for increasing your deposit.

The takeaway? Read the fine print on secured card fees, rates and terms so you know exactly what you’re paying.

Do Secured Credit Cards Come With Any Extras?

Some secured cards come with perks. Some don’t.

There are some secured credit cards, for example, that let you earn rewards when you spend. Some offer cash back, some offer points and others give you travel miles.

Secured cards can also come with features like free fraud monitoring or monthly credit score access. Some even waive late fees the first time you miss your due date.

Make sure you read all of the fine print and know what the benefits are. This way you’ll be informed.

Do Your Homework on Secured Cards

If you’re ready to improve your credit score, a secured credit card can help you do this. These cards can also potentially help you earn rewards as you spend. But remember, they’re not all the same. Take time to compare different options carefully to make sure you’re choosing the secured card that best fits your needs and spending style.

 

Get Paid Faster Using a Mobile Banking App

Tired of waiting for that paycheck to come in? Then worry no more. Employees who are sick of having their paychecks get lost or stolen now have a way to be assured that it will not happen again. No more waiting, no more wondering when their pay will come through. With the use of a mobile banking application, money will be right at people’s fingertips in an instant. It’s as easy as 1-2-3.

Struggles of living paycheck to paycheck

Employees sometimes have to wait for their checks to be cleared before getting their hard-earned money. The time spent on waiting could have been used to pay bills on time or have easy access to money in case of emergencies. It is frustrating when there’s no cash in hand and something needs to be bought or paid.

A lot of people are also struggling to budget their money for important things while they wait for their paychecks. With limited time on their hands, everything gets piled up and people scramble with what to set aside their money for. Finances tend to be all over the place without proper money management. Sometimes living paycheck to paycheck means people are spending more rather than saving money. The question now is how to avoid these kind of problems.

How to start getting paid early:

People now have the opportunity to receive their pay two days early in just a few clicks. Chime Account is an online banking app which offers a feature that would be beneficial for employees. This feature allows its users to receive earlier pay than those who don’t use this. When employers release salaries, it is automatically deposited in the employee’s bank account. No more waiting for days to receive a check.

Banking consumers that would like to receive pay early just need to follow these steps simple steps:

  1. Download the Chime app and apply for an account
  2. Fill out the pre-filled direct deposit form, print, and give it to employer and;
  3. Wait for it to be approved and then enjoy an early pay.

With this, consumers don’t have to worry about their money getting lost in the mail. The app allows people to have direct access to their money anytime, anywhere. It’s very convenient for those who do not have the time to deposit checks personally at the bank or ATM. The Chime app also alerts its users whenever their employers have deposited their salaries. So whether the user is at work, relaxing at home, or out getting groceries, a notification will be sent to their phones when the money is received.

See? The steps to make a convenient and hassle-free way of receiving pay early is fairly easy. With the help of the mobile banking app, it is easy to control finances and plan how much one should save. It’s also less headache for people who have a busy life by allowing them to access their money quickly and easily. This could be an effective solution to money handling problems.

Banking Services provided by The Bancorp Bank, Member FDIC. The Chime Visa® Debit Card is issued by The Bancorp Bank pursuant to a license from Visa U.S.A. Inc. and may be used everywhere Visa debit cards are accepted. Chime and The Bancorp Bank, neither endorse nor guarantee any of the information, recommendations, optional programs, products, or services advertised, offered by, or made available through the external website ("Products and Services") and disclaim any liability for any failure of the Products and Services.