Fixing Your Credit Score

As if 2020 wasn’t bad enough already, what with a pandemic, lockdowns, and an economic downturn unlike any other, millions of people also lost their jobs… and that will leave millions of us with blemishes on our credit reports that can and, in many cases will, take years to clean up.  We all know what the effect of just one missed payment can be, but what about months of missed payments?  What about repossessions, evictions, and the inevitable court cases that are sure to arise?  Is there anything that can be done to salvage some of your credit score?

Although there really is no good answer to these questions, there are some things that you can do to mitigate some of the damage:

  • Review your Credit Report:  Even though it is not a particularly pleasant activity in light of recent events, sit down and go through every single item on your credit report.  Make a list of the changes (favorable and unfavorable) over the past few months, and then, address each of the unfavorable items individually.  What options are available to you for correction of each and every item?
  • Put a Statement in your Credit File:  Most credit bureaus have the option for you to put some notes, explanations, letters, etc., into your file.  Take advantage of those options!  While it may not improve your score, it will help future lenders, employers, etc., to see exactly what caused the problems that are in your credit file.  And, while it might not seem important to you now, having a note about your job loss due to the pandemic will definitely help to explain those late charges on your credit cards later on.
  • Find and Dispute Errors:  Errors in your credit file are far more common than most people realize and taking the time to review and remove negative, inaccurate information is vital to maintaining your credit file.  Common problems include incorrect name, address, phone numbers, accounts belonging to others, identity theft, data errors, and more.  Dispute each and every single issue that you find – identify, clarify, and submit backup documentation to substiantiate your claim, then as that it be corrected or removed.  It may take time, but it can and should be done!
  • Watch your Credit Score as closely as you do your bank account:  With so many free credit monitoring services available, there is really no excuse for not knowing what your score is and exactly what is impacting your score at any given time.
  • Make your payments on time:  Once you get past your problems and get your income back on track, get your payments back on track as well.  Many people figure that there’s no way they’ll ever catch up or repair delinquencies, so they just ignore them without ever making the effort to get back on track.  That’s the wrong approach – contact your creditors and work out a plan to get each and every account up to date.  You might even be able to negotiate the removal of those late payment notifications in return for catching up, but first you have to try.
  • Get your Credit Utilization Score down as soon as possible:  Since this one thing makes up a huge part of your credit score, getting it down below 30% is vital to improving your score.  (Get it under 7% and that puts you in league with those who have “very good” credit.  1%-3% puts you in league with those who have “exceptional” credit.)
  • Increase your Credit Limit:  Although this is not always the best route to take, opening a new credit card can decrease your credit utilization, and therefore, increase your credit score.  Just be sure that you don’t make the mistake of overusing your new credit card and/or applying for too many new cards!

Remember, you’re not alone in this situation.  Millions of people around the world have been negatively impacted by recent events, so your hard work to repair your credit will undoubtedly pay off in the future when lenders have to decide who among us is worthy of new credit.

 

Article reprinted with permission from  Fresh Start Card Offers.

Upside to the Pandemic?

In a highly unusual economic climate, a highly unusual thing is occurring in the United States… Credit card debt is actually declining during the current recession!  In fact, for the first time in years, total American credit card debt has now dropped below the $1 trillion mark.  So, why is this so important, you ask?

Actually, this decline in credit card debt indicates drastic changes in consumer behavior as the pandemic rages on around the world.  For example, with the shutdown of restaurants, bars, and other entertainment venues, Americans are definitely swiping that credit card a lot less!   Then, factor in the job losses, and what do you have?  Not only is the money not there to spend, but people are working extremely hard NOT to spend the money they do have (and not to rack up balances on credit cards, either).

Of course, all of this “declining debt” may soon change as the Federal Unemployment Insurance benefits expire later this week, and more people run out of money for day to day expenses.  That means the recent plunge in debt may be short lived, at least until another stimulus package is agreed upon.

Are Creditors Holding Back Due to the Pandemic?

 

Over the past couple of months, we’ve noticed a trend in the number of approvals for new credit cards… and unfortunately, it’s not good news. With the record job losses that came with recent efforts to slow the spread of COVID-19, we’ve also begun to see records of a different kind. Creditors are hesitant to issue new credit to both businesses and individuals. All types of loans, from homes to cars to businesses, as well as all types of credit, including credit cards, have been affected. So, how do you get a credit card these days, especially if your credit is less than stellar?

 

Truthfully, if you have less than perfect credit, you may have a real problem getting a new credit card right now. Not only are creditors holding back, but in some cases, they’ve essentially stopped lending money (or opening new accounts) altogether. And that’s across the board – from those of us with excellent credit to those of us with no credit. Why? Because the risk is now greater that they will not get paid back should something happen to your job.

 

So, how do you get credit these days? Well, to be honest, in order to get credit, you may have to be willing to offer something up as a sort of security against the loan. If you’re buying a home, expect the bank to be more insistent on the size of your down payment. If you’re getting a personal loan, you may have to allow the creditor to put a lien on your car. And if you’re getting a credit card, you may have to start with a secured card.

 

(Click here to see our secured card options.)

 

Times are tough. The country is in a recession. But you can still get credit – it just may not be as easy as it has been in the past.

Should You Borrow Money Now?

Right now, more than 30 million Americans are on unemployment, or in some states, trying to get unemployment started.  Cash is becoming scarce as the first round of stimulus checks has long since been spent.  But, if you’re running out of cash, should you borrow money to survive?  And if so, where should you go to borrow the cash?

If you don’t want to go to family members to borrow the money that you need, there are three other options to consider if you need money quickly:

  1. Find an affordable credit card:  When used wisely, a new or existing credit card account with an interest free (or even a low interest) deal is the fastest and easiest way to get the cash you need.  And, chances are, you may have up to two years to pay the balance off!  Just be sure to read the fine print on any cash advance option to make certain that the low or interest free deal includes cash advances, and make a plan to repay the money before the promotional time expires.
  2. Personal Loans:  An unsecured personal loan typically comes with a lower interest rate than a cash advance on a credit card that has no promotional offer attached, however, you typically have a fixed payment for a longer period of time, so a personal loan might be easier to repay.  Just be careful that you don’t overstress your normal budget when you take out the loan or you might just find yourself short of cash after the crisis is over!
  3. Payday Loans:  If you’re still working and need an immediate cash infusion, but have no other options, there are payday loans available online that you can take advantage of.  Just be careful not to get into what we call the payday loan cycle, meaning that you’re continually borrowing next week’s paycheck this week – the interest rates tend to be very high and, once you get into that cycle, it’s very difficult to get out.

Of course, there is one final option.  You can contact each and every one of your creditors personally and request special payment terms to get past the cash crisis.  Right now, nearly every utility, mortgage, loan, and credit card company is working with customers in response to the COVID-19 pandemic.  Just be sure that you know, in advance, when your arranged payments are due and what effect, if any, the delay will have on your credit score – one or more reported late payments can take years to drop off your credit report.

Did You Get Your Stimulus Check?

MoneyThis morning, millions of Americans checked their bank account, and this morning, millions of Americans were thrilled to find their stimulus money direct deposited.  Now, the question is, what will you do with your stimulus money?  Should you rush out and buy stuff?  Spend it on necessities?  Pay bills?  Save it?  Before you rush out to your local big box store for those “essentials,” think long and hard about what you’re buying and where you’re spending that money!

First and foremost, don’t spend it foolishly!  Even though this may be “extra” money to those of you still working during this pandemic, you may want to consider putting your stimulus money into savings.  Why?  Because, unless you are an essential worker, and in most cases, even if you are an essential worker, the economy is going to get a lot worse before it gets better!  Contrary to what the “experts” have been telling us, things are not just going to go BOOM when smaller, nonessential businesses are allowed to re-open.  In fact, we are apt to see more layoffs before we see rehires.  So, whatever you do, don’t go out and spend your money without thinking about the future.

Secondly, if you’re currently laid off, are you receiving unemployment?  If not, paying bills will most likely be your best option.  The question is, what should you pay?  Obviously, basic necessities first – food, utilities, housing, etc.  But what else should you pay?   If you can afford to do so, keep paying ALL of your bills!  I know that it’s tempting to use the grace periods that banks, lenders, utility companies, and credit card providers are offering right now, but unless you absolutely have to, don’t skip payments!  Pay the bare minimum, but don’t make the mistake of not paying if you can afford to do so.  Why?  Because when we come out on the other side of this pandemic, it’s going to matter.  You’re going to have to pay these bills then, and you’re likely to be expected to pay them all at once, so if you can, pay now.  (Besides, we already know what late payments do to your credit score, don’t we?)

Finally, and perhaps most importantly, if you can afford to spend your stimulus money, consider spending it at the SMALL businesses in your local economy.  That’s right, spend it with those businesses that have been forced to close because they aren’t “essential.”  Get take-out from the restaurant that isn’t a big chain, buy gift cards from the smaller, specialty retailers in your town, or even use your check to do some good – buy groceries for someone who is laid off and can’t get unemployment, drop off meals to a few self-quarantined senior citizens, or donate some PPE to your local hospital.  Whatever you do, think local.  Think small.  Buy American.  That’s the only way to save this economy.

 

When You Can’t Afford to Pay Your Credit Card Bills

Credit CardWith the Corona Virus Pandemic, there are a lot of people who are now laid off.  While these lay offs are supposed to be temporary, who knows how long that might last?  Even more importantly, what happens if you can’t pay your bills?  What will happen if you can’t pay your credit card bills?  Your mortgage?  Your car payment?

Almost everyone knows, not paying your bills could destroy your financial future.  But what really happens when you just can’t pay?  These are just a few things to expect:

  • Late fees on every bill that you’re unable to pay
  • The APRs on your credit cards will spike
  • Every loan you apply for in the next ten years will have a much higher interest rate
  • Mortgages, car loans, and personal loans will cost more, assuming that you can get any of them
  • Better credit card companies will not approve you, meaning you will not be eligible for cash back and rewards programs
  • Rental applications may be declined and/or they may request a larger deposit or advance rental payment
  • Credit checks done in conjunction with employment may cost you the job

Essentially, your entire life will get harder, especially anything having to do with money.  How can you avoid this?  First off, if at all possible, make those minimum payments!  Call your mortgage company or your auto loan provider and ask for deferrments, interest only payments, whatever they will agree to.  Be honest!  Remember, you’re not the only one who is in a financial hurt.  They will be dealing with many others just like you, and chances are, they have options they can offer to help you.  Don’t wait until you’re already late – call as soon as you know you won’t be able to make a payment.  And then, take advantage of every single opportunity you have to resolve your inability to pay until you get back on your feet again!

 

Pay Off Your Credit Cards with a Personal Loan?

Credit cards maxed out?  Barely able to make those minimum payments each month?  Taking out a personal loan might be a good solution, but is it really the best way to pay off your credit card debt?

If you’re one of the millions of Americans who is over their head in credit card bills, you’ve probably wondered what your options might be, especially when you look at the interest rate on your credit card bills every month.  Unbelievably, some are ranging between 36 and 48 percent these days, and that’s making those minimum payments even harder to make every month.  And even if you do succeed in making those payments, the length of time to pay those bills off can be as high as ten years!  Clearly, there has to be a better way.

That’s where the personal loan comes in.  Personal loans typically have a lower interest rate than those charged by credit card companies, so you stand to save a lot of money on interest, and since personal loans have a set timeframe to pay them off (usually three to five years), you can actually see light at the end of the tunnel, so to speak.

Depending on your credit score, your interest rate could be as much as 10% or even 20% lower than the interest on the credit cards that you plan to pay off, and combining all those “minimum” payments into one lower monthly payment can also free up money in your budget every month.  So, a personal loan is definitely something that you’ll want to consider to clear mounting credit card debt.

How hard is it to get a personal loan?  Honestly, that depends on your credit profile.  If you’ve been making all of your payments on time, have adequate income to repay the personal loan, and your credit score warrants approval, your chances are very good.  The application can usually be completed online, then in a few days, the money is typically dispensed to your credit card companies and/or put in your bank account for you to pay off the credit cards.

Just be careful, if you choose this route, and don’t run up your credit cards again. If you do, you could find yourself in an even bigger financial bind!

 

 

 

Should You Apply for A Card with an Annual Fee?

Credit CardWhen it comes time to get your first credit card, or perhaps get a new credit card, take time to sit down and make a list of everything about the cards that you’re interested in.  The PROS and the CONS.  Depending on your credit level, the cards you’re interested in, the rewards available (if any), and the fees attached to the credit cards, you can either save a bundle or end up paying an annual fee that simply doesn’t make it worthwhile to get the credit card at all.  But, are there actually times when paying the annual fees on certain credit cards makes sense?

Let’s look at some of the reasons you might consider paying those annual fees:

You have a Limited Credit History:  If you’re just starting out, it’s not always easy to get a credit card in the first place.  Most of the top credit card companies reject your application right off the bat, others promise a certain amount of credit, but hit you with a hefty fee (up to half of the credit limit), and still others charge a higher than normal interest rate.

Unfortunately, many of the credit cards that are marketed to customers with limited or no credit history also charge an annual fee. However, for these types of cards, you’ll typically see an annual fee that’s less than a $100, but when it costs you the $100 just to get a credit limit of $200-$300, it’s very frustrating to say the least.  But, if your credit score is very low and you’re serious about building it up, then this may be the best way to start, so don’t discount these credit cards without considering whether it will work for your circumstances.  Sometimes, the end justifies the means.

Your Credit Isn’t Good Enough: What if your credit is less than perfect or damaged?  As a result, you may not qualify for credit cards with no annual fee. If so, you’ll most likely have to start with a credit card with an annual fee, and then work your way up to other credit card options.

The Rewards Outweigh the Fee:  There are upper tier credit cards that offer substantial rewards, but do charge a fee.  If, after you’ve reviewed the rewards, and you’re certain that you’ll exceed the amount of the annual fee in cash back or points rewards, then the card with the annual fee may be a good option for you.  Just make sure that you can easily downgrade to a no fee option should you choose to do so.  Closing a card can actually hurt your credit score, so the downgrade option is definitely one to look for when selecting a credit card of this type. 

In closing, it’s safe to assume that there are times when a credit card with an annual fee can be beneficial to you.  You just have to make sure that you review all of the terms, know exactly what you want, and what you’re getting.

 

 

It’s Tax Time Again!

Here it is, tax time again!

Figure Income TaxWere you able to save much on your taxes this year?  Or, did you fall into one of the many tax brackets where it seems you just can’t get a break?  Regardless of where your income falls on the scale, there are some things that you can do right now that will potentially reduce your tax bill.  While many of these things fall into the tax return you’ll eventually file next spring, there are a couple of things you can do to make sure this year’s return is at least as accurate as it should be.

  • If you’ve not already done so, consider having a tax professional do your taxes.  Granted, there are lots of free or nearly free options online, but the laws change so much during any given year that you should definitely consider having a reputable firm do your taxes for you.  Especially if you make a lot of money, have lots of deductions, or have made a major life change in the past year, the difference between doing them yourself and having another do them could mean a substantial amount of money.
  • Make sure you’re filing under the correct status.  Even though you might think this is pretty straightforward, there are actually three options for singles and two for married couples.  Single, but have a child?  Single is probably not the right status for you.   Perhaps your spouse passed away, but you have a child?  There’s a couple of different status options for you, too.  Even Married is not necessarily as simple as it sounds.  Did you know that you might be able to save money if you and your spouse file separately instead of jointly?  Depending on your situation, choosing your status can significantly alter your refund (or tax bill).

Now, what about next year?  What can you do differently this year that will save you money?

  • One of the biggest ways to save money on your taxes is to BUY a home.  Not only will you save money because you can deduct mortgage interest and property taxes, but you will also be building equity in something that you own.  No more paying rent (buying a house for your landlord).
  • Go back to school!  Finish your degree, take classes for work, or learn something totally new.  Many educational expenses qualify for tax breaks, just be sure to do your research in advance so you’ll know if what you sign up for qualifies.
  • Keep paying on your student loans.  You can deduct up to $2,500 in interest on your student loan interest every year, even if you don’t itemize.  So, keep paying on time!
  • Donate to charity.  While it’s always nice to make a few dollars when we sell old clothes, furniture, and such online or at garage sales, it may be more beneficial to you if you donate it to charity.  Just keep the receipts and itemize your deductions (if you qualify).
  • Make pretax contributions to a 401(k), 403(b), or 457 retirement plan.  The more you can contribute pre-tax, the more you’ll save on your income taxes.  For 2020, the maximum 401(k) contribution is $19,500. If you’re age 50 or older, you can make an additional “catch-up” contribution of $6,500, bringing your total 401(k) contribution limit to $26,000. The limits for 403(b) and 457 plans are the same.

Still think you can’t save money on your tax bill?  Remember, the more attention you pay to your finances throughout the year, the easier it becomes to save money on taxes (and everything else) when the time comes.  So, get busy!  Pay attention!  And have a great year!

 

Why Budget Your Money?

Do you try to stick to a weekly, monthly, or even an annual budget?  Maybe you figure since you can barely make ends meet that it’s a waste of time to even try to budget your money?   Maybe you’ve never even thought about budgeting?

Even though it may not seem worthwhile, or even important to you, budgeting your money is actually very important to your financial future.  Not only will it help you to see places where you can (and should) save money, but setting financial goals and objectives and then achieving those goals is a great way to boost your monetary self confidence.  I can almost promise you that, achieving even the smallest objective will be just the encouragement that you need to strive for the next, bigger financial goal.

Budgeting is a powerful financial tool even for those of us with little money – but it’s not foolproof.  Emergencies arise.  Unexpected expenses.  Income decreases or increases.  So many factors can have an effect on your budget, but if you don’t HAVE a budget, there’s absolutely no way to prepare, endure, or recover from some missteps. And you certainly won’t make near as much headway toward reaching your longterm financial goals as you would if you simply sit down, analyze your spending, and create a workable plan to stay on track.

Here are some of the best reasons for you to create and stick to a budget this year:

  • Keep Your Eyes on Your Financial Goals:  Having a plan for your future involves sticking to a plan for today, but if that plan seems too far out there, it’s really easy to lose sight of where you want to be.  Being able to see where you are, where you’ve been, and where you want to be (and WHEN you can expect to get there) is crucial to your success. If you can’t see it, it will be that much harder to work toward it.
  • Curb Your Spending:  It seems like there’s always something that we think that we want or need out there, and even though it’s really easy to do so, we shouldn’t just pull out that credit card and slide it through the machine every time we’re tempted.  If for no other reason, having an analysis of your current (and past) spending habits (and needs) can keep you from adding yet another bill to an already tight budget.  Once you know what your bottom line is each month, I can almost guarantee you won’t want to see that number decrease!
  • Emergencies:  One of the most important things you can do when you create your budget is to allocate a certain amount of money each week (or month) toward setting up an emergency fund so that you can get through the next financial crisis, whether that crisis is illness, job loss, an accident, or something else entirely.  With the right amount of time and planning, you will be better suited to survive the next financial emergency that you face.
  • Cut Unnecessary Expenses:  As you analyze your finances, you will gradually accumulate enough information (and knowledge) that you’ll just naturally see areas where you can cut back or eliminate certain expenses… for example, cutting your cable subscription and streaming instead can save lots of money, maybe theres a gym membership that’s still coming out of your checking account on a regular basis that you’re not using, or maybe it’s something else entirely.  The point is, if you don’t pay attention to it, you may not realize that you can eliminate it.

Truthfully, these are just a few of the reasons for you to seriously consider making a budget and sticking to it this year –  some may make sense for you, some may not.  You may even have a totally different reason for wanting to set up your own financial plan, but the important thing to remember is that you have to have a plan.  Granted, your plan should be flexible, and you should review it regularly to see where you need to make adjustments, but you still need to have a plan if you ever want to achieve your financial goals.