Should You Apply for That Credit Card?

With the holidays rapidly approaching, your mailbox is probably stuffed with catalogs, credit card, and loan offers, but should you apply for that new credit card, order from that catalog (with the promised credit line), or should you cash that short term loan check?  Granted, money is always tight around the holidays, and affording all of the extra expenses would be a lot easier with a clean line of credit, but what should you look for before you apply?

Make sure you’ll actually qualify for the offers!  One of the most important things to remember when looking at any new credit line, be it a catalog shopping site like a Fingerhut Credit Account issued by WebBank, or a new credit card, or a personal loan, is whether or not you will actually qualify once you actually begin the application process.  Remember, most of those “prequalified” offers are just that – the lender has purchased a list of potential candidates based on your demographic group (your location, age group, income level, etc.), but they have most likely not pulled your individual credit report to see if you would actually qualify once you complete the application process.  So, before you even consider the offer, you should check your own credit report to make sure your credit score would likely qualify you for the offer that you are considering.

Should you fill out the application and mail it back in or should you simply go to the website and complete the application online?  While you might worry about completing an application for credit online, it’s actually safe in most cases to apply online, and instead of waiting for a response in the mail, you’ll most likely find out fairly quickly if you do complete the application online.  Reputable credit card companies, loan providers, and catalog shopping sites have ample safeguards in place to protect your personal information, so it’s usually safe to visit most sites.  (However, this is not the case for most of the offers you receive via email – links in emails are extremely vulnerable to identity theft and you should never click on a link received within an email.  ALWAYS visit that creditor’s site using your browser instead.)

Research all of your options before you apply for any of them.  Just because you received a prequalification offer in your mailbox does not necessarily mean that this the best credit card for you to accept.  Take a look at the fine print… What’s the interest rate?  Are there any additional benefits (rewards, points, introductory rates)?  What is the typical credit score needed to qualify for the offer?  How are charges handled?  What happens if you dispute a charge?  What happens if you fall behind?  What are the over limit fees?  Late fees?

Once you’ve studied all of the fine print, then it’s a good idea to compare the offer with other offers that you are likely to qualify for to see if the card really is a good fit for you.  Then and only then do you actually want to apply for the credit card, place an order with the catalog shopping company, or accept that loan offer.

Emergency Funds

Watching the events of the past couple of weeks, what with Hurricane Harvey flooding Texas, and now that Hurricane Irma is looming in the Atlantic Ocean, I’m reminded of one of the most important reasons that we all need emergency funds. In the event that you have an emergency, how will you manage to survive the days, weeks, or even months that it takes to return to some semblance of a normal life?

With hurricanes in particular, we usually have some warning and there are preparations that can be made, but you’ve got to have the funds available to make the right preparations. For example, you may want to buy plenty of food and water well before the storm comes into your area, or you may need to board up your windows, or if the storm threat is serious enough, you may need to evacuate completely.

After the storm passes, there are still more challenges to overcome… the price of gas, food, and other supplies can skyrocket, which takes a bite out of your already stressed budget. It’s a lot to try and cover on your normal salary, assuming that you’re able to get to work. But how many of us have an extra thousand or two sitting there just waiting for us in times of dire need? According to national statistics, not very many. In fact, 69 percent of us have less than $1,000.00 in savings, and of that, 34 percent have no savings at all.

What about you? What are your options? How can you effectively have an “emergency fund” when you don’t have the cash available?

One of the best ways that I know of to create an emergency fund that you can tap into quickly should you ever need to is to get a credit card and keep the available credit at or above the level that you would need to purchase the items you need to buy food and water, pay those exorbitant gas prices, or even rent the hotel room that you’d need to escape a hurricane, wild fire, flood, or other natural disaster if and when one threatens your area.

Granted, it may not go as far as you need it to should disaster strike, but at least a credit card with your “emergency fund” in available credit will give you options that you may not otherwise have. And those options can be the difference between life and death in some cases.

What’s in Your Credit Score

Ever wonder what exactly is a credit score?  What even makes up your credit score?  And, even more importantly, exactly what impacts your score has on your finances and why?

Basically, a credit score is nothing more than a simple three digit number that credit bureaus use to determine your credit worthiness, but depending on what your actual score is, it can have a huge impact on your finances, including not just the amount of money you can conceivably borrow and the interest rates you’ll have to pay for credit cards, car loans, and even mortgage loans, but also on the type of job you may or may not get, and even the rates you’ll be charged for car insurance, homeowner’s insurance, and so much more.

That’s why it’s so important to not just know your credit score, but to improve your score if it is not as high as you need it to be.

What makes up your credit score?

Although there are lots of places that provide consumer credit scores, most of them are not actually used by lenders to assess your credit worthiness.  Financial institutions actually rely on two major credit scores, your FICO score and your VantageScore, when deciding if you’re eligible for a loan.  VantageScore and FICO credit scores range from 300 to 850. The higher the number, the better your credit rating.

Here are the ranges for both:

FICO score

  • 800 to 850: Exceptional
  • 740 to 799: Very good
  • 670 to 739: Good
  • 580 to 669: Fair
  • 300 to 579: Very poor

VantageScore

  • 750 to 850: Excellent
  • 700 to 749: Good
  • 650 to 699: Fair
  • 550 to 649: Poor
  • 300 to 549: Very poor

Your credit scores are actually based on elements of your credit history, and once again, the two are different:

FICO score

  • Payment history: 35 percent
  • Amounts owed: 30 percent
  • Length of credit history: 15 percent
  • New credit: 10 percent
  • Credit mix: 10 percent

VantageScore

  • Amount of recent credit: 30 percent
  • Payment history: 28 percent
  • Use of your current credit: 23 percent
  • Size of account balances: 9 percent
  • Depth of credit: 9 percent
  • Amount of available credit: 1 percent

How important is a good credit score?

Since your credit score affects so many aspects of your life, it only makes good sense to monitor your credit report and strive to keep your credit score as high as possible.  The higher your score, the easier it is to qualify for a mortgage, buy a car, or get any kind of credit (and the better the interest rate you’ll ultimately pay).

It also may make it easier to get a job, as some employers check your credit, and even some regulatory agencies refuse to license professionals with a poor credit score, so the penalty for poor credit can affect more than just your financial life.

What if you need to improve your score?

The way in which you use loans and pay debts has a significant impact on your credit score. You have plenty of opportunities to improve your score, but you should know, it takes time to improve your credit score, so plan ahead and start working on your credit history now.

Here are a few simple things that you can do right now:

  1. Pay your bills on time, every time.  Even one late payment can have a significant effect on your credit score.
  2. Pay down the balance on your credit cards and keep them at or below 30% of the total available credit on each card.
  3. Pay off the cards that have small balances as soon as you can, and then, if you use your cards regularly, try to use only one card.  Just remember to keep the balance below the 30% threshold!
  4. Sign up for one of the many free credit score providers, like Credit Sesame, and continuously monitor your score.  You’d be amazed at how raising your score by just a few points will make you feel!


USAA Named to FORTUNE List of ‘World’s Most Admired’

FORTUNE® Magazine has announced its World’s Most Admired Companies® for 2017, and USAA ranked No. 25.

USAA ranked No. 2 in the Property and Casualty (P&C) insurance industry for 2017.

“This is a recognition our employees greatly deserve,” says USAA CEO Stuart Parker. “Their focus on our mission and enduring commitment to serving our members makes us all proud to work at USAA. We don’t take designations like this for granted. We are continuously investing in our people to better serve members and make USAA a great place to work.”

Earlier this month, USAA was ranked No. 11 on the Harris Poll Reputation Quotient (RQ®) and No. 35 on the Best Workplaces for Giving Back. USAA is No. 114 on the FORTUNE 500® and has been recognized on other FORTUNE lists of best companies, including FORTUNE 100 Best Companies to Work For®.

This is the fourth consecutive year USAA made the list which is unique because results are generated based on survey feedback from industry leaders and peers. Executives, directors and analysts rate enterprises in their own industry on nine criteria, from investment value and quality of management and products to social responsibility and ability to attract talent. Other notable companies on the list include Apple®, Google®, Amazon® and Southwest Airlines®.

The World’s Most Admired list is considered the definitive report card on corporate reputations. Healthy financials boost a reputation most, according to FORTUNE. About 350 companies make the Most Admired list each year, but only the top 50 are ranked. In the P&C insurance category, USAA remains at the No. 2 spot this year out of 16 eligible firms.