6 Fun Ways to Save As a Family

6 Fun Ways to Save As a Family

Meeting financial goals as a family can be challenging. But inspiring your family to help and contribute to a financial goal doesn’t have to be a painful process, especially when the result is an exciting family vacation, a new family car, or college savings. In the spirit of America Saves Week, I’ll share some ideas on how to save as a family for all those items and bucket-list experiences.

1. Gamify It!

In my family, we often make a game of who contributes to a joint family pot for that month’s fun activity. A game of monopoly can turn into a real contest, as anyone who loses is asked to contribute a small amount to that month or week’s activity of choice (such as a meal out, or family movie). Of course, contributions should be proportional to earnings – teens might contribute $5 from their part-time job or allowance, while adults would be expected to contribute much more. Still, the spirit of the game is focused on sharing and enjoying together – and because everyone has a stake, we enjoy it all so much more.

2. Making Money Can Be Fun

Every year around the holidays, my entire extended family likes to take a vacation somewhere warm, so we start planning and saving a year in advance. By each contributing to the holiday vacation fund, our money goes much farther, and we’re often able to visit really cool places we might’ve not otherwise afforded. Of course, if we can easily afford to contribute our share, we do so, but when money is tight, we find fun ways to raise cash for our share of the contributions. Last year, for example, some of my cousins hosted a bake sale. Others sold items they’d knitted, art they’d produced, and so forth. All of the proceeds went straight into the family vacation fund.

3. Sell, Sell, Sell!

A family garage sale can be an enjoyable and rewarding way to raise extra cash for shared activities or purchases. If your family wants a new flat-screen TV, game console, or other piece of technology or furniture, why not start by selling what you already have and don’t need? A traditional garage sale is one good way to raise cash, as is selling unused items online (this tends to be the better option for selling electronics and gadgets).

4. Match It!

Often, children’s only way to save is to use their holiday or birthday gift money. It can be challenging for kids to save money they so badly want to spend and enjoy immediately, so it’s important to offer incentives for doing so. One idea is to match dollar for dollar every bit of money they save from their gifts. That ensures kids get the immediate gratification of knowing their saved gift money is being doubled, but also enables them to feel empowered by having chosen to save and contribute to family goals.

5. The Envelope Method

When saving for multiple goals, the envelope method is an excellent way of keeping all the monies separate for their intended uses. Simply mark each envelope with a stated goal, and contribute regularly to each until the goal amount is met. For small children, it can be rewarding to contribute to smaller family goals, such as ice cream or a movie rental. A $10 or $15 goal can mean a $1 or $2 monthly contribution from their allowance. This helps children learn the value of saving, and builds confidence in their ability to do so.

6. Your Credit Union Can Help

Your local credit union can be an excellent resource for helping your family save together. From traditional savings accounts or CDs to holiday savings accounts, your credit union can help you select a financial product that can help your family in reaching its shared goals faster. For larger goals, in particular, a shared family account can be an excellent resource for keeping your family on track to realizing your financial wishes.
Happy saving!
By Janet Alvarez, WiseBread.com 
Janet Alvarez is the news anchor for WHYY/NPR and the Executive Editor of Wise Bread, an award-winning publication focused on promoting financial literacy.


The content for this post was sourced from www.Credit.org

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Why is My Credit Score Different on Each Report?

Why is My Credit Score Different on Each Report?

There are three major credit reporting bureaus in the United States: TransUnion™, Equifax™, and Experian™. Each one has its own unique mathematical method of calculating a credit score for the consumer. And each bureau may have slightly different information on how they calculate credit scores that can seem confusing. So, why are the scores different from one to another?  For some people, credit scores may vary as much as 40 points between the three credit reporting agencies. When you apply for a loan or credit card, your credit score is a key factor in getting approved and will influence the type of interest rate and lines of credit you qualify for. The lower your credit score is, the more likely you are to receive a higher interest rate. In fact, you may end up with less credit line or no approval at all.

There are three key reasons your scores may be different from one credit bureau to another.

1. The Credit Bureaus

Credit scores can vary because of differences in the credit scoring algorithms that each reporting agency uses. There are many distinct credit scoring formulas used by creditors, lenders, and insurers to evaluate your creditworthiness. These scores will evaluate your credit report differently in order to match the specific characteristics of the entity that is using your report. The most common credit score model that consumers are exposed to are Vantage and FICO.

2. Your Creditors

For the most part, your credit report is a simple collection of data sent to the credit bureaus from your creditors. That means if you tell your auto lender that you have a new address, they could report that new address to the credit bureaus. If your payment is late, that will be reported. The cycle is ongoing. Also, creditors report your account information to the credit bureaus in different ways and different times throughout the month. As a result, one credit bureau may know you paid your home loan late but another bureau may not have processed or received the data yet. The result can be vastly different credit scores until the data is updated at both credit bureaus.

3. When the report is ordered

Let’s say you are car shopping over a 30-day period. When you set out on your mission, let’s say 710 was your credit score. Ten days later, you go shopping someplace else, and it’s 715. Twenty-five days later you make your last stop and somehow its dropped to 605. Well, the reason is that each report, ordered and accessed on the same day, may contain the same accounts, but could be missing information. Think of them as living records that are never perfectly in sync.

Different scores and mismatched reports can often feel like acting on your credit is a moving target. But as long as you remain aware of the effect timing and reporting and the multitude of other factors that go into calculations can have, you’ll already be working with more information than the average American. Monitoring and managing your credit will give you a powerful advantage when deciding how and when to leverage your score for a new line of credit.

© 2019 IdentityIQ, LLC


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Starting Credit for the First Time

Starting Credit for the First Time

Just because you leave home for the first time doesn’t mean you’re ready for total independence. Depending on how much you have paid attention to your credit score prior to making your grand exit, financial independence might be a larger issue than you expect.  If you thought credit was just about credit cards and buying a home – think again.

How Does Personal Credit Affect You?

In today’s economy, your personal credit determines what you can purchase, and how much you will pay for it. For example, your credit score can impact:

  • What apartment or home you live in
  • Your insurance rates
  • Interest rates
  • Your first job

That’s right, employers have the right to screen your credit report and score as part of the hiring process. This makes credit paramount to your financial health.


Not Having Credit Is Expensive

Without a proven track record of your creditworthiness, financial institutions will likely view you as a high-risk borrower. For that reason, you will have limited options to build your credit. Products you are eligible for will be low risk for the bank, which means you might incur:

  • Higher interest rates
  • Higher fees
  • Lower credit limits

Additionally, your credit usage habits may be closely monitored. If you appear to be racking up too many charges, your credit card provider may freeze your credit line until they can talk with you about your spending. It’s not that they don’t want your business; they just want your business under terms that are safe to them. Until predictive risk analysis becomes more accurate, this is how financial institutions test the waters and assess your risk.


How Do I Start To Build Credit?

Financial institutions typically process consumer credit applications through automated processing systems. Consumers who do not have a credit history won’t have a credit score either. Most creditors decline an applicant with no credit – which is the problem. The best strategy for you to build credit is to start small credit lines and less risky credit sources. To understand this strategy, let’s dive into the differences between secure and unsecured debt.


Secured Credit Cards

Secured credit cards, offered by almost all reputable banks and credit unions, are very popular with consumers who are building their new credit histories. Secured credit is credit backed by the consumer. In other words, the consumer makes a deposit with the creditor, who then issues a credit card with a credit limit equal to the amount deposited.

For example, if you deposit $800, then the bank will issue you a secured credit card with a credit limit of $800. This deposit is usually accompanied by monthly fees. Banks offer this type of debt because the risk is low for them – they will get their money back if you don’t pay them. Banks will usually issue secure credit cards if you have managed your bank account well – if you do not have a history of bounced checks or using check overdraft protection. As you continue to use your card and pay your balance off, your credit history will grow. Eventually, can apply for unsecured credit cards that do not require a deposit. One thing to note about secured credit is that your cash deposit is typically locked up and not accessible while you have the secured card. And unfortunately, the money often does not earn interest.


Unsecured Credit Card

Unsecured debt means that the creditor has no collateral such as a car or home backing the credit.  Lenders who issue unsecured credit take the risk that you will not pay them back for what you borrow.  Because unsecured credit is a higher risk proposal, lenders are more cautious when reviewing the applicant’s credit history. If you don’t have credit history, it may be more difficult to land an unsecured credit card.  In most cases, the easiest way to acquire an unsecured credit card, without a credit history, is through a gasoline or retail department store credit card.

Retail & Department Store Credit Cards

Retail cards are credit cards issued for use at specific retail stores such as Kohl’s, TJ Max or Target.  They can also include other services or products such as Chevron or Shell gasoline. Retail cards are generally easier to obtain, even if your credit history is completely new. Most likely, you will get a low credit limit such as $300.00. As you use the card (and make on-time payments) your lender may automatically increase the credit limit. This can happen in a matter of months.

Expect these cards to have high interest rates, which means it’s important to pay them off (entirely) each month.


Bank Debit Cards Reporting on Your Credit Report

Most debit credit cards are another form of a “secured” credit card. They are backed by the balance in your bank account. But, if your bank allows, you can use your card as either a debit or credit card. This is a great option to start building your credit history and eventually qualify for better credit options. It is possible you’ll incur extra fees for using your card in this way, so double check with your bank for exact fees and terms of use.


© 2018 IdentityIQ, LLC


The content for this post was sourced from www.Credit.org

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Warning Signs Your Credit is in Danger and Disputing Inaccuracies

Warning Signs Your Credit is in Danger and Disputing Inaccuracies

The purpose of an alarm is simple. It serves to tell you and others around you of a problem. In most cases the alarm is simply the first step to further actions that are needed. Credit monitoring is no different, it’s your first line of defense to manage your credit score and react to unusual credit report activity.

Suspicious Information on Your Credit Report

Let’s say you look at your credit report and are not sure where a new credit card came from. You notice inquiries from companies with whom you never applied for credit. Unauthorized accounts or address changes could be one of the first signs that a I.D. thief is using your identity. If you find a credit card or loan that you don’t remember opening, call the creditor immediately to start an investigation. If it turns out to be a case of identity theft, take evasive steps to lock down your credit.

Credit Card Balances at their Credit Limit

High balances on credit cards are not uncommon, but that extra debt could bring your credit score down significantly. Reducing your balances to below 30% of your credit limit can help you keep your credit score at its peak.

Late Payments

Paying your credit card bills late not only can cost you extra fees and interest, it also may damage your credit score. If you have had trouble making your payments on time, evaluate what is causing the problem. You can ask your creditor to move your due date to a different time of the month or sign up for online bill payment services that can be programmed to remind you before the due date.

Inaccuracies on Your Credit Report

With almost 300 million people in the United States, a few mixed up records on your credit report can be expected from time to time. The Federal Trade Commission indicated that 1 in 5 people have inaccuracies on their credit report. Finding someone else’s credit data on your report is especially widespread for people with common or shared family names like “Joe Smith, Junior.”

If you find an inaccuracy on your credit report, consider the following steps

1. Creditor Dispute

The fastest way to fix an inaccuracy on your credit report is often by contacting the creditor that is reporting the information to the credit bureau. Most have internal processes that will quickly help you address the problem.

2. Credit Bureau Dispute

If the creditor is not able to address your concerns or you cannot contact them, then you should file a credit bureau dispute. You can dispute an inaccuracy by mail or online with the credit bureau directly.


© 2018 IdentityIQ, LLC


The content for this post was sourced from www.Credit.org

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The Dark Web – Your Credit and Identity for Sale

The Dark Web – Your Credit and Identity for Sale

Most of us are very familiar with the internet and search engines, such as Google, Firefox, or Bing. But did you know that most of us only have access to around 4% of the ‘safe’ content found on what is the commonly called the surface web or clear net? The other 96% of web content is buried in what’s called the deep web, also called the dark web.

The deep web, which is different from the dark web is also called the invisible or hidden web. It’s the part of the world wide web that is not discoverable by standard search engines. Search engines only lead to websites on the surface web. The deep web accounts for 90% of all internet content, which is generally hidden behind secure systems. For example, we may use the deep web when we retrieve business reports, scientific information, organizational data, medical records and so on. These types of documents and data are protected behind secure servers, firewalls, and heavy login requirements.

The dark web, while often referenced on modern-day crime-based TV shows and action movies, is still a very new concept for many people. It’s a technology created by the military in the 1990’s to allow intelligence operatives to exchange information with complete anonymity. The dark web-only accounts for around 6% of all web content and is only accessible through special software. Once inside, the websites can be accessed through a browser in the same way we are all accustomed to browsing the internet. However, some sites are hidden from the search engines and can only be accessed if you know the exact address of the site. Today, the dark web consists primarily for sites that service illegal information, terrorist activity, secret communications, and TOR encrypted sites. Special markets also exist in this realm, and they’re called darknet markets.  These markets primarily deal with illegal products like drugs and firearms that are paid for with crypto (Bitcoin) currency. If it’s illegal, its likely found here.

“The big concern is that stolen data is like a bomb that is ready to go off. It can be sold and resold on the dark web.”

So, how does this invisible internet world impact you?

50% of the U.S. population was impacted by a cyber-attack. Chances are, if you ask around, you will know someone who was affected. The big concern is that the stolen data is like a bomb ready to go off. It can be sold and resold on the dark web to entities that will use your information for a variety of purposes such as filing a tax return, opening fraudulent credit, or building an identity database on you and your family. The problems could pop up days, months or years after the data breach.

What can I do about it?

It seems many consumers are just giving up or ignoring the problem until it directly affects them. But this just increases the likelihood that you might be affected more heavily because early signs of tampering were not detected and handled.  There are simple things you can do to protect yourself. Some may seem cliché, but they really do give you some control.

1. DON’T try to go to the dark web

Unless you know what you’re doing, you can be putting yourself and the information stored in your computer on a platter!

2. Automated credit and dark web monitoring

Let’s be real. Nobody has time to monitor their identity and credit over the entire internet for unusual or suspicious activity. But that level of tracking is necessary in today’s modern digital world. Enroll in a service that will automatically monitor your information and the dark web for you. Dark web monitoring can alert you when your personal information is being traded online by identity thieves. If an event occurs, IdentityIQ offers member website information and agent guidance to help you if an event occurs.

3. Credit report review

Credit monitoring is critical, but it does not notify you of every possible change to your credit report. You should review your three bureau reports from TransUnion, Experian, and Equifax, at least every quarter (monthly, if you are at high risk). It takes minutes and is a great opportunity to scan for anything unusual.

4. Computer protection

Buy and maintain your computer anti-virus and malware software. Also, set your computer to automatically update the operating system. This is an important setting because many updates include security patches to protect your computer from the latest threats.

5. Web and physical security

Be careful about what you look at or divulge online when using public wifi. They are easy to hack, and anyone connected can see your online activity if they are also connected. Before entering sensitive personal information into online forms, look for a padlock icon on your browser address bar before the “https://”. This indicates you are on a secure website. Finally, always shield your hand when entering a PIN in public places and at ATMs. Video surveillance can monitor you almost anywhere, and video camera lenses can be the size of a pin!

Even though you may be on the internet every day and have not yet had to deal with identity theft, the risk is always present. The dark web and deep web are tools used to protect as well as exploit personal information. Taking the steps listed here will help to protect your information as well as the information of those who are close you.

© 2018 IdentityIQ, LLC


The content for this post was sourced from www.Credit.org

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Protecting Your Social Security Number

Protecting Your Social Security Number

This one number makes all the difference to identity thieves… your social security number. When you apply for a job, the application asks for your social security number. When you apply for a bank account, they want your social security number. When you file a tax return, apply for a loan, get medical treatment, apply for government benefits, you are asked for your social security number.

Someone illegally using your social security number and other information about you not only assumes your identity, but they can sell and resell your information as well. To add to this risk, as consumers, we are gradually becoming mentally resistant to attacks on our identity. We don’t always do the work that is necessary to protect ourselves and we assume there is safety online where there often isn’t sufficient oversight, if any.

The big question is, what can you do about it? How can you tell if someone is using your social security number and identity? It can often seem like by the time you figure it out it’s too late.

For consumers who do nothing, “too late” is an accurate assessment. In 2017, one company alone had a data breach that included the social security numbers of 143 million people. Anyone who isn’t monitoring their data for suspicious activity is increasing their risk of identity theft.

The fact is, your social security number is not a secret anymore.

Social security numbers were created for the single purpose of tracking worker contributions to a national retirement fund. It was never intended to be an identity number. Over time, however, retailers and banks offered easier access to credit with a quick ID check on your name and social security number. Until something else replaces social security numbers as the primary controlling factor of your identity, there are a few simple things you can do to protect yourself.

Automated social security number monitoring

Catching ID theft early is your best first line of defense. The simplest way to do this is to sign-up for an automated social security number monitoring service. With credit monitoring and address change monitoring, you’ll be alerted by email if your social security number is used to open credit.

Avoid disclosing more than necessary

There are several organizations that require your social security number, such as employers, the IRS, and financial institutions. But there are many organizations that often ask for your social security number even though they don’t really need it to enroll you in their services. Whenever possible, avoid providing your social security number unless it is absolutely required.

Protect your card

Do not carry your social security card with you. A state-issued ID, which has your picture embedded in it and other security features, will be sufficient for day-to-day identification. There’s no need to risk a lost or stolen card when it isn’t needed for daily use.

Implement identity-protecting best practices

When disposing of documents that contain your social security number, shred them using a good quality crosscut shredding machine. Remember to go paperless when it comes to bank and credit cards statements. And once a document has been scanned and safely saved to your computer, shred the paper rather than filing it or placing it in a stack of papers.

Your social security number is a major key to your credit health, but it isn’t protected by individuals and organizations as well as it should be. Now that you recognize its importance and the weight of the risk it represents take the steps discussed to protect and monitor your social security number, so it is treated as a valuable identity asset.

© 2018 IdentityIQ, LLC


The content for this post was sourced from www.Credit.org

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How To Build Credit Without Using A Credit Card

How To Build Credit Without Using A Credit Card

When people are trying to build credit, typically they will use a credit card to establish that they are a good credit risk. They might start with secured cards, or become co-signers on the accounts of other users with good credit. However, getting a credit card can become a life-long commitment, getting you into debt that might take many years to pay off. It’s good to be careful before using credit card debt to establish a credit history.

So what can consumers use, if not credit cards, to build good credit? When building credit without using a credit card, there are several options to consider:

  1. Make your other loan payments on time

Any loans you may have, whether they are auto, mortgage, or student loans, must be paid on time in order to establish a good credit history.

If you already have one of these kinds of loans, you already have a way to build credit without adding a credit card to the mix. By making timely payments, you are proving every month that you are a good risk, and your credit score will reflect that.

There is a very important thing to know that affects this and all of the other methods listed below. In order to create a credit score, the credit bureaus need to have at least six months’ activity on your credit history, and no deceased indicators on your credit file.

That last part is easy—you need to still be alive. But some consumers stumble with the other part. An inexperienced borrower might think that repaying an installment loan in full very quickly would demonstrate great repayment habits, but it does the opposite. If you pay off an installment loan in less than six months, it may drop off of your credit file entirely, so you lose any positive credit history you might have gained. (Note, do not mix-up this concept with credit card usage, there is NO need to “carry” revolving credit card balances to establish a credit history, simply use the account and pay it off in full each month. Use of the account a couple of times a year from these transactions establishes a credit history without incurring finance charges).

The lesson is to keep your credit history active—repay a credit-builder loan (see below) on schedule, not ahead of time.

  1. Credit-builder loans

A credit-builder loan is a very small loan, usually around $1,000. The sole purpose of the loan is to prove you can repay a debt, so you don’t actually get the money you’re borrowing in most cases—the financial institution sets aside the money for you, and you pay them back. Once the loan is fully repaid, you get the money. It’s a lot like building up savings, like you would with an emergency fund, but you also get good credit history out of it (assuming you make all your payments on time).

Some banks or credit unions might offer a small secured loan option as a credit-builder loan. Be aware, though, that not every financial institution offers any kind of credit builder loan—in fact, most do not. Your best bet for getting a credit-builder loan is to check with a local credit union or Community Development Financial Institution (CDFI).

  1. Rent reporting

Another option that is gaining popularity is reporting a consumer’s rent payments to the credit bureaus. Traditionally, we don’t get positive credit history from making our rent payments on time every month. Now, thanks to a growing trend in the credit industry, there are services available to make a consumer’s consistent rental payment history appear on their credit reports.

The catch with this method is that your landlord may have to participate. They must report your payments to one of the services available to get your rent payments on your credit reports. Or they must use a payment service that reports your rental payment history automatically. Experian’s RentBureau makes it easy for landlords to find a service that can handle rent payments for them and do the credit reporting so they don’t have to do any extra work.

There are also services that allow you to report your own rent payments, but they are not free—usually these services carry a monthly fee. Some of the most popular rent reporting services are Rental Kharma, Rent Reporters, and RentTrack.

  1. Financing purchases with installment loans

This method used to be a popular way to help consumers establish a credit history. A young person or newly married couple just starting out would buy furniture or a major appliance they need—like a refrigerator or washer & dryer. They’d get an installment loan from the seller to finance the purchase, and in the process establish that they can repay a debt.

Today most places that sell furniture or appliances will sign you up for an affinity credit card rather than offer you an installment loan. But if you can find a retailer that still sets up loans to finance larger purchases, you can still make a go of this method to build credit without using a credit card.

  1. Peer Lending

This kind of loan, also called P2P (peer-to-peer) lending or crowdlending, is a loan made to and from individuals through an online service. Borrowers create a profile on a website explaining how much money they need, and what for. The lenders review the profiles and credit assessments of the borrowers and decide whom they want to lend to through the service. Lenders will diversify their money among many different loans, and if enough lenders get on board with a particular loan, the borrower gets their funding.

The online service handles all of the payments, credit reporting, etc. The two largest peer-to-peer lenders in America are Lending Club and Prosper.

  1. Alternative credit

Because tens of millions of consumers lack enough credit history to qualify for products like credit cards, the lending industry is building alternative credit solutions. Alternative credit helps evaluate the creditworthiness of borrowers using information like utility payments and cell phone plans. If a consumer can pay all of their conventional bills on time every month, it should reflect well on them when they go to borrow money from a financial institution.

While there are consumer-focused alternative credit products like PRBC, it’s mostly your lenders who will take advantage of alternative credit in order to grant you loans or other credit products. Services like FICO XD and CoreLogic Credco already exist for financial institutions to use when making decisions about lending and credit.

If you are in a position where you need a lender to rely on alternative credit data before extending a loan to you, ask around to find a lender that uses this kind of information as part of their lending process.

While there may be some hurdles to overcome, it is possible to build credit without using a credit card. It’s important to understand how your credit works and what the best steps to take to improve your score and establish the best possible credit history. A credit report review is a great idea for anyone looking to establish or build positive credit.


The content for this post was sourced from www.Credit.org

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Preparing to Buy A Home When You Already Have Debt

Preparing to Buy A Home When You Already Have Debt

In an ideal world, you’d begin your homeownership journey debt free (with a 3-month emergency fund saved, to boot). In the real world, however, debt is a reality, whether it be some credit card debt, a car loan, or outstanding student loans, all of which could add up to a sizable amount. Therefore, eliminating it before buying a home may be all but impossible.

The good news is that homeownership may still be an achievable goal, even if you’re deep in debt. It may be more difficult, but smart debt management can help pave the way for you to own a home. Here are some practical and achievable tips on managing debt and becoming a homeowner.

Cut Your Debt to Income (DTI) Ratios

One term you’re likely to see often when house-hunting is DTI or debt-to-income ratio. Lenders want to know what percentage of your income goes to paying off the debt you already have. A high DTI suggests you’ve already tied up a good amount of your income and adding a mortgage could be too financially taxing for you.

Generally, lenders prefer to see a DTI ratio under 40% of your total gross income. So, for example, if you make $3,000 per month (typical median annual income for Millennials is around $35,000), your total debt payments should be less than $1,200. Some lenders may choose a lower DTI, like 35%, as their cap to offer a loan.

A few ways to reduce your DTI ratio are:

  • Pay off some debt. The simplest way to show a lower debt ratio is…have less debt! True, this is easier said than done. If your budget allows, tackle one source of debt more aggressively, such as a credit card balance with the highest interest rate. If you increase payments by the average monthly amount you expect to spend on home maintenance, this can also serve as a practice run for what your budget might look like as a homeowner. Reaching out to a certified debt coach or financial counselor will help you plan to pay off your debt efficiently and reach your goals faster.
  • Consider refinancing long-term loans. Refinancing student loan payments to a 20-year versus 10-year plan lowers the monthly payment (and your DTI). Make sure you can pay extra and direct payments toward the principal, so you can still pay off your loans in a shorter time frame.
  • Double-check your credit report. Errors can happen, so if your credit report mistakenly listed someone else’s debt on your account (thanks to a similar name, or a wrongly entered SSN), it may look like you have more debt than you actually do. You’re entitled to one free credit report per year from all major credit bureaus. Additionally, a Credit Report Review with a certified financial coach will provide you a thorough understanding of everything that is on your report.

Save a Manageable Down Payment

The often-cited industry gold standard down payment is 20% to buy a home. Typically having this level of down payment, you may get a more favorable interest rate and save on the mortgage insurance premium that is generally associated with loans that have less than 20% down payments. If you are already managing tens of thousands of dollars in other debt, 20% may not be achievable and the good news is that there are many mortgage options available with lower down payment requirements, especially for first-time homebuyers. Having stable employment and a strong credit score will also help you qualify for loans at better rates (another great reason to reduce some credit card debt before house hunting!).

Investing your time in pre-purchase homeownership coaching and taking a home buyer education course is highly recommended before you begin your homeownership journey. You will learn about the loan options available, down payment options and programs and what to expect as a homeowner. Many loan programs also require this education for first-time homebuyers. You’ll still work through a lender such as a mortgage bank or non-profit community development financial institution, so it’s important to compare options, negotiate, and ask questions to find the best rates and terms. The better your credit, the more lenders you’re likely to find who will approve you (getting over 600 or so is a good goal to set).

Buy the Home You Can Afford

Based on your income, credit history and debt ratios, lenders may pre-qualify you for a certain maximum loan amount. Be careful, this maximum may be okay with the lender but more importantly, this amount needs to fit into your overall operating budget. Generally, you should aim to keep housing costs below 35% of your income. That includes associated costs like utilities, taxes, insurance, and maintenance. Going over this figure could put you at a higher risk of being “house-poor,” tying up too much of your paycheck in your home.

Debt makes buying a home harder, but it’s far from impossible. If you’re managing your current debt comfortably, you may find lenders who will help you reach your homeownership dream. If you’re struggling with your debt, don’t give up, either. Work with a financial counselor to build a debt management plan so you can balance your obligations and your goals.



The content for this post was sourced from www.Credit.org

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6 Ways for Millennials to Prepare to Buy a Home

6 Ways for Millennials to Prepare to Buy a Home

If you’re a Millennial, it certainly can feel like the deck is stacked against you financially. Compared to our parents and grandparents, student loan debt burdens are substantially higher, and without a college education these days, good paying jobs are limited. House prices are 10 times as high as they were 50 years ago; meanwhile, the middle 20% of workers by income only saw about a 33% increase in wages.

The good news is that although homeownership rates are admittedly lower than they’ve been in past generations, just over 1 in 3 Millennials own their home. If homeownership is an aspiration, there is a realistic path you can follow to prepare yourself to buy a home.

Set a Realistic Expectation for Home Affordability.

Look online and you’ll find countless mortgage calculators promising to answer the question, “How much home can you afford?” Tread carefully. It’s not uncommon to pre-qualify for a loan that is larger than is really best for your budget.

Instead, go through your income and expenses carefully and figure out what amount you could comfortably spend on housing each month (remember that you’re responsible for repairs and maintenance costs, too). Our handy Mortgage Readiness Quiz is a good first step in assessing both your buying power and loan approval readiness.

Once you’ve set your target house price, it’s also time to shop for the best mortgage products for your situation. Today, there are many special loan products for first-time homeowners with minimal down payments available. Pre-purchase coaching by a HUD-approved housing counseling agency will help you be prepared and The National Association of REALTORS® reported that in 2016, Millennials put down an average of just under 8% to buy a home, according to Census data from 2016-2018, that comes to about $25,000.

Consider Location

With time, creativity and a healthy budget, you can change almost any feature on a house, except of course its location. The adage “location, location, location” cannot be understated. It’s important to find a home in an area that fits your lifestyle both today and in 5-10 or even 30 years. Items such as travel times to your work, the quality of the school district and the local amenities, shopping, and restaurants, are they reasonable and will they fit your needs? The trick is not to equate “reasonable” with “ideal.” Expanding the area of your search can turn up affordable options you might have missed.

Generally, suburban or rural homes tend to carry a lower price tag than houses in urban locations. If you’re up for a dramatic change, see if a less-populated state has cheaper home prices than your current location (check salary rates, too, to make sure you can afford cost of living). Look past the “recently added” listings, too. It may be easier to convince the seller to consider a price drop if the house has been on the market for a while.

House Hunt for Your Current Life

One day, you may hope to have five kids and a pack of animals. If your budget isn’t ready to accommodate a six-bedroom house with a huge yard, that dream may have to wait. Your first home isn’t necessarily the place you’ll stay forever. Don’t pressure yourself to tick every item on your perfect-home checklist.

A couple expecting their first baby may have all the space they really need for the next 5-7 years (the minimum length of time many real estate agents recommend to let a house appreciate in value) in a two-or three-bedroom home.

Research Loan Programs, State and Federal

The Federal Housing Administration (FHA) offers a loan program that puts homeownership within reach for many people who would have a hard time qualifying for a conventional loan. FHA requirements, especially in the credit score requirements, tend to be more relaxed than some conventional loans. First-time home buyers can also purchase a home with only a 3.5% down payment if their credit score is at least 580, and home buyers with a 500-579 credit score can still get approved with a 10% down payment. If you’re lucky enough to have some gift cash from relatives, you can use this toward the down payment (lenders for some conventional loans may require you put up a minimum amount from your own funds, rather than relying on gift money).

You’ll pay two kinds of mortgage insurance: an up-front premium of 1.75% of the loan amount and an annual premium based on length of the mortgage term.

If you meet income requirements and want to live in a qualifying rural area, a USDA loan is another option. This program was started to encourage housing development in rural areas. It’s possible to get a USDA loan with no down payment. You can look up addresses on the site to see if the properties are included in the program.

Check State Programs

Your state may offer housing assistance that you can add to federal programs you qualify for. Look up your state on the HUD website to find out more. Maryland’s SmartBuy program, for example, gives home buyers the chance to purchase a home from a select list while also eliminating up to $30,000 in eligible student debt. Tennessee offers down payment assistance as a 0% second mortgage that’s forgiven after 15 years if you’re still living in the house.

Don’t Neglect Debt

Student loan payments and credit card debt can get in the way of saving money. Don’t drop other financial commitments in hopes of socking away a down payment faster. Missing credit card payments and carrying excessive balances hurts your credit score. A low credit score could signal lenders to offer less favorable interest rates or even deny your application altogether.

A better strategy is to meet with a certified credit and debt coach, who can help you understand your credit report and advise you on ways to establish a budget and work towards reducing excessive debt. Not only does this reduce your debt-to-income ratio (DTI; a number lenders consider when reviewing mortgage applications) and potentially help your credit, but it also encourages smart budget habits you can continue to use when saving for your down payment.

Housing markets change often, but staying committed to your homeownership plan will help you be prepared when it’s time. Explore your options and talk to a Mortgage coach or take a pre-purchase counseling course if you want more guidance on finding your best pathway toward owning a home.


The content for this post was sourced from www.Credit.org

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5 Credit Card Myths That Are Hurting Your Credit Score

5 Credit Card Myths That Are Hurting Your Credit Score

When it comes to boosting your credit score, there are a lot of myths floating around. It’s important to be skeptical and proceed with caution because your financial health is at stake.

If you are influenced by the wrong myths about credit cards, you can actually suffer from poorer credit, because you might be avoiding things that could help your score improve. Consider the following 5 myths that might be hurting your score:

Myth: Negative items are removed when you pay off the debt.

It’s good to get overdue credit card debts back on track, however, the late payments and the negative credit aren’t necessarily removed just because you repaid the account.

Slow pays on a credit card account negatively impact your credit, and the best way to offset that is to re-establish positive credit with the account. Your credit score gives you points for the positive activity and takes points away for the negatives – therefore, it’s very important to re-establish positive credit on the account to offset the negatives.

Myth: It’s best to pay off your balance completely as fast as you can.

It’s not true that you need to keep your credit card balances at $0 to get a good credit score. FICO® has reported that the people with the best credit scores typically do have multiple credit cards with balances, but they keep the balance owed low.

That’s not to say that one must carry a balance to build a good credit score; paying off your balances in full and not incurring finance charges, is the best way to save money and generate a great score.

Myth: You should avoid using credit cards at all to have the best score.

As we said above, you must use credit to generate a good score. It’s possible to achieve this without credit cards, but they are the most convenient way to prove you are a good credit risk; you can use them almost everywhere and easily make payments. If you avoid credit cards altogether, your credit report will be made up of fewer factors, reducing your “credit mix” and lowering your score.

A better strategy is to use credit cards periodically, while avoiding high balances or incurring expensive finance charges, and make your payments on time every month. Regular use will show that you’re good at using credit responsibly. That, and paying off the resulting debt quickly, will boost your score.

Myth: Debit is safer than credit at the checkout register.

If you use debit transactions at the register, your credit score won’t benefit from the activity. Using credit correctly will lead to positive credit reporting activity that will boost your score.

Because there is a myth that debit is safer than credit, many people pass up this opportunity to get some positive credit activity.

It may have been true in the past that debit cards were more secure than credit at the point of sale. But today, with chip-and-PIN technology, credit cards are just as secure to use, and that kind of security should be less of a concern when choosing debit or credit.

Myth: A low credit score means you can’t get credit at all.

If you’re stuck with a low credit score and you think that is blocking you from any access to credit, you should consider obtaining a secured credit card from your local bank or credit union, there you may find a card that you qualify for regardless of your credit history.

This type of credit card is “secured” by the amount you have deposited into an account against which the card draws funds; this is usually your credit limit as well. Make sure that the secured card reports to the credit bureaus, so you can be certain that you are building a credit history as you use the card and make payments. After about a year of using the secured card, your initial deposit is returned to you, and you should be able to “graduate” to an “unsecured” card.

Credit cards can be an important tool to help people build better credit scores, but they can be dangerous. Use them carefully and you’ll see improvements to your credit rating while benefitting from the security and other perks credit cards offer. But if you’ve gotten in too deep with credit card use, we’re here to help. Call today or get started online with a priority financial coaching session.


The content for this post was sourced from www.Credit.org

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