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Keeping Good Credit

9/20/16

 

When taking a loan or financing a purchase, a good credit score can be crucial to ensuring that you get the best rate. A credit score is a powerful number; it is designed to encompass various parameters of credit history to provide creditors with a quick assessment of your credit-worthiness and will be used to create the terms of a loan.

Your credit score is generated from information within your credit report. Lenders report aspects of consumer accounts, such as amounts owed, whether payments are made on time, and term-lengths of accounts. This information is compiled into your credit report to provide an overview of your credit history. Certain details are weighted more than others when calculating your score. For example, having missed or late payments can dramatically lower your score, whereas closing out credit accounts has a lesser effect.

Ultimately, there are three bureaus that maintain and distribute this information. They are Experian, Equifax, and Transunion. If you want to retrieve your credit information, current federal law entitles you to one free copy of your report every 12 months from each of the three credit reporting agencies. One way to access your report is to visit AnnualCreditReport.com; this is the official website that is directed by Federal law to provide a credit report from all three agencies. Additionally, if you have been denied a loan based your credit, you are entitled to a free credit report. However, the report doesn’t always include a credit score and you may need to pay to receive your score within the report. Even so, monitoring your report is crucial because the information in your report drives your score, and it is up to the consumer to review their own report for mistakes or fraudulent activity which may erroneously drive down their score. 

Scores range from 301 up to 850, with the higher number indicating a better score. Within this range, the numbers are bracketed into different categories, from bad to excellent. A score from 661 -780 is considered a “good” score, and typically this is the range that lenders tend to expect when creating loans. If your score is below 650, you may have a difficult time getting a loan with some lenders. If this is the case, begin by reviewing your report for errors. If all seems to be correct, you might consider having someone with better credit co-sign on the loan with you.

If you have no credit, you may still be able to apply for a credit card with a low limit in order to build your history, and having a co-signer with good credit can help you get started. Every time you take a loan or open a credit account, you have a new opportunity to demonstrate your credit worthiness and build your credit – it just takes time. Make your payments when they are due, keep your income-to-debt ratio in balance, and maintain your credit accounts for longer periods of time, and your score will continue to rise!

wes real author


5 Things You Won’t Learn About Money in College
4/29/16

College students are bombarded with all kinds of challenges. No doubt it is an exciting time–what with learning to navigate the campus, getting to class on time, adjusting to new social circles and last but not least assuming a greater responsibility for managing your own money. Some students come better prepared than others. And many graduate from college and still don’t have a firm grasp of how to manage money.

Here’s what you need to know as you face the work force and have to truly "adult":

  1. Create a budget – I know it’s a pain to set up a budget and even more of a pain to actually adhere to it. Nevertheless, it is an incredibly important part of managing your money. Start by listing your monthly income sources (use your net income) and then list your expenses like rent, phone bill, utility bill, food, etc. You may not succeed at first, but work hard to stick to your budget. It usually takes a few months to figure out a realistic budget.
  2. Separate your wants from your actual needs – This is a big factor in your budgeting process. If your food expenses looks out of line after a few months, track how often you are eating out and where. Do you need to eat out that often or go to higher end restaurants? Again, it often takes a few months to figure out wants from needs, but be aware of unnecessary expenditures and adjust your habits as necessary.
  3. Set up a checking account – Most, if not all, college students have a checking account, but often it is with their parents. Their parents are making the deposits and possibly even balancing the checkbook. Set up your own checking account and shop around for the best bank. First American Bank and Trust has the perfect account: our Free Checking account. There are no service charges and no minimum balance requirements. Plus, since we are locally owned and operated, our staff will be happy to spend time with you and help you with any questions or challenges you might have.
  4. Establish credit – This comes as a shock to graduates. You landed your first job and have been making good money. You’ve even managed to save enough (see savings tip below) for a down payment on a much-needed new vehicle. You go to a dealership and find the perfect car, but when they run your credit report, they find that you have no credit. You can’t get a loan with no credit. Your choice, at this point, is to have a parent co-sign. This will indeed start building your credit, but it takes approximately 12 months of payments to warrant a credit score. If you want to be proactive, though, start building your credit before the need for a loan arises. Many reputable credit card companies offer secured credit cards. Or you can get a credit card with a parent as a co-signer. On-time repayment is crucial to a good credit score.
  5. Set up a savings account – I realize that saving when you are just starting out is almost impossible, but start small. Try putting 10% of your paycheck into savings, and add to it whenever possible. This is your emergency fund or your car down payment fund. I cannot stress how important it is to have a cushion for the times when life throws you a major curve ball. You can never predict when it will happen, but when it does you’ll be glad to have some extra money stored away.

Life after college is a blast of reality. No more summers off; no more breaks between semesters or two weeks off for Christmas. Becoming an adult definitely has its challenges, but you will be well on your way to making a success of it and making your life more stress free if you utilize these tips.

laurie author


Financial Resolutions Worth Making
1/5/16

“Cheers to a new year and another chance for us to get it right.” – Oprah Winfrey

The New Year is a great time to resolve to do things differently. According to Statistic Brain Research Institute, the most common 2015 New Year’s resolution was to lose weight, getting organized was second, and financial resolutions were third. No matter what type of system or tricks you use to accomplish your resolutions, here are some resolutions you may want to consider to get or keep your financial life on track.

  1. Create a family budget. Consider everything that is an income or expense. Make it realistic. A budget doesn’t mean you need to make drastic cuts in spending. It means you need to plan what you will spend.
  2. Create or maintain an emergency fund. Most experts recommend 3-12 months of monthly expenses be kept readily available for unplanned emergencies like car problems, medical issues, etc.
  3. Review your bank accounts. Most banks have several options for checking accounts or savings accounts. Having the right type of account can save an average account holder several hundred dollars per year. For example, if you use your debit card everywhere and have direct deposit and e-statements on your checking account, you may benefit from a higher interest rate than someone who doesn’t. Take the time to review your checking and savings/money market/CDs.
  4. Review your insurance coverage. Life, health, and property insurance should all be reviewed on an annual basis to ensure that your policies are appropriate for your stage of life
  5. Review your mortgage. If you have not reviewed your mortgage in the last few years, it may pay to refinance. The Federal Reserve increased short-term rates recently, but longer term rates, like mortgages, are still a great bargain.
  6. Start or increase your retirement savings. One of the most common questions I hear is “how much is enough?” Recent studies have shown you should be saving about 14% of your compensation, including any employer contributions. If you don’t have an employer plan, consider opening an IRA.
  7. Review your investments. The keys to investing are to review the investment performance of your account(s), asset allocation (cash/bonds/stocks), contributions or distributions, and expenses. Are your investments meeting your goals? How much risk are you taking? Too much? Not enough?
  8. Review your estate planning.  If you don’t have a will, get one.  If you do have one, review it every year for family changes (deaths, births, divorces, etc.).  If it needs to be updated, take care of it. Most people procrastinate because they don’t like to think about dying or because they don’t want to pay the attorney. Check your beneficiary designations on your life insurance and retirement plans because they often pass outside of your estate.

If your New Year’s resolutions include getting your financial life on track, we’re here to help!

kemp author


Tips for Staying Safe During the Holiday Shopping Season
12/16/15

The holidays can be a stressful time, and keeping one’s finances safe and in order with a few straightforward tips can help to reduce stress while enjoying the season. There are two different goals that you can set up to remain jolly this time of year: setting and sticking to a budget, and protecting your financial security.

Setting a budget for the Christmas buying season is critical for several reasons and is akin to making a good grocery list before heading to the store. First, don’t go hungry—which is to say, keep a disciplined approach and refrain from impulse buying. Second, only purchase items on the list and keep the list for subsequent years. Third, take advantage of the sales that are available for those items on the list and don’t forget to do your research online.

Financial security is the other way to avoid having unpleasant surprises come January. Given the popularity of online shopping, make sure all of your devices are updated with the most recent operating systems, patches, and anti-virus software. In addition, take care of “what’s in your wallet” by keeping a hand and eye on wallets and purses in crowded shopping centers. One additional security step is to make an inventory and even photocopies of the contents in your purse/wallet so you know exactly where to go if an item is lost, misplaced or stolen. Also, keep track of your purchases in real time using the mobile banking and online banking services most banks support today. These can provide alerts when charges are made or balances have dropped below a certain level.

Taking these few steps will ensure your financial condition is in decent shape come January and will help make this holiday season even more enjoyable.

sam author