Building or rebuilding your credit is a great step to financially empower your life. With good credit, you may be able to qualify for lower rates on loans, mortgages and credit cards, which can save you money in the long run. However, if you have no credit, or bad credit, you may not be able to get a loan or credit card, and may end up paying a very high interest rate. Here’s some basic information that can help you build or improve your credit.
Check Your Credit Report
The first step towards building credit is to know what your credit report says about you. You’re entitled to one free credit report every year from each of the three major credit bureaus, and can request one from each of them at their own website, or from annualcreditreport.com. Please keep in mind these free credit reports do not include a credit score, but you can purchase your credit score.
Tip: If you stagger your credit reports from each bureau, you can keep an eye on your credit throughout the year.
Check Your Credit Report for Errors
The next step will be to look over your credit report and find any errors. You’d be surprised what can end up on your credit report. Sometimes wrong information will get posted by accident. Some common things that people have found include:
- Identity – A wrong name may be listed.
- Accounts opened that you didn’t initiate – This could be a sign of identity theft, and a great reason to always check your credit report. Make sure you it was you that opened your checking accounts.
- Wrong account information – Sometimes your credit limit could be listed wrong, or a loan could show as open after it’s been closed.
Fix or Dispute Credit Report Errors
After reviewing all the information on your credit report to make sure it’s accurate, you’ll want to fix or dispute any errors. If you find an error with a creditor, the first step you should take is trying to fix it with them. This may save you from having to dispute it with the credit bureaus. However, if they don’t fix it, you’ll need to initiate the dispute process with each credit bureau. You can do this online…here are the links to each credit bureau’s dispute section, which will walk you through what you need to submit.
Build Good Credit Habits
Just like building your reputation, it takes time, and is very easy to damage. Building credit requires some discipline. Here are some good credit habits you should adapt:
- Always pay your bills on time
Our bankers say this is the most important step. One way to keep on top of your payments is to set up payment reminders in your calendar. You can also set up automatic payments using bill pay to make sure you pay any creditors on time.
- Keep your debt low
A good rule of thumb is to use your credit card regularly, but don’t spend more money than you can pay off each month, by the due date. If you have loans and can afford to pay more than your minimum payment, you can pay less interest over the life of the loan compared with paying just the minimum balance, and may pay it off faster.
- Don’t take out too much credit
This can affect your debt to credit ratio, which is calculated by dividing your total debt by your total credit limits for your revolving lines of credit. Your debt to credit ratio is one component some bureaus use to assess your credit risk.
- Don’t take out multiple lines of credit at the same time
This could give creditors the impressions that you’ve hit hard times and are in need of more credit, which can be a red flag. They may not think that you’ll be able to pay them back.
- If you’re having a hard time paying your bills, ask your creditors for help, or make an appointment with a legitimate credit counselor. Check the FTC’s tips for more information.
Who Uses My Credit Reports?
If you’re applying for a loan, your credit score may be one factor used to determine how risky it is to lend to you. A general rule of thumb is that riskier borrowers tend to receive higher interest rates than less risky borrowers. Think about it like that friend that never paid you back…would you be willing to lend out even more money to him or her? However, other people may also pull your credit report, like a prospective landlord or employer or insurer, to figure out if they want to rent, employ you or sell you insurance. Your credit report will tell them where you live, how you’ve paid your bills, and if you’ve ever filed for bankruptcy.
For more tips on how to improve or build your credit, check out this information from MyFico.
Cutting Off the Joneses: The Art of Managing Lifestyle Inflation
The road to reaching your financial goals can sometimes be very difficult and tedious. We tend to hold back from buying certain things, and sometimes, we live on a tight budget in order to make ends meet. But all this seemingly comes to an end when all your hard work pays off and you get a raise, and finally, you can treat yourself to something nice. However, getting a raise can lead you to one of the biggest challenges to reaching your financial goals — and half the time, you don’t even notice it.
Have you ever heard of lifestyle inflation?
Simply put, lifestyle inflation is when your spending increases as your income increases. This can include moving to a more expensive apartment, getting a new lease on a car, or making small, repeat purchases that add up over time. All these can make it hard to break out of living from paycheck-to-paycheck even when your paycheck gets a little bigger.
It’s easy to fall into this trap. After all, what’s the point of working so hard to get a raise if you don’t treat yourself?
While there’s nothing wrong with splurging a little, the cause of lifestyle inflation goes much deeper than simply wanting to treat yourself. An article by Marcus on why ‘Rising Income Levels May Lead to Lifestyle Inflation’, found that young professionals use material markers to express who they are, in order to demonstrate that their career or chosen path is rewarding. In other words, lifestyle inflation is generally caused by the desire to prove your position in life — manifesting itself through material items, the house you live in, or the places you go to. And although doing this can feel good in the short-term, lifestyle inflation poses a problem in the long run, as Trent Hamm of The Simple Dollar explains that lifestyle inflation hinders you from reaching your financial goals. Allocating most, if not all, of your new raise to your spending budget means that you’re not saving or investing any of it for later on — marking a roadblock to your journey towards debt freedom and financial wellness.
If you recognize yourself in these examples, fret not. Here are a few ways you can break the cycle:
Set goals for yourself. Our resident writer Ash Cash stresses in ‘Saving 101’ the importance of setting financial goals in order to save better. Having goals allows you to constantly remind yourself what you need to save for, and why, especially if it’s something you want badly. That way, you won’t be as tempted to stray away from your plan!
Cut out what you don’t need. You’d
be surprised at the number of things or activities that you spend on, but can
easily cut out of your expenditures. Of course, we don’t recommend doing this
all at once. Start small and cancel subscriptions you don’t use anymore, or
start eating out just once a week. Make small, manageable moves, and soon
you’ll find yourself celebrating the joys of meeting your goals and saving
Track your expenses. After receiving a raise, the Balance cite that the best way to identify lifestyle inflation behaviors is to track your spending — even for just a short time. Once you recognize these behaviors, you can start cutting out purchases you don’t need.
Keep a “splurge” budget. Not buying or doing things you want will make you miserable, but overspending won’t be good for you in the long run, either. That’s why it’s a good idea to create a splurge budget for a week or month, and to stick to it. Purchases you don’t “need” come out of that budget, such as buying a new video game, ordering something online, or getting a coffee at a café even if you have a coffee maker at home. If you want something pricier than your budget for the week or the month, try to “save” that budget and let it roll over the next month so you can purchase the item. This way, a splurge budget lets you treat yourself, but also keeps you in check.
Article written by Anna Levy
Exclusively for paradigmmoney.com
11 Ways to Save During the Holiday Season
The holiday season is upon us, which means significantly more spending—and more potential to encounter financial trouble. Because of the emotional play many retailers use to get you to buy from their stores, it’s important to be overly vigilant with your spending during this time. Below are 11 ways you can save (instead of spend) during the holiday season.
1. Decide how much you can spend and make a plan.
Many people don’t like to use the word “budget” because it seems restrictive. However, creating a holiday budget or “making a plan,” as we’ll call it here for all intents and purposes, is imperative during the holiday season. By making a plan, you’re avoiding overspending and essentially telling your money what to do—rather than allowing it to be in control.
2. Open a holiday spending account.
Using your main checking account to do your holiday shopping is one of the biggest mistakes you can make during the holidays. Doing so allows you to tap into money allocated for other important things like bills and groceries. By opening a separate checking account for holiday spending, you’ll help yourself stay on budget. And once the money is gone, you have a clear stop on holiday shopping. Make sure it’s a free checking account, opening an account that charges fees would defeat the purpose of doing so.
3. Account for splurges.
Let’s be honest: you’re going to splurge this month. A dress for your office Christmas party? A sale at your favorite retail store? The jeans you’ve been eyeing for months are suddenly 40 percent off? We could go on and on, but you get the drift. Set aside a dollar amount that you’re willing to spend on yourself this month. Knowing how much you can afford will keep you from being swept up by “can’t-miss” deals.
4. Cut back on expenses.
Cutting back on expenses during the holiday season—or even before—will give you more money to allocate towards the holidays. Small changes like cutting your cable (you’ll be visiting family and friends most of the month anyway!) or avoiding takeout meals will save extra cash and make a big difference in your budget.
5. Track your spending.
Using a spending log is essential this time of year. Gifts aren’t the only thing affecting your budget—more social occasions means more spending. From extra Ubers to hostess gifts, your expenses can add up quick. This usually forces people to make decisions that they may not want to make, like tapping into credit or using money that is not allocated for holiday shopping. Using a spending log will keep your spending in check.
6. Narrow down your list.
It’s easy to get caught up in the fun of the season and want to gift something to everyone you’re close to. Let us remind you (as corny as it sounds) that presents are not what the holiday season is about. Take a look at your holiday list and be honest about what you can afford. It’s not fun, but your loved ones don’t want you hindering your financial future for them.
7. Set gift-giving expectations.
Setting gift-giving expectations is really important: If your love ones assume you’re going to spend a lot of money on them, they may feel obligated to do the same in return. Having a conversation early on about gift limits will allow both parties to avoid overspending, not to mention it will sidestep any ensuing embarrassment or guilt that comes with one party not giving an equally as lavish gift.
8. Take advantage of store offers and coupons.
Taking advantage of store offers and coupons should be a given, but you’d be surprised at how many people pay full price for things during the holiday season. Many people feel like they are competing against other shoppers to get the best gifts, so they don’t spend the necessary time finding the best deals. Don’t believe the hype! Make a shopping plan for each individual on your list. Research where you can find the best deals on the product and then sign up for company email lists. Follow sales and make purchases at the right time. Ordering presents in advance (or price shopping with ample time) not only assures that you get the best deals, but also that you don’t spend excess cash on things like rush shipping.
9. Be creative.
Being creative is about understanding that you don’t have to spend an arm and a leg in order to show your love ones you care. There are many people who are more appreciative of the thought that goes into a handcrafted gift than a purchased item from a big box store. Being thoughtful can have a lasting and more memorable effect than breaking the bank. Spending quality time with an elderly relative, helping a friend clean her home the day after a big party, or offering to babysit for a couple are just a few ideas.
10. Reduce decoration costs.
You may feel inclined to go all out when it comes to decorations, but if you’re crafty enough, you can save a lot of money by creating your own. If you really love holiday decor, wait until the season is over and purchase for next year. Prices for decorations are inflated during the holidays, so buying them during the off-season can save you a lot of money.
11. Remember the reason for the season.
We cannot repeat this enough: remember the reason for the season. The holiday season is not all about gift giving. Sometimes your presence is better than your present! The holiday season is about family and friends, and should be cherished in that way.
Do you have a holiday season savings hack that you swear by? ‘Tis the season to share!
11 Ways to Save During the Holiday Season was originally published on TheEverygirl.com.
5 Tips for Holiday Break
Like most students, you’re probably looking forward to spending time with family and friends over the holiday break. But before you relax, take a little time first to size up your finances for next semester. Here are a few tips to get you started:
Review Your Spending from Last Semester
Not sure where all your money went? Now is a good time to examine your spending from last semester by reviewing your bank account statements, check register, credit card statements and receipts (if you saved them). One way to do this is to make two lists: one with all your unavoidable expenses, such as tuition, rent, basic food costs and insurance payments, and another with everything else—in other words, purchases you wanted at the time but did not necessarily need. Now take a look at that second list. Bet you’re surprised at how many things you spent money on that you could have done without, or don’t remember why you purchased in the first place! Make a pledge to cut back on some of those items and watch your savings grow.
Save Your Cash Gifts
Did you get some cash in your stocking? You might be tempted to blow it on those irresistible post-holiday sales, but take a moment to think about your needs for next semester. Will you have enough money for books, school supplies, gas and other school-related needs? At the very least, plan to save 10-20 percent of your extra cash for unexpected expenses like car repairs or medical emergencies. Knowing that you have a little nest egg set aside will give you some peace of mind and allow you to focus on your studies.
Budget Your Anticipated Financial Aid Refunds
If you will be receiving a refund from your financial aid award next term, keep in mind that a good portion, if not all, of these funds may be from student loans that you signed up for. These funds will have to be repaid when you graduate or leave school, so it is important to budget and spend them wisely, and make sure you have enough money to last the entire semester.
Re-apply for Financial Aid
Remember, you must re-apply for financial aid every year. You can submit the federal FAFSA form beginning January 1, 2015 for the 2015-16 academic year. Your state and school may also require you to re-apply or update your information, so be sure to visit with your school’s website or contact the financial aid office for information on deadlines and other requirements. Also, check out Mary’s article in the Huffington Post for more information and tips on applying.
Look for Part-time Job Opportunities
If you think you’ll be running low on money next semester, start looking for some part-time job opportunities or increasing your hours at your current job. The best place to start your job search is right on campus. There are lots of jobs available, from library clerk to food service worker—check with the employment office or website. You might also want to consider capitalizing on your own talents to make some extra cash by offering services such as tutoring, babysitting, dog walking, or repairing cars or electronics.
Following these tips will allow you to enjoy your much-needed break and put you on a path to financial peace of mind for next semester—so start today!