Credit Infocenter

How to Avoid Having Your Credit Be Negatively Affected by Covid-19

April 6th, 2020 · Credit Repair

With 3 million people applying for unemployment benefits in the past week, you can be sure many of these people are worried about how they are going to be able to pay their bills.  As we all know, if you fail to make payments on loans, your credit score will be affected negatively. What can you do to protect it?  

The latest stimulus package passed into law almost had a provision in the law that would not allow credit bureaus to report non-payment of bills for 4 months.  That would have gone a long way in helping to stave off the ill effects. In the absence of this amendment, some banks and credit card companies have all expressed their willingness to work with consumers hard hit by job loss due to the global pandemic.  

If You’ve Lost Your Job

Contact your creditors. Many credit card companies are willing to allow you to delay payments if your ability to pay has been affected by the pandemic. However, this delay in payment is not automatic.  The same applies to mortgage companies – many have signaled their willingness to work with the public and potentially delay your mortgage payments for up to 12 months. The payments would be added to the end of the loan so you would still need to make them.  The same with interest on credit cards, it will still accumulate while you are delaying or missing payments.  

Make the minimum payment on your credit cards. While you should always strive to make the full payment amount on your credit cards, making the minimum payment will guarantee that you will not get a bad mark on your credit report.  In addition, you will be avoiding racking up the maximum interest on your credit cards.  

If you’re receiving a stimulus check from the government, resist the temptation to purchase something that’s been on your wish list and instead concentrate on paying existing bills.  

If You’re in a Deferred Payment or Forbearance Plan

Lenders must notify the bureaus if a customer has been placed in a special program.  The notifications ensure that these programs will not hurt a consumer’s credit report.  Both FICO and VantageScore, the companies behind the credit scores used in lending decisions, have publicly stated that people in forbearance or deferred payments plans will not see their credit scores suffer.  

Pull your credit report from annualcreditreports.com.  Make sure that no black marks are being reported on your credit score.  If you’ve already used up your one free credit report for the year, you can join free credit score monitoring services such as Mint.com and CreditKarma.com.  Make sure your credit scores are not being affected by your deferment or forbearance programs.

Make sure you are not being charged a late fee.  Credit card companies charge up to $39 dollars if you are late on a payment.  People in forbearance of deferment programs should not be charged fees for missing payments.  

If You Must Dip into Savings

Make a budget.  Those savings were built up carefully, so make sure that they last as long as possible.  Getting into a habit of having a budget now will help you to build up those savings once you get back on your feet with a new job or increased income.  

You can take up to $100,000 from your retirement accounts without penalty.  As part of the new stimulus bill, the 10% penalty normally assessed when you take money out of your 401K or IRA accounts is now waived.  Be careful doing this though as the markets are down now, you may have to withdraw more money than you would have to make your expenses, missing out on the opportunity for stocks to go up.

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What Does “Credit Repair” Mean?

January 17th, 2020 · Credit Repair

Our world deals in credit. We pay for just about everything with cards rather than cash. When you pay for something with a card, that card is either linked to your bank account or to a credit account. A card linked to your bank account is called a debit card, while a card linked to a credit account is known as a credit card.  

So what exactly is credit and why would it need to be “repaired?” Let’s take a look at the answers to these questions and others relating to good and bad credit.

What Is Credit?

Credit is the name given to a trust that exists between a money lender and a money spender. When the lender provides the spender with money, it’s with the understanding that they’ll receive payment at a later date. 

Opening a line of credit gives you access to a certain amount of money through a credit card. You can build up good credit in several ways, including making your payments in full and on time. Bad credit can develop as you miss payments or only make partial payments among other things.

Learning How to Repair Credit

Learning how to repair credit isn’t difficult, but it does take time and patience. First, you need to know your credit score. A score of 550 or lower is considered poor, while around 700 is good, and above 800 is excellent. 

How Do You Know If You Have Bad Credit?

There are a couple of ways to know if you have a bad credit score. One is to evaluate yourself: are you making your credit card payments in full and on time? If the answer is no, you likely have a poor credit score. 

One way to know for sure where your credit score sits is to get a copy of your credit report and credit score. There are three nationwide credit reporting companies: TransUnion, Experian PLC, and Equifax. Everyone is entitled to one free copy of their credit score and report from each of these companies every twelve months. 

You can submit a request for your credit score and report online, through annualcreditreport.com or over the phone at 1-877-322-8228.

How to Repair Bad Credit

If you have poor credit, try doing the following to improve it:

  • Pay outstanding credit card balances. Do what you can to dig yourself out of large amounts of debt and stay on top of your payments. 
  • Pay bills on time. Show your creditors that you can be trusted with their money.
  • Review your credit score. Know exactly what your score is and where you stand.
  • Dispute negative marks or incorrect late-payment entries. People make mistakes. Some of those mistakes could be negatively impacting your credit score.
  • Increase credit card limits. If you’re maxing out your credit limit every month, that will damage your credit score. Call and ask your credit card company if they can increase your credit limit. 
  • Open another credit card account. But don’t use this card. Opening another account will help to increase your credit limit on your current cards.
  • Don’t close old accounts. Even if you haven’t used a credit line in years, closing that account could impact your credit score negatively. If you need to close an account, close a new one before you close an old one. 

Why You Need Good Credit

When you start making payments on outstanding debts racked up on a credit card, you begin developing a credit score. A credit score is a numerical value given to a person’s credit files. It represents the person’s creditworthiness.

Put simply, if you have a good credit score, lenders will be more likely to give you loans when you need them. Looking to buy a house? Good credit will help you get a better deal on a loan. Thinking of getting a new car? Good credit will help there too! 

Contact our partner Lexington Law for a free credit repair consultation today. We’re here to help you figure out how to repair your credit score.

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4 Ways to Save for Retirement

December 6th, 2019 · Credit Repair

When you’re young, retirement seems like a stage of life that will never come. Because retirement seems so far off, many 20-somethings would rather spend their hard-earned cash in the present than stash it away in a retirement savings account.

But life passes by quickly, as it always does, and by the time they hit middle age, hundreds of thousands of Americans wind up regretting their lack of savings for retirement. So far behind in the savings game, they may be ready to throw in the towel and say it’s too late. Or, they may not even know how much money they need to comfortably retire. They may be patting themselves on the back for putting a couple hundred dollars away every month, only to realize it’s not nearly enough to live on.

If you’re wondering how much to save for retirement—or how to save for retirement, check out our guide below. We’ll give you simple, actionable tips so you can build up a sizeable nest egg, no matter what stage of life you’re currently living in.

How Much Money Do You Need to Save?

The amount of money you need to save for retirement depends on the lifestyle you want to live. Likely, you’ll want to be living as comfortably as you do now, so that should be your benchmark for how much you’ll need per year. Then you’ll take into account the things you’ll need to pay for. (Some people will not need to pay a mortgage or pay expenses related to their children by the time they’re retired.)

One rule of thumb is to save at certain levels at each decade of life. For example, in your 30s you should save at least as much as your annual salary. By the time you’re 40, you should save three times your annual salary. And when you turn 50, you should have six times your annual salary put away for retirement. At age 60, you should have eight times your salary saved, and then at 67, you should have 10 times your salary reserved for retirement. Ultimately, you should save 12 times your salary before you retire.

Savings Tips

If saving 12 times your annual salary sounds overwhelming to you, you’re not alone. But, if you take it one month at a time and dutifully save the right amount, you’ll eventually get there. Here are four excellent ideas when it comes to saving for retirement:

1. Take Advantage of Your 401(k)

Does your employer offer a 401(k) plan? If so, you’d be crazy not to take advantage of it. This type of savings plan earns interest over time, so you’ll save more the sooner you start. On top of that, many employers will match some percentage of the amount you put in, which is basically free money. If you’re not sure how much to put in, start with saving at least 10 percent of your pay.

2. Set Up a Roth IRA

Maybe your employer doesn’t offer a 401(k). Or maybe you want to really maximize your retirement savings. In that case, set up a Roth IRA to earn interest on even more money you set aside for retirement. This money can be put in the account tax-free, and it won’t be taxed when you take it out in retirement. There are limits on how much you can put in a Roth IRA, so this is a great tool to work alongside your 401(k).

3. Pay Off Debt

Paying off debt isn’t technically saving you any money—or is it? If you have school loans, a home mortgage, or any other debt, you’re paying interest every month that you have the loan. So, the sooner you pay down the debt, the better. You will indeed save thousands of dollars by paying off your debts earlier than the term of your loan. Just make sure there aren’t any penalties for paying in advance!

4. Use an HSA

A health savings account is another great way to take advantage of pre-tax dollars. This money can be withdrawn from your paycheck every month to go into an account reserved for medical expenses. The money earns interest, and it can sit in the account until you’re ready to use it. Since many retirees have growing medical expenses, this is an important aspect of any retirement budget.

Learn More

By following these tips, you’ll be well on your way to a sizable retirement savings fund. Want to learn more about saving money? Check out our post on the basics of budgeting.

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