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Money Concerns In Your 20s: Setting Up Your Finances Right From The Start

young woman looking tiredMoney concerns in your 20s may seem like a trivial thing since you have just gotten out of school. But considering the current financial situation in the country, you may want to start being serious about your finances early on. Most people are looking for financial tips for new graduates because they are eager to set up their finances in such a way that will help them avoid the mistakes that their elders made. Millennials, or at least those who are still in their 20s have seen how their parents and grandparents struggled with their personal finances. That experience definitely left a mark and is influencing how people in their 20s are reacting towards financial situations.

According to an article published on Investopedia.com, the spending habits of young adults are influenced by their friends, social media and the latest recession. Different studies reveal that they are inclined to follow the financial habits of their friends and they rely heavily on what goes on in their social media networks. The Great Recession significantly reduced the appeal of credit cards for the young adults – after seeing how it nearly drove their parents and grandparents under.

Whether this is true for you or not (assuming you are in your 20s), you need to put your prejudices aside and figure out how you will set up your finances today. You need to start it right so that your momentum in building up your wealth will not be hampered by mistakes that could have been avoided early on.

Typically, your money concerns can be divided into two: your debts and your financial goals.

Dealing with your debts out of college

Let us start with your debts. Being in your 20s, you know that one of your major concerns right now is your student loans. The really bad news about student loan debt is simple – it keeps on increasing. Chances are, you graduated with a lot of them in your name.

If that is the case, you need to know that dealing with your debt as early as possible is the best course to follow. By prioritizing this, you are lowering the interest amount that your debt is accruing. It can also help you setup your finances so that you do not have to pass up on financial opportunities because of your debts.

According to an article published on TIME.com the student loans debt that is now more than $1 trillion is starting to hurt the economy. Not only is it keeping students from making personal investments, it is also causing the government some serious budget cuts on other programs. That is so they can divert funds to help save the delinquent student loans borrowers.

Given that effect, you know that other money concerns is not as great as your responsibility to pay off your debt. This is true even for those that you have incurred in the past like credit card debt or other personal loans.

So how do you do that? Here are some tips for you.

  • List how much you really owe. Make a list of the debts that you owe – from student loans, credit card debts and other accounts that you have opened in the past. Give the details of each debt: the lender, interest rate, current balance and monthly payments. This will help you categorize which of them requires your attention the most. Ideally, you want to concentrate on those with the highest interest.

  • Calculate your payment capabilities. If you already have a job, you need to calculate your income to figure out how much you can afford to contribute towards your debts every month. That way, you can figure out how you will set up your budget. If you do not have a job yet and the 6-month grace period for your student loans is up, you need to research how your unemployment can be used to delay your billing.

  • Create a budget plan. When you have your income, you should list your expenses and make sure that you have enough money to send towards your debts. If it is not enough, your choices are to earn more or cut back on your expenses.

  • Research on the different debt solutions you can use. There are various debt relief programs that you can use to help make your debt payments more organized. You can use debt consolidation programs to simplify the payment process that you have to go through. Research the processes that you can choose from and figure which is most suitable for your specific financial requirement.

Financial goals that you can set up in your 20s

Apart from getting out of debt, you still have other money concerns to take care of. We have consolidated them into your financial goals. What you have to realize is that as you get older, your priorities will change and so will your financial goals. So you need to be careful about how you focus on each one because while you are working on them, they might not be relevant anymore.

But just to get your started, here are some of the money concerns that you can work on in your 20s.

  • Build up your emergency fund. As important as getting out of debt is, you need to work on your emergency fund too. That way, you do not have to put yourself further in debt in case the unexpected happens. You can start with $1,000 as your rainy day fund and just put more money as you go along.

  • Contribute towards your retirement. You also have to start thinking about retirement – yes even as early as now. If you do not want to wait until you’re 80s to retire, you should start saving up for your future. The thing about starting early is you can make small contributions and you can still reach your target.

  • Raising your credit score. This is an important task for you to work on early in your career. This is not just about having debt, it is more of how you will behave towards your debts. You need to learn how to pay off your credit obligations properly. That is primarily, how you will raise your credit score. To give you some tips, here is a video from National Debt Relief that has some tips on how you can improve your credit score.

  • Establishing your career. This is not really a financial goal but it is still important because it will allow you to reach your targets. In fact, most people in their 20s are usually focused on this. Figure out what you want to do and if it can finance the type of lifestyle that you want to have.

  • Acquiring possessions. According to the MarketPlace.org, student loans, after reaching $1.1 trillion, is starting to affect the ability of young adults to make investments – like buying houses for instance. It ties up around $1,000 per year and any payment made towards interest is actually a lost investment. So as difficult as this may be because of your debts, you need to look into ways to acquire possessions. Do not let your debts keep you from doing that.

The great thing about working on your money concerns as early as when you are in your 20s is you get to have the time to make mistakes. Not that you would not be careful of course. You will still take your time to consider your options but the thing is, you can afford to make risks at this point. So know your options and start working on your finances as early as possible.

In case you need help with your student loans, National Debt Relief recently released their federal student loan product. This is a consultation service wherein they evaluate borrowers in terms of their financial, employment and student loan conditions. They will recommend the right program that you can avail and will even help you with the paperworks. This service will only cost you a one time flat fee that will be placed in an escrow account. National Debt Relief will only withdraw this amount when you are satisfied with the paperwork that was done on your behalf. If you do not get into a program, then the company will not get paid. There will be no maintenance fee or any upfront fees in the service.

What You Need To Know About The New FICO Score That’s Coming Soon

What You Need To Know About Debt ManagementThe Greek philosopher Diogenes once said, “There is nothing permanent except change” and this is true in the world of lending as it is in the rest of our lives. Lending is constantly changing, which means that the way we are scored needs to be updated periodically and in line with this here comes the latest – FICO Score 9.

Does the term “credit score” frighten you?

Even though you may be afraid of the term “credit score” it’s important that you know yours and how it affects your personal finances. Lenders generally look at credit scores as follows:

Between 700 and 850 – Very good or excellent credit score
Between 680 and 699 – Good credit score
Between 620 and 679 – Average or OK score
Between 580 and 619 – Low credit score
Between 500 and 579 – Poor credit score
Between 300 and 499 – Bad credit score

When you apply for any kind of credit, the first thing the lender will do is look at your credit score. As you can see from the ranges shown above, if you have a credit score of less than 580, the odds are that you will be turned down or, best case, charged a very high interest rate. If you don’t know your credit score it’s critical that you get it before you next apply for credit – or you could be in for a very unpleasant surprise.

What a credit score means

Credit scores are a three-digit representation of how creditworthy you are. Landlords, creditors and other creditors use it to decide if you should be given a credit card or a loan and how likely it is that you will repay the money. To put this another way, your credit score is a way for lenders to predict how risky you would be as a creditor.

Now comes FICO Score 9

While there are literally dozens of different credit scoring models, the first and most popular is the FICO score. It was developed by a company then called Fair Isaac Corporation as a way to simplify the whole credit granting process. Prior to FICO lenders were required to sit down and carefully analyze your credit report line by line. Plus, they had to review your reports from the three credit reporting bureaus because they could be and often were different. As you can imagine this was both tedious and time-consuming.

The updated model

The models for scoring created by FICO are considered to be the gold standard in terms of deciding consumer risk. Virtually all the credit granting businesses use them. For example, in 2013 alone lenders bought from FICO an amazing 10 billion scores to decide who would be granted loans or credit cards. However, things change over the years and FICO generally keeps creating new models to tackle these changes and do a better job of predicting how creditworthy a person would be. The newest in this long line of credit scoring models from FICO is FICO Score 9 and is to be released this summer.

Much the same as Score 8

FICO Score 9 will be much the same as FICO Score 8. However, FICO said in a recent press release that it will have better “predictive power” and will consist of a better representation of a person’s creditworthiness. Andrew Jennings, who is FICO’s chief analytic officer was quoted as saying, “Our innovative, multi-faceted modeling approach incorporates a more exhaustive characteristic selection process to build a score that is even more effective across a wide variety of situations.” To put this in simpler terms, FICO Score 9 is to do a better job than FICO Score 8 of predicting how risky you are.

Improved consistency

As noted above, there are three credit bureaus that provide scores to both lenders and individuals. They are Experian, Equifax and TransUnion. One thing that has made it tough for lenders to get the maximum value out of the credit scores they purchase is that there is sometimes a wide variation between the three bureaus regarding an a person’s score. In fact, when a lender orders a credit report it is not uncommon that each bureau provides a somewhat different score. These inconsistencies can sometimes be quite large, which makes it confusing for both creditors and individuals. So, according to FICO one of the biggest improvements that will come with FICO Score 9 is that these differences will be less apparent, which will make it faster and easier for lenders to decide whether or not they want to issue credit to an individual.

Many new scoring models

This change coming from FICO is just one of the many new scoring models that are on their way. The new ones are expected to focus on individual industries. As an example of this, there will be different scoring systems between credit cards, auto loans and mortgages. This is due to the fact that lenders are searching for ways to grant credit to new customers while still adhering to a number of historically important guidelines.

Watch for more news

FICO will have more details about Score 9 as it comes closer to releasing it. You should pay close attention to this so you’ll know how you might or might not be affected by these changes and your ability to get new credit.

Check your credit reportCredit Report

While it’s important for you to know your credit score it’s equally important for you to see your credit reports. The law entitles you to a free copy of each of your three reports once a year. You can choose to get them from each of the credit bureaus or altogether on the site www.annualcreditreport.com. People who are credit wise generally get one of their free credit reports every four months. This represents a way to kind of monitor your credit without having to pay a company to do it. Reviewing credit reports isn’t much fun but it’s important that you look over each one carefully. A study released last year by the FTC (Federal Trait Commission) showed that nearly 20% of us have credit reports that contain errors and that 5% of us have errors so serious they are affecting our credit scores.

What to look for

When you go over your credit report the negative items to look for include late payments, skipped payments, defaults, bankruptcies, charge offs, tax liens and collections. If you find any of these in one of your credit reports it’s important to make sure they are legitimate and not errors. If you do find errors you can dispute them with the appropriate credit bureau by writing a letter and enclosing whatever documentation you have to prove your claim. The credit bureau will then check with the institution that provided the negative item and ask that it be verified. In the event that the institution cannot verify or fails to respond within 30 days, the credit bureau must remove it from your credit report, which could lead to a nice boost in your credit score.
If you do need to dispute something in one of your credit reports, here’s a video on the right way to construct a  dispute letter.

In summary

Your credit life is ruled by that little three-digit number called your credit score. It’s critical that you know your credit score especially before you apply for a big loan such as an auto loan or mortgage. You need to get and review your credit reports so that you can dispute any errors that could be affecting your credit score. And finally, be sure to watch for more information about FICO Score 9 so you will know how it might affect your credit score and your financial life.

Trying To Rebuild Your Credit? Here’s How To Find An Affordable Secured Credit Card

frustrated looking woman looking at a laptopAlmost all of us wreck our credit at some point in our lives – usually when we’re young and not so great about the decisions we make. There is an old saying that good decisions come from experience, and experience comes from bad decisions. If you’re like us you probably made some bad decisions about credit and may even have been forced to file for bankruptcy.

If you did mishandle your credit and find that you can no longer get any credit at all, you need to learn from the bad decisions you made and begin rebuilding it.

You do know your credit score, right?
If you’re not able to get credit it’s probably due to your credit score. Lenders look at credit scores in the following ranges:

• Between 700 and 850 – Very good or excellent credit score
• Between 680 and 699 – Good credit score
• Between 620 and 679 – Average or OK score
• Between 580 and 619 – Low credit score
• Between 500 and 579 – Poor credit score
• Between 300 and 499 – Bad credit score

If you’re being denied credit, you probably have a credit score of less than 500. But the important thing is to learn your credit score. You can get it by going to the site www.myfico.com and either pay $19.95 or sign-up for a free trial of its Score Watch program. The three credit reporting bureaus – Experian, Equifax and TransUnion – offer free credit scores but you may have to jump through some hoops in order to get yours. We like CreditKarma and CreditSesame as good sources for a free credit report. Plus, a site such as CreditKarma offers a lot of other valuable information in addition to your credit score.

Now that you know your credit score

Once you get your credit score the next step is to get your credit reports so you can see why your score is so pitiful. The law mandates that you can get your credit reports free from the three credit reporting bureaus once a year. You can get yours by going to each of the credit reporting bureaus or on the site www.annualcreditreport.com.

What to look for

If you have a very low credit score it’s because there are damaging items in your credit report. The ones to look for are late payments, missed payments, collection accounts, judgments, bankruptcies, defaults and lawsuits. You should also be sure to look for errors. The FTC (Federal Trade Commission) released a study last year showing that 5% of us have errors in our credit reports so serious they are damaging our credit scores. If you’re lucky you might find that there are errors in your credit report that are dragging down your credit score. If this turns out to be the case, you will need to dispute the negative items by writing a letter to the appropriate credit bureau, along with whatever documentation you have that proves your case. If you can get the erroneous items deleted from your account, your credit score should get a very nice boost.

Get a secured cardcredit cards

In most cases you won’t find any errors in your credit report, which means you have basically shredded your credit. In this case you will need to begin rebuilding it and one of the best ways to do this is to get a secured credit card. If you’re not familiar with these cards this is where you make a security deposit in order to get a line of credit. Some of these cards will also have an annual fee and even interest rates that are higher-than-average. Instead of just jumping into the first secured card you find, do some comparison-shopping to ensure that you get one that’s affordable. Here is what to look for.

What’s the annual fee?

All companies that issue secured credit cards have different annual fee requirements. These can be from $29 to $39 or even more, depending on the individual card and its interest rate. For example, you might find that a card that has a low interest rate and low deposit requirements has a higher annual fee. On the other hand, a card with a low annual fee might have a higher interest rate and stiffer deposit requirements.

Check out what’s required for a line of credit

If you search carefully you might find a secured credit card where you could qualify for an increase in your credit line and without having to add more funds for a security deposit. In the event you believe you will be using that secured card for a year or more, think about getting one that offers this advantage. You will need to maintain your account in a good standing by making your payments on time every time to get such a benefit. But this should pay off for you.

Go to a credit union

Membership in a credit union used to be limited to people in a certain group such as the employees of a company or members of a union. However, today many credit unions are open to just about anyone. A lot of them offer secured credit cards and some will even forego the annual and application fees. In addition, the secured cards offered by credit unions usually have lower interest rates and more alternatives for rebuilding your credit – even if you’ve had a bankruptcy, illness, divorce or another life-altering situation that damaged your finances.

If you’re not familiar with credit unions, here’s a helpful video that discusses the differences between banks and credit unions.

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Check out credit-card comparison websites

There are many websites that have reviews of secured credit cards and their current rates. Try to monitor a few of these as this could help you learn the pros and cons of each secured credit card program. This can give you a great birds-eye view of the latest programs and the offers before you begin researching individual cards on your own.

Don’t look just at deposit requirements

The first thing you’ll probably look for in a secured credit card that would be affordable is the deposit requirements you will be required to make before you get the card. But do remember that the security deposit is just part of the card’s total cost . You need to check out annual fees, the interest you will be charged on any balances you carry forward, the application fee and any other required fees. Add up all the costs of the different cards you’re comparing and their terms. What a card costs you over the course of a year will be much higher than just the security deposit. So make sure you account for those other costs.

Be careful you don’t get scammed

This may shock you but not all companies that offer secured credit cards are legitimate. If you’re not careful you could actually run into a scam. Before you sign up for a card, go online and check out multiple sources and look for reviews of the card and the company behind it. If the company passes this test, you can be pretty sure that it’s legitimate.

Watch the fine print

There’s an old saying in the advertising business that the big print giveth and the small print taketh away. Once you boil down your selections to a few secured credit cards be sure to read all the fine print. You need to have a detailed understanding of the card’s annual fee, fixed or variable interest rates, security deposit requirement and any other fees you would be charged over the life of your contract. And don’t be afraid to call the card’s customer service department if you have any questions about the terms or if you need something clarified. There is another old saying that it’s better to be safe than sorry.

5 Steps To Make A Credit Check Work In Your Favor

woman looking at files and frustratedAre you planning to buy a home this year? Or maybe buy a car? Whatever it is that you want to purchase requires you to be concerned about your credit report, as long as it will involve a loan application.

Before a lender approves of your loan application, you need to go through a credit check. This is when they look at your credit report to compute your credit score. The whole purpose is to know if you are credit worthy or not. For instance, according to the latest mortgage law provisions published on ConsumerFinance.gov, one of the financial information that lenders should look into is the credit history of the borrower. This is to filter out the borrowers who has a high probability of not paying back their mortgage loan.

The credit check will help lenders determine if you can be trusted with a loan. In case you have a not so favorable credit report, that does not necessarily mean you will be disapproved immediately. The lender will try to protect themselves by imposing a high interest on your loan. While that will still get you the finances you applied for, it will cost you more money because of the interest.

5 steps to make credit inquiries work to your advantage

In case you applied for a loan or a new credit account, you may want to make sure that you will pass the credit inquiry that you will be subjected to. This way, you can make assumptions as to whether you will be approved of the loan or not.

So before they conduct a credit check on you, make sure you go through these 5 steps.

Step 1: Check your own credit report. The major credit bureaus will ask you to pay for a copy of your credit report but they are also mandated to give you one free copy every year. If you want to access them, you can go to AnnualCreditReport.com to download your free copy. Ideally, you want to do this a few months before you actually file your loan application. That way, you can read your credit report before the lender get access to it.

Step 2: See if there are errors and file a dispute against it. This is the reason why you want to get your report a few months before your application. In case there are errors, you can have it disputed so the credit bureaus can change it. A study done by the Federal Trade Commission revealed that one out of five consumers have reported that they found errors in their credit report. According to the study shown on the FTC.gov, this could have led them to pay more on loans due to a higher interest rate. In case you find out that you need to dispute an entry on your report, you should send a letter to the credit bureau involved. Send a copy of the document proving that the entry is wrong too. Once sent, you have to wait for them to respond, investigate and take action. That action may be to prove that their records are correct or to revise your report as per your data. If you are proven to be correct, they should send you a free copy of your credit report that contains the right information.

Step 3: Calculate your credit score. The second step is to check your credit score. You may want to calculate it to know how you will fare in your loan application. This is the grading system that will allow the lender to determine your interest rate. If it is high, then you are considered to be a low risk borrower. That will keep your interest rate low because your lenders will not feel the need to protect themselves from the possibility of you failing to pay for your debts. Your score will help you determine how much you need to improve to get the rate that is most affordable to you.

Step 4: Send bigger payments towards your debts. The next part of your credit check is to pay off your debts significantly. If you followed our suggestion to check your report a few months before the loan application, you should have some time to make significant contributions towards your debts. Timely payments and a lower debt balance will help improve your credit report so it looks more appealing to lenders.

Step 5: Make sure there are no unauthorized charges or new accounts/inquiries. Since you are already holding your credit report, you may want to double check for any unauthorized or suspicious entries that could show that you are a victim of identity theft. You want to report this as soon as possible to keep them from stealing your money.

By doing your own credit check before the lender, you are giving yourself the chance to improve your credit score. That is a great way for you to prepare for your upcoming loan.

Who checks your credit report

Apart from lenders, there are also other people or organizations who are interested in your credit report. This is why credit scores have become king. If you will be transacting with any of them, you may want to conduct a credit check on yourself too.

  • Creditors. If you will open a new credit card account, these companies will check your credit report before approving your application.

  • Landlords/property owners. If you will be leasing a home or any property, the owner or landlord will naturally want to know your payment behavior. That will tell them how well you can be expected to pay them rent every month.

  • Insurance companies. This also involves a regular payment scheme so it is but natural for them to want to check out your payment behavior. In case your credit score is low, you can expect that they will give you higher premiums.

  • Utility companies. They will also do a credit check on you to see how well you will pay. Most of the time, this check is done in order for them to determine if deposit is needed from you or not. If your credit report is unfavorable, then you can expect to be asked to put down a deposit.

  • Collection agencies. This is simply to determine if you are financially hard-up as you claimed you are.

  • Employers. Although you are not paying your employer, the credit report will say a lot about your character. It will help them assume how responsible, organized and disciplined you are when it comes to your finances.

  • Government agencies. They require this from you in case you are asking for some assistance – especially when it comes to finances. It is usually to check your eligibility. Sometimes, it is reviewed for national security purposes.

  • Court. These include judgement creditors or bankruptcy courts. They use this as part of the documents to help decide on your case – or to see if creditors or collectors should start collecting from you.

Anyone who has a court order to get your credit report can also acquire it. Apart from that, no one can access your report.

When is the best time to look at your credit report

Apart from borrowing money, there are also other instances wherein you have to do a credit check on yourself. What you don’t know about your credit score can hurt you so it pays to take a look at it every now and then. Here are the instances when you have to look at your credit report.

  • Three times a year. This is your regular check ups to look for errors or any unauthorized activity on your report. You don’t really have to pay for anything because you get one free report from each of the major credit bureaus (TransUnion, Equifax, Experian) every year. You can download it from the Annual Credit Report website.

  • After a credit disapproval. When you are declined of any application, you may want to view your report to see why you are not approved. That way, you can ask them to reconsider in case the reason for the disapproval is wrong.

  • Possible identity theft. You also want to check it if your credit card or information is stolen and you think you are in danger of identity theft. This is your way to monitor if they are using your details already.

  • Credit repair. You also want to check your report, obviously, if you want to improve your credit score. You need to look at your current situation to figure out the improvement that needs to be made.

In case you find out that your credit score is low, here is a video from National Debt Relief that will reveal the fastest way you can increase your score.

Think You Have Good Credit? Know The 8 Credit Score Ranges To Be Sure

checklistAre you confused about your credit score? Well you are not alone. A lot of Americans are actually having a hard time understanding this score. In fact, based on a news release from ConsumerFed.org, ⅖ of consumers are unaware that mortgage lenders and credit card issuers refer to this number before making decisions. At least, ⅖ of the respondents of the survey initiated by VantageScore Solutions and the Consumer Federation of America. The same number of respondents also think that age and marital status are factors to consider when calculating their credit score.

Obviously, there is a need to teach consumers about this financial topic and why don’t we start with the different credit score ranges? Now you may be wondering, why are we concentrating on this? Why not something about how it is computed?

It is simple. You want to know about the various ranges of credit scores because they come from different companies. Each of them use varying computations. If you want to know if you have a high score or not, you have to understand where it will be coming from.

What are the 8 ranges of credit score

First of all, you may be wondering, why do we have so many credit score ranges anyway? According to the explanation from CreditKarma.com, it all began with just one – the FICO score. It is the reason why this remains to be the most popular model for computing credit scores. The FICO score was developed by Fair Isaacs Company back in the 1970’s to standardize the credit decisions done in the financial industry. Over the years, other credit score companies adapted the original algorithm from the FICO model and created their own by improving it as they see fit. The main runners in these improvements and credit score variations come from the three major credit bureaus – TransUnion, Experian and Equifax.

So what are the popular credit score ranges that you need to know about? Make sure to familiarize yourself with these because what you don’t know about your credit score can hurt you.

Fico Classic Score (300 to 850)

This score is developed by the Fair Isaac Company. This is one of the three type of scores that can be availed from this company. The higher the score is, the better it will be for the consumer. This is usually availed by lenders from the three credit bureaus while consumers typically go directly to Fair Isaac. This is the most popular range there is – even with other companies. It is typically used by credit card companies, lenders (auto, mortgage and student loans), banks, insurance companies, credit unions and other financial companies.

FICO Industry Option Score (250 to 925)

Obviously, this is another score coming from the Fair Isaac Corporation. Just like the Classic, this score is also sold to lender through the three major credit bureaus. However, this is not available to be directly availed by consumers. Those who get this score are usually the auto lenders and creditors from credit card companies – although there are lenders who avail of this too.

Fico NextGen Score (150 to 950)

This is the last of the three credit score ranges that is provided by the Fair Isaac Corporation. Just like the Industry Option, this is available to lenders through the 3 credit report agencies (credit bureaus) but it is not available to consumers directly. The primary user of this are credit card companies but other lenders can also look at this score.

VantageScore (1.0 and 2.0: 501 to 990) and (3.0: 300 to 850)

This was the old version of the VantageScore that is provided by VantageScore Solutions. The three credit bureaus actually invested in this because they wanted an alternative to the FICO Score. This score has an unusual range and according to the company, it required lenders and creditors to change some of their rules. That is the main reason why a lot of them opted not to use it. In fact, only 10% use this for their lending decisions. The 3.0 is the new version of the VantageScore that was only recently released in 2013. Lenders get their credit scores from the three credit bureaus but only Equifax and TransUnion make it available to consumers. Most financial institutions use this already when making their lending decisions.

TransUnion Risk Model (300 to 850)

This used to be known as TransRisk. Obviously, this was developed by TransUnion and unlike the previous credit score ranges, this is only available through this company. Consumers can avail of this score through other sites as long as they are owned or affiliated with TransUnion. The main clients of this score are credit companies, debt collection agencies, auto lenders, insurance companies and most large banks.

PLUS Score (330 to 830)

Experian developed this score and surprisingly, this is not made available to lenders. The main clients of this credit score are the consumers themselves. The main purpose of this score is to educate consumers and help them improve their scores. They can avail of this score through websites owned or affiliated with Experian.

Experian National Equivalency Score (360 to 840)

This is another score that is developed by Experian and it can be availed by lenders through them alone. For consumers, they can avail of this credit score but only through the Credit Sesame website – for free. Most financial lending and credit institutions avail of this but they are also joined by lawyers, property management companies and even the federal government.

Equifax Credit Score (280 to 850)

As the name carries it, Equifax developed this credit score and lenders can avail of this with them. It is also available to consumers through Equifax too. The company is secretive as to who uses it but it can be assumed that financial institutions use it for variety.

Regardless of the company computing your credit score, it is important to note that all of them refer to the same source – your credit report.

What does a high credit score mean?

When you are trying to buy a home and you have a low credit score, you know that it will cost you a low interest rate. So the main purpose of knowing all of these data is to eventually improve and maintain a high credit score.

But what exactly does a high score mean?

Based on the infographic from Credit.org, the FICO score of 680 and above is a good score. It will allow consumers to get a 4.2% on a housing loan. In fact, the median score in the US is right 723 – a bit above this range. If the score of the consumer is 740 and above, that is considered as excellent. It can land them a 3.9% on their mortgage rate. The lowest range of score at 300 to 550 means the consumer will get a 9.5% on their home loan.

Obviously, with the varying credit score ranges, you know that the “high” requirement will vary among them. For instance, the 800 score of PLUS Score may not be good enough for a FICO NextGen Score – since their ceiling is until 950. You have to consider where your score is being taken from so you can understand how you can improve it.

So before you can really start working on your credit score, know the company that computed it so you will know where it falls under the credit score range it is taken from.

Tips To Help Increase Your Credit Score Without Using A Credit Card

woman looking at documentsA lot of people are asking: will opening more credit cards improve my credit score? This is actually a good question. Some people are convinced that this is the only way that you can start building up your credit score.

Here’s the thing. Your credit score is dependent on your credit report. This report holds details about any debt that you have. So if you have not taken any debt yet, then what information can you place on your report? And here’s where it gets more complicated: you need a credit score to be able to take on any debt. Given all of these requirements, how can you hope to build up your credit score?

This is where credit cards are “supposedly” there to help out. However, this is something that people are hesitating. After all, credit card debt put a lot of people under some serious financial trouble. A lot of our youth witnessed how it made the life of their parents and grandparents difficult. They do not want to follow the same footsteps.

Different ways to build your credit ranking without needing a card

Well if you do not want to follow their credit card mistakes, then you don’t have to. You are probably thinking about the next question by now: how will you build up your credit score if you cannot get any type of debt?

Here’s an important truth that you need to know: there are options to get a loan without the need for a credit score. It is limited, but there are other options. Let us list them down for you.

  • Get a federal student loan. If you are young and you are still in school, you may want to start working on your credit score by taking on a student loan. The approval of this loan does not really depend on your credit score. These do not require a credit check. Of course, for it to help you improve your credit standing means you have to know how to deal with student loan debt. That basically means knowing how to pay it back properly. Try not to be late, pay as much as you can – these are the usual tips that you will get so your student loan can help you build up a high score.

  • Try to apply for an installment loan. Sometimes, retailers will allow you to purchase a product and pay for it in installment. The great thing about this option is you are expected to pay for it over a long period of time. That will help you build up your credit score without making the payment too much of a burden. The important thing that creditors and lenders are looking for in your score is how well you can be trusted to pay back what they will allow you to borrow. That is the core purpose of this financial measurement. If you do good in this loan, then you can expect to have a good credit score.

  • Loan money from a credit union. First and foremost, this will require you to be a member. Look for a credit union that you can qualify to join and open an account with them. They operate in the same way as a bank – but instead of being governed by a board of directors, it is managed by the members themselves (more specifically appointed members). When you are finally a member, you can opt to get a small loan to help you work on your credit report. Based on the September 2013 data released by the Credit Union National Association through their site CUNA.org, credit unions have loaned an amount worth $642 billion. They have an asset worth $1.06 trillion. This proves that they are capable of loaning you money. If they decline because you do not have any background on debt, you can opt to get a secured loan. That means your loan is backed by the money in your account. They should be able to give you approval then.

  • Look into peer to peer loans. These are companies that operate online and connect you to private individuals who are willing to lend you money. No bank or financial institution is involved here. Also known as social lending, this is a great option for you to get the loan that will help you build up your score. Since it operated online, the overhead costs will not be as high for the companies managing them. That means they are not compelled to get a high interest rate from you. Although they look into your credit score, it will not cost you a very high score.

  • Request existing companies to file on your credit report. If you have rent, utilities and even phone bills that are recurring every month, you can ask them to file a credit report on your behalf. They are allowed to do so but it will be more of a favor for you than out of obligation. That should help boost your credit score. At least, it will if you had never been late on your payments.

These are some of the options that you have. There are other choices but we do not really recommend them – or we haven’t heard about them yet.

If you really want to use a card to improve your credit report…

In case some of these are not appealing to you, that is alright. You can still use credit cards to help you arrive at the high credit score that you are aiming for. Just make sure you will not commit the biggest credit mistake that you can ever make – and that is to bury yourself in credit card debt.

Just remember that the actual credit card ownership is not how you will get a good score. It is your attitude towards it. You have to know how you will use these cards so you can be viewed as a creditworthy consumer. Here are some tips that we have for you to help ensure that being a cardholder will really benefit your credit report.

Pay your dues on time. The most important thing that you can do to help your credit score go up is to avoid late payments. According to the information provided in MyFICO.com, late payments can affect your score based on how recent, severe or frequent you do them. Basically, they are saying that a recent late payment can put more damage in your score than a frequent late payments in the past. So try not to be late if you really want to boost your score.

Budget every credit card use. To help you avoid late payments, one tip that we have for you is to include your credit card use in your budget plan. That means allocating an amount that you can afford. You have to plan how much you can charge on your card to avoid overusing it. Also, it will help you put aside the money that will allow you to pay for your full balance at the end of every month.

Know how to use your card properly. Lastly, you have to educate yourself on how you can use your credit card properly. That means you have to understand what the interest is and how it can affect the finance charges on your balance. You have to know how the finance charge, late payment fees and other charges can grow your debt significantly. Also, you have to understand how the grace period can keep you from credit card debt.

Understand that credit cards are quite harmless if you know how to use it properly. You can own it, use to have a high credit score and still end up with zero balance every month. It is not about the debt itself that will build up your credit score. It is how you pay for it.

Consumers Are In Need Of Credit Score Education

woman looking at a documentAre you confused about your credit score? If you are, then you may want to pay attention to this article because we will try to give you some of the basic credit score education that you need.

A consumer’s credit score is taken from their credit report. This report holds vital information about you. It shows a list of your credit accounts plus any good and bad behavior that you have displayed. In fact, that is the whole purpose of your score. It says a lot about your credit behavior. It is a number that represents your debt situation and how you rank at managing it. Simply put, when you are in a bad financial situation, chances are, you have a low credit score.

People usually encounter this score when they are trying to apply for a new credit account. Lenders and credit card companies will always check if a consumer is a responsible credit holder. Anyone who will let you borrow their money will naturally be interested in how you will pay it back. It does not matter if you have the income to pay your dues. Some people borrow money and forgets about it. This is something that lenders and creditors want to avoid.

Apart from loans and new credit accounts, employers will also look at your credit score before hiring you. Utility companies and even landlords can use this information to check out your credit behavior. These inquiries about you makes credit score education all the more important.

Study shows a lot of consumers do not understand credit scores

Unfortunately, everyone may know about credit scores but not all of them fully understand it. An article recently published by CNN.com discussed a survey done by VantageScore – one of the providers of credit score information. Apparently, lenders follow the Dodd-Frank Act by providing consumers with a disclosure notice to explain a credit application disapproval, but most consumers do not understand it. These reasons could include a current delinquent account or too many credit inquiries, but consumers have no idea what all of these mean so they fail to take the steps to help improve their score.

VantageScore surveyed 200 lenders and it revealed an increasing need for credit score education. The highlights of the survey as mentioned in the article includes the following:

  • 75% of lender participants are concerned that their clients do not understand what is written in disclosure notices.

  • 10% of lenders think their customers understand the disclosure notice “reason codes.”

  • 10% of lenders do not have a Spanish translation for their disclosure notice.

  • 38% of lenders are willing to help provide applicants with tips to help improve their credit score.

  • 33% of lender believe that a clearer and simple language will help make disclosure notices more understandable.

A separate survey, that is a joint effort of VantageScore Solutions and the Consumer Federation of America (CFA), revealed that a lot of consumers know very little about credit scores. The survey results as published on the ConsumerFed.org and it showed the following information:

  • ⅖ of consumer respondents are not aware that credit card companies and lenders refer to credit scores when it comes to making decisions about pricing and approval.

  • ⅖ believe that age and marital status influence credit scores.

  • ¼ to ⅓ of consumers do not know that they have the right to be informed of the reason for credit decisions (loan disapproval, interest rates, etc).

  • ⅓ to ⅖ of respondents are not aware that even the credit score of co-signers can be affected by student loans.

  • ¼ or more of respondents do not know how to improve or keep their credit scores from declining.

  • ⅓ of consumer respondents are misinformed about credit repair agencies.

Source: http://www.consumerfed.org/pdfs/CFA-VSS-Survey-Results.pdf

All of these statistics prove that more than ever, consumers should take time to get credit score education. You need to learn how to utilize this so it will not have any effect on any financial opportunity that comes your way in the future.

Here is a video from National Debt Relief that discusses why credit scores are important and how it can affect your plans to refinance your home.

Important credit score concepts you need to know

Now that you understand why credit score education is needed, let us discuss the basic concepts that you need to learn. If anything, this information will help you fix your credit score fast – or at least, in time for you to keep it from ruining financial opportunities that will come your way.

Here are 5 things about credit scores that you need to know about.

What is a credit score?

A credit score is a measurement of a consumer’s credit worthiness. As mentioned, it depends on your credit report. The data found on this report is a compilation of all your credit information from the various credit and financial institutions that you have transacted with. The three major credit bureaus (TransUnion, Experian and Equifax), compile this information and put it on your credit report.

A credit score range will depend on the company behind it but the average is from 300 to 850. A high credit score indicates that you are creditworthy while a low credit score would raise warning bells for lenders.

How is your score computed?

The exact formula to compute your credit score will vary. Fico Score and VantageScore, for instance, will compute your score differently. But all of them will base your score on your payment history, debt amount, credit history, new accounts, and type of accounts. These are the 5 important factors affecting your credit score.

Based on the FICO Score, the payment history affects 35% of your score. When you have a late payment, this will be affected. The next part is your debt amount – which is 30% of your score. When you have a high debt amount, this will suffer. Your credit history is 15% of your score. The older the account, the higher your score will be. The fourth involves new inquiries – which is 10% of a credit score. When you apply for a new loan and the lender looks at your credit report, that can affect your score negatively. The fifth also affects 10% of your score and it is the type of accounts that you use. The more variations, the higher your score will be.

Who looks at your score?

The majority of the people who will look at your score includes lenders and credit card companies. If you plan on transacting with any of them, you need to brush up on your credit score education. They make up the majority because you are borrowing money from them. Other viewers of your score includes employers, landlords, insurance companies and utility companies.

How to check credit scores?

If you want to take a look at your credit score, you need to get a copy of your credit report first. You can get a paid copy from one of the major credit bureaus or you can download a free copy from the Annual Credit Report website. The government mandates the three major credit bureaus to provide consumers with a free copy of their report every year. That means you get three free copies annually.

Once you have your credit report, you can proceed to search for a credit score calculator. There are many free calculators online – just make sure you will go with a site that is trustworthy and secure. Simply input the data in your credit report to get an estimate of your credit score.

What happens when you have a bad credit score?

Probably the most important question in credit score education is what will happen when you have a bad score. It really depends on who will look at your score. A bad score would mean higher interest rates from lenders and credit card companies. It will not really mean a disapproval – unless your score is really very low. For landlords, they may keep you from leasing their place or they will get a higher rental deposit from you. For employers, a bad credit score can cost you a job. For insurance companies, it can mean a higher premium payment. For utility companies, it can be the same as the landlord, you could be asked for a deposit.

Nothing is wrong with keeping your credit score high so you might as well try to take care of it. Start by learning more about it through credit score education. Added knowledge will never put you in a bad light.

Important Credit Decisions For The New Year

debt and associated wordsThe first month of the year gives us time to ponder and reflect on the choices taken, credit decisions acted on and even options waited out. It gives us a chance to learn from mistakes made, apply best practices and even try something new for the year. The most important thing is to know which practices need to be avoided to prevent credit problems to pile up.

With this, the practical first step is an audit – literally and figuratively. Taking a close look at the past year’s financial data is essential in determining credit health as the new year closes in. How much debt is still owed, how much has been paid over the year and even the interest rates. Something to ponder on as well is the attitude we developed towards debt. Do we regard it simply as a monthly payment needed to be made or a ball and chain that prevents us from living a debt-free life?

Make smarter debt choices in 2014

Perhaps one of the more exciting developments for the coming year is the new mortgage law that will be taking effect. As a Reuters.com article explained, the new mortgage law calls for careful and thorough pre-assessment of loan applications. This is geared towards ensuring that the borrower has the ability to pay back the loan. If one of your intended credit decisions in 2014 is a home loan, you have to ensure that you can qualify for this.

To be enforced by the Consumer Financial Protection Bureau, rolling this out at the start of the year is already in place with creditors. As with most new laws, discussions are still in the air about some areas that could be affected with the implementation – one of which are minority group borrowings.  But the bureau is intent on upholding the ability-to-pay assessment without foregoing the rights covered by fair-lending law.

As a consumer, this law is our shield against loans we feel we can repay but in actuality, we cannot. There maybe some financial areas we need to consider like getting rid of credit card debt or lowering some payables first before applying for a new loan. Whatever it is, the new mortgage law is our second set of eyes every time we apply for a loan.

Tips to improve your credit standing this year

For the coming year, here are some tips in improving credit standing so you can make better credit decisions. An improved credit rating opens up financial options for you for your credit needs, offers better interest rates for taking out loans and even improves your chances of getting a loan even with the new mortgage loan.

Pay off a credit card. One quick way to improve your score is to pay off a card or two. You can opt to pay off the one with the smallest balance, making it easier to pay it off. You can also plan to  pay off that card that has been crippling you with a high interest rate. It will save you money down the line. Or better yet, look at your cards and pay off that one that is least used. You are better off focusing on cards that you use.

Shop around for a card. Choosing your credit card is one of the first few credit card decisions that you have to make. The credit card industry is a competitive arena and this spells good news for those looking for new cards. The aggressive competition drives down rates and drives up perks that you can easily replace your existing cards with new ones. The idea is to study carefully that cards you are considering before jumping in to a new boat.

Use priority cards periodically. There is always a card or two that is important to us. It may be the one we use for the business when taking out a loan is not an option, or that card we have accumulated a lot of points off from previous purchases. Whatever it is, use them from time to time to prevent dormant fees or closing the card entirely.

Make on-time payment. Nothing beats paying on the dot except paying earlier than the due date and putting in more than the minimum amount. But nevertheless, remember never to forget paying on time. It prevents additional charges, fees and interests that comes bundled up with late payments. It puts a blemish on your credit standing as well reflecting your inability to pay on time.

Be proactive. Monitoring your account is as much as your responsibility as it is your creditor. Especially with the recent security breach at Target. As they released in Target.com news, the PIN numbers were taken but in its encrypted state and the key is on a separate system. Even then, we need to closely monitor our accounts and make it a practice to study carefully the charges on our card.

Know the loans you need. Never apply for a loan just because your feel like it. There always has to be a valid reason before affixing your signature above that dotted line. Think twice and smart on loan applications. Useless loans that build up your payment requirement over time has a negative effect on your credit score because you will surely struggle in meeting the payment every month.

Build-up your emergency fund. Over time and due to the complexity of finances, there are different opinions on how many months your emergency fund needs to last. One thing is certain, you need to build the fund to support you through trying times. Unemployment can now reach and average of 9 months so it is practical to build up your fund for not less than 9 months. But do not stop at 9 months, continue at it as much as you can.

Monitor your credit limit. As you use your card, credit card companies increase your credit limit as a way of thanking you for using the card. It is also given to those that pay their cards on time. With this, it is wise to know what your credit limit is to prevent from overcharging against your card. It is a good practice to keep charges well under your limit to have a manageable monthly payment amount. Being able to meet payments improves your credit standing.

Know the good debts that can make you prosper

Saving up money is a great objective for the year but there are certain types of debt that, if used properly, can improve your way of life. By making the right credit decisions, you could keep yourself from turning a potentially good debt into a bad one.

Student loans. Ken IIgunas is a Duke grad student who went to extreme measures in trying to eliminate his student loans as reported by Yahoo.com. This included living in a van and using his gym membership to take showers. But Ken is more of an exception rather than the rule. He saw student loans as an immediate debt he needed to repay in order to graduate debt free, and he did. But for most, student loans are inevitable as you pursue the formal education needed to reach your dreams.

Business loans. This type of loan is acceptable because you are trying to start a business with the objective of making more money. With this, the loan is just a stepping stone in putting up that business which can improve the financial standing of you and your family.

Mortgage loans. It is every American’s dream to own a home. And waiting for the time when you have enough to buy one just doesn’t work for everyone, especially for those earning minimum wage. Taking out a home loan is one way to get that dream house now and put focus on your monthly income. It forces you to mature enough financially and prioritize the house payments before all other unimportant expenses.

As 2014 unfolds, there are steps that we can take to re-assess how we performed the past year and credit decisions we can make for this coming year to improve our way of life. With that objective, the positive effects ripple out not only to ourselves and our family but our community as well.

Revealed – The 4 Greatest Myths Of Credit Scoring

Credit Score highlighted in yellowHaving a poor credit score is no big deal, right?

Wrong.

A poor or bad credit score has some very serious consequences. For one thing it will cost you money. This is because there is an inverse ratio between your credit score and the interest rates you’ll be charged. In other words the lower your credit score the higher will be your interest rates. While this may not have much of an effect on a short term personal loan or a small credit card balance it can mean big money when it comes to auto loans, mortgages and other types of secured loans. As an example of this, a 30-year loan for $165,000 at 3.93% will have a monthly payment of $786. However, if have bad credit and are charged 4.46% (just half a point more) your monthly payment would jump to $830 per month. This would be a whopping $16,560 over the life of your loan.

In addition, if you have a poor credit score you may have to pay more for your auto insurance and might not be able to rent an apartment or get your utilities turned on.

Where do you stand?

Lenders usually evaluate credit scores in terms of these ranges:

• Between 700 and 850 – Very good or excellent credit score
• Between 680 and 699 – Good credit score
• Between 620 and 679 – Average or OK score
• Between 580 and 619 – Low credit score
• Between 500 and 579 – Poor credit score
• Between 300 and 499 – Bad credit score

If you know your credit score you now know how lenders will view you. If you don’t know your credit score, it’s time you got it. You can get it free (once a year) from any of the three credit reporting bureaus – Experian, Equifax and TransUnion – or at the website www.annualcreditreport.com. You can also get your score at www.myfico.com, which might be your best option as it’s the score most often used by lenders. The other credit scores such as the ones you would get from Experian and TransUnion will not be identical to your FICO score. But one of these should be close enough for you to know where you stand and how you would be viewed by a potential lender.

Great myth #1: A minor late payment won’t hurt your credit scoregrandma looking shocked

It’s said that a minor late payment won’t hurt your credit score if you quickly catch that account back up. While this may be true it’s only if that late payment is isolated and historical, which means the account is not currently delinquent.

There are two categories of derogatory information in the world of credit scoring. They are minor and major. The line that divides these two categories is very clear. If you have a historical delinquency that didn’t go past due by 90 days or more, it would be considered a minor derogatory item. This category also includes historical 30- and 60-day delinquencies. Everything else is considered to be a major derogatory item. This would include defaults tax liens, collections, judgments, repossessions, foreclosures, bankruptcy, any account that is 90 days late or worse and accounts that are currently delinquent.

If you are currently 30 days delinquent on a debt your score will be lower than if you had never been delinquent on anything. In fact it will be considerably lower − probably by 35 to 50 points. If you are more than 60 days delinquent on paying a bill (but not in default) it gets worse. Your score would probably be 100 points lower than someone who had never missed a payment.

Why do these cause your credit score to drop?

A scoring system such as FICO or VantageScore is aimed at predicting how likely it is that you will go delinquent by 90 days soon after you apply for credit. If you are currently delinquent – even for just 30 or 60 days – you make the credit score’s job simple because you’ve basically proved that you’re willing to be past due on credit obligations. This is what causes that drastic drop in your score.

Not well known

There is something else you should know about your credit score that is not a secret but isn’t well known by many consumers. It’s that if you have a “30-day late” on one of your credit reports this means you’re at least 30 days late on that bill and probably even later. This is because lenders are not allowed to report your late payments to the credit bureaus until you’ve gone a full 30 days past the due date. If you’re just a week or two behind on a loan payment this won’t be on your credit reports though you will likely have to pay a late fee. So, if there is a “30-day late” on your credit report, this actually means you’re 30 to 59 days late on that bill. And if you find a “60 day late” on your credit report, this really means you’re 60 to 89 days late on that obligation and so on.

The point here is that if you have a “30 day late” on your credit reports it’s likely that you’re really 40, 50 or more than 60 days late. This is another reason why FICO and VantageScore are so tough on consumers who have accounts that are currently delinquent.

Man climbing range of credit scoresGreat myth #2: All I have to do is catch up on the payment

A second great myth about credit scoring is that if you just catch up on your payment and avoid going 90 days past due your score will recover. This is true to an extent as your score will bounce back but not entirely. The reason for this is that lenders update your credit reports only once a month. In the event that you have an account that is showing up as being currently past due, it will actually be that way for an entire month. And it’s likely that your credit score will be lower and even considerably lower for 30 days.

“Account maintenance”

Many finance and credit card companies pull your credit scores every month just to determine if they want to continue to do business with you. This is called either “account management” or “account maintenance.” When you review your credit reports you may find a long list of inquiries that fall into those two categories. The problem with this is that if a creditor pulls your credit score during their account management process and sees that it has dropped because you have a currently late account, it’s likely to react by lowering your credit limits, closing your account or raising your interest rates.

Great myth #3: Your credit scores will take care of themselves if you just handle your finances responsibly

Remember what we wrote in an above paragraph that credit scores are a way to predict how you will handle credit in the future. If you quit using credit or use it in a way that the credit scoring formulas don’t like such as using just one card, closing down a bunch of accounts or maxing out your cards – even if you pay them off in full – your scores could go down. This is because it will look as if you were having some problem with credit.

Great Myth #4: Checking your credit will hurt your credit score

The truth is that getting your own credit report and scores will not affect your credit scores. Period. On the other hand if you were to ask a friend or relative at a car dealership or bank to pull your credit reports this would likely be treated as a “hard” inquiry and would ding your credit score. But it’s a non-event when you check your own credit.

This is a very bad myth because it can keep people from checking their credit reports to see what’s going on with their credit and their scores. A recent survey found that about 20% of all U.S. credit reports contain errors and that 5% have errors so serious they are damaging people’s credit scores and causing them to be turned down for loans or paying much higher interest rates. You really need to go to www.annualcreditreport.com at least once a year to get your credit reports from the three credit bureaus so that you could dispute any errors you find. And if you’re about to apply for a major loan such as an auto loan or mortgage, you should go to ww.myfico.com and buy your score so that you can see how lenders will view your application. Plus, you will get some good tips th`ere for improving your numbers.

Speaking of credit reports

If you’d like to know more about credit reports and how credit reporting works, here’s a short video that offers  some good information.

 

Financial Changes In 2014 That Can Make Or Break Your Personal Finances

woman thinkingThe new year is just around the corner and it is a chance for us to start on new habits that will improve our financial situation. There are financial changes in 2014 that you need to be aware of because they can help improve your current financial situation. If you can take advantage of it, you might be able to build a better future for you and your family.

The current consumer debt is still quite high but there are a couple of things that you need to know about it.

  • Mortgage and credit card debts have both gone down in the past few years. As of December 2013, the average household debt for mortgage is $149,456 and credit card is $15,279.

  • Overall credit per household is still increasing.

  • Student debt and auto loans are the major contributors to the increase in consumer credit.

Obviously, the rising consumer debt in 2013 still means we are in need of financial advice for every generation. Each generation goes through several credit problems and they could all benefit from some serious financial changes in 2014.

Fortunately, there are a couple of rules and products that will take effect in 2014 can possibly help you make these improvements possible. We will discuss 3 important changes that you can take advantage of to reach your financial goals and the financial tips that will help you use them.

Financial tip: 1: Contribute more in your retirement

There are various strategies to help prepare for a good retirement but most of them is gearing towards making your contributions bigger. A good retirement means you have more than enough money to pay for what you need – food, housing, healthcare and even your entertainment activities.

So what are the financial changes in 2014 that will affect your retirement plans?

The IRS.gov reports that there willbe changes to the salary range that qualify for the tax credits when filing their contributions. Most of these amendments will allow higher income ranges to benefit from these tax credits to possibly help them increase their funds for their saving goals. Their tax deductions will be phased out if they qualify for the new Adjusted Gross Incomes (AGI) range. The income ranges that are affected are the following:

  • Taxpayers making traditional IRA contributions: singles and heads of households with an employer sponsored retirement plan and AGI of $60,000 – $70,000 (from $59,000 – $69,000); married couples with a joint filing and one spouse having an employer sponsored retirement plan and AGI of $96,000 – $116,000 (from $95,000 to $115,000); and, contributors who do not have employer sponsored retirement plans but is married to one that has it and has a combined AGI of $181,000 to $191,000 (from $178,000 to $188,000).

  • Taxpayers making Roth IRA contributions: married couples with joint filing and combined AGI of $181,000 to $191,000 (from $178,000 to $188,000); and, singles and heads of household with AGI of $114,000 to $129,000 (from $112,000 to $127,000).

  • Low to moderate income taxpayers making Saver’s Credit (Retirement Savings Contribution Credit): married couples with joint filings and AGI of $60,000 (from $59,000); heads of households with AGI of $45,000 (from $44,250); and, singles or married but filing separately with AGI of $30,000 (from $29,500).

Given these changes, you may want to maximize your savings by availing of the tax credits that will enable you to put more breathing space into your budget. This will take effect during the 2014 tax year. The freed amount can be used for other saving goals or investments.

Financial tip 2: Prepare for your home loan

The second of the financial changes in 2014 involves home loans. On January 10, 2014, the amendments in the Truth in Lending Act will take effect. Most of the adjustments will make mortgage lending a lot more strict so borrowers will be kept from getting a loan that they cannot afford to pay back.

The goal of these changes is to screen borrowers further by increasing the underwriting process. Based on the information gathered from ConsumerFinance.gov, there are two important changes that will take effect in 2014.

Ability to Repay

The new law will require lenders to check the following requirements to determine if the borrower is indeed capable of sending their monthly mortgage payments.

  • Income or assets (present and reasonable assumption for the future)

  • Present job conditions

  • Ability to make monthly payments to other financial obligations

  • Ability to make monthly contributions to other credit accounts

  • Ability to make monthly payments on anything related to the home loan

  • Overall credit obligations (e.g. alimony, child support, etc)

  • Debt to income ratio

  • Credit report/history/score

The law implies that lenders must seek the aid of a third party source to get all of these information about the borrower.

Qualified Mortgage Rule

The other part of the changes in the Truth in Lending Act involves qualified mortgages. These are the mortgage applications that are assumed to have passed the rules imposed on the Ability to Repay qualifications. The improvements on this rule is meant to keep lenders from offering high risk products and other features of banks and financial institutions. The limitations are set to help keep incapable borrowers from being approved of the loan when they are clearly unsuited for it financially. The rule lists certain loans that cannot be considered as a qualified mortgage like the ones with balloon payments or terms that exceed 30 years.

This is a great way to protect lenders from defaulting borrowers and at the same time, keep consumers from getting a loan that is beyond their capabilities to pay back. If you are planning to buy a home in 2014, you need to make sure that all of the requirements specified by the changes will be met. Most especially, you may want to consider improving your credit score to help ensure the lowest interest on your mortgage loan.

Financial tip 3: Monitor your credit report

The last of the financial changes in 2014 that we will discuss in this article is connected with the big changes that will happen to credit scores. At least, this is true for the FICO score.

The most prominent credit score company, FICO, released a new product known as Fico Score Open Access and it allowed lenders and creditors to share the credit score of their clients without additional charges. Apparently, consumers will get access to this for free so they can help monitor their credit health.

Although it is up to the lenders and creditors how they will take advantage of this feature to increase their customer’s brand loyalty, it does not hurt for individuals to take advantage of it. Ask your credit card company or lender how you can avail of this freebie. Some companies are making it available in their own websites or making the score known to clients through their statements.

With all the improvements and financial products being released, there is really no excuse anymore to not monitor your credit report. You have to start taking this seriously. Not only will it keep you from abusing your credit use, it will also tip you off if you had been a victim of identity theft.

All these financial changes in 2014 are all meant to help make you a financial success. It is up to you to decide how you will use it to improve your current money situation. You have to remember that being a financial success does not necessarily have to mean that you will be completely without any debt. However, you need to learn how to control it.

But if the debt is already getting out of hand, do not fear. There are debt relief solutions that you can use to help get you out of your credit problems. Here is a video from National Debt Relief that will help you take control of your debts.