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4 Things You Must Know Before Co-Signing Loans

Loan and related textsCo-signing loans will always be a dangerous transaction. You do not really gain anything and you are setting yourself up to lose a lot. It is actually one of the mistakes that may cost you a good credit history. The idea is, you are acting as a guarantor for someone because the lender deems them unworthy to borrow on their own. If the lender does not trust them with borrowed money, they will be given the option to find someone that can be trusted. Not only that, this cosigner should be willing to take on the burden in case the primary borrower proves to be a bad credit holder.

What makes co-signing loans even more dangerous is the non-financial damages that it can cost you. It is bad enough that you are left to pay the debt even if you did not benefit from the money. You also have to live with the ruined relationship between you and the primary borrower. Whether that is a friend or a relative, you cannot treat each other the same way if this debt is hanging over your heads.

You may argue that you know the person very well and that you trust them enough to put your financial reputation on the line. Even if you owe that person a debt of gratitude, you should still think twice about making this plunge with them. The statistics are not really favorable when it comes to cosigners.

According to an article published on FiveCentNickel.com, 75% of defaulted co-signed loans are paid by the co-signer – not the primary borrower. If you really value your relationship with the person asking for help, you need to avoid signing a loan for them. The chances of you being ruined is too great for you to risk it.

Make sure you know these 4 before you co-sign a loan

If you ask experts, most of them will frown at the idea of co-signing loans. In fact, an article from USNews.com simply states that when you are asked to act as a guarantor, don’t do it. There are just so many things that can go wrong and can be compromised.

But just in case you find it in your heart that you want to help, you should not plunge immediately to sign the loan. There are 4 important things that you need to know before you proceed.

The risk you will take.

Start by enumerating the risk that you are taking. First of all, you are equally responsible for that loan. In the event the primary borrower cannot pay off the loan (whether intentionally or because of unforeseen circumstances), you need to pay them off yourself. There are also lenders that will not notify you if the primary borrower failed to meet their payments. You will only know about it when it is too late. The loan is already in default and your credit score is already suffering from it. Make sure that you are aware of all these consequences and the risks that you will be taking on.

The payment terms.

Another thing that you need to know before you decide on co-signing loans will involve the payment terms. Make sure you sit down and discuss the terms of the loan. Ensure that the primary borrower has a payment plan in place and they have the resources that will allow them to repay what they are borrowing. If they cannot explain to you how they plan to pay the loan, do not proceed. Not only that, you have to ask them to put everything in writing. Document your agreement so it is clear that they will pay the loan and it will be done in such a way that you have both discussed.

The options to protect your finances.

The next must-know involves your protection. Discuss with the primary borrower your plans to protect your interests in co-signing the loan. For instance, if they will borrow a big amount, get a hold of a collateral that can cover the payment of that loan. Sign an agreement that will give you the authority to sell that collateral in the event that the primary borrower is unable to pay back the loan. If you will co-sign a business loan, ask them to give you shares of the company – or to make you a co-owner until they have paid back the loan.

The ways you can get out of the co-signed loan.

The last thing that you should find out is how you can get out of your co-signed loan. This actually depends on the type of loan that you borrowed and who you borrowed it from. One of the popular methods to remove yourself from a co-signed loan is by refinancing the loan. Once the primary borrower is able to build up their credit score that will allow them to borrow on their own, they should refinance it to change the accountability for the borrowed money.

Take note of these 4 and make sure you know about them before you agree to co-signing loans for anyone. If you do not have these information, then just say no. Sometimes, saying no can save you from a financial crisis. Think about that before you try and help anyone financially.

When it is okay to co-sign loans and when it is not

While the general rule is to say no when someone asks you to co-sign a loan for them, there are times when you can actually say yes. This is still a case to case basis of course. Here are the situations wherein it is okay or not okay to say yes to become a guarantor for someone.

Co-signing loans are okay:

  • If it will help your child get a student loan. We want what is best for our children. If that means helping them get the finances to help them study, then that is what we should do. According to the CFPB or Consumer Financial Protection Bureau, 90% of private student loans in 2011 were co-signed. The data was published through ConsumerFinance.gov and revealed that a lot of these co-signers are complaining that it is hard to get out of their co-signed loan. So in case you will push through with this, make sure that it is clear with your child that they should pay off the loan themselves. Guide them so they will practice smart spending habits.
  • If it will help someone you are financially responsible for build their credit record. Ideally, this is only applicable to your children. After all, you are financially responsible for them. Helping them build a good credit record is something that you can do. At least, you can help them borrow a small amount and guide them in paying it off properly.
  • If it will help someone with a bad credit record but has a collateral they are not willing to give to a bank. If the person you will help has a collateral that can help cover the loan you are co-signing for, then it may be okay to help them out. Of course, you need to ensure that you will have the authority to sell that collateral to help pay for the debt in case the primary borrower bails out on the loan. Make everything legal.

Co-signing loans are not okay:

  • If it is for someone who has an existing bad credit report. This is true even if it is for someone very close to you like a friend or a relative. Of course, this depends on the reason why the borrower has a bad credit report. If it is because of their financial habits, then you should never agree to co-sign on a loan with them. They are high risk borrowers – do not risk your financial position for them. But if they have a bad credit score because of identity theft, then you may reconsider.
  • If it involves a big amount or a high interest loan. If you know that you cannot save afford to pay for it yourself, then do not say yes to co-signing loans. Unless you are sure that you can pay it off in case the borrower cannot, then you need to just say no.

While there are smart ways to co-sign a loan, you need to consider other options to help out. If you can guide them to build their credit report in the first place, you probably do not have to co-sign for them. Think about these options first.

What Will Life Be Like With No Credit History?

credit history being erasedWe all need a good credit history. It can help improve your financial life in a lot of ways.

For those of you who are confused about it, this is basically what is in your credit report. It contains the credit activities of consumers. Every time someone borrows money, it is recorded in this report. When the consumer makes a payment or when they open another credit account, it will be placed in this credit report. It will be part of the history of the consumer’s credit.

Now this report is very important in our society. At least, if you want to make serious financial transactions, you need to have a good credit report. It will help creditors and lenders gauge how responsible you are when handling borrowed money.

But what if you have no interest in building up your credit history? What will happen if you have no entry on your credit report? How will it affect your personal life – specifically your financial transactions?

What happens when you do not have any credit record

One thing’s for certain – when you do not have a credit report, you do not have any debt. As mentioned, this report takes into account all of your credit activities. If you do not have any debt, then you do not have any credit history.

Having no credit report is actually a choice. You can choose not to use any credit to make financial transactions. You can choose to just use cash so you will not be in danger of overspending your monthly budget.

This choice, however, is not a popular one. According to an article published on TheSimpleDollar.com, Americans are notorious for their credit card use – which is obviously a form of credit account. The article cited a report from the Federal Reserve that states how the average American household owes $7,281 in credit card debt. The article does admit that this figure includes even the households that do not use credit cards. If the statistics only include the homes that use credit cards, then the average will jump to $15,609. That means a lot of people have chosen not to use credit cards.

That may seem like a lot of people with no debt. However, you need to realize that there are other forms of debt like mortgages, car loans, student loans, etc. That means almost all Americans that are 18 years and above have some form of debt to their name. It is an indication that almost all of them have credit histories too.

Now deciding not to join this statistic is obviously a very brave one. You will be joining the minority of people who have made a stand against the use of credit. While there may be a lot of benefits to having a credit report, there are also two things that it cannot do for you.

It does not reveal your income situation.

First of all, you need to realize that it does not have any bearing on your financial situation. Even if you do not have a credit report, that does not mean you do not have a salary. There is no difference between someone who is earning a minimum wage or a 6-figure income. A credit report only monitors your credit – not your income. Of course, your income will matter in some way – especially when calculating your debt to income ratio. But that is not a huge factor in your credit history. Your salary will not be reflected in your credit report.

It does not guarantee your financial condition.

Your lack of credit report will also reveal nothing about your financial condition. This is also true for those who have a good or bad credit record. Some people have a high income and stable financial situation and still have a bad credit report. Of course, having a bad credit report would make you more prone to have money problems but it is not a guarantee that you will be headed that way. Some may have a good credit record despite having a low income and unstable employment situation. It is also possible for you to have no credit history and have a very stable financial situation. You will have a stable situation if you have a steady source of income and you have an emergency fund that will allow you to survive even if that source is compromised.

Effects of having no credit report

So, what are the real effects of having no credit report? Will it make your financial life more difficult or will it be an improvement?

There are two important effects of having no credit history.

It will be difficult to borrow money to invest.

You may be wondering, why would I want to put myself in debt in the first place? Well, it is possible to live without debt, but there are some drawbacks to that. For instance, buying a home is usually easier when you take out a mortgage. Saving up to buy a new home in cash will take ages to do. It does not make sense to do that and waste money renting a house. If you really want to be smart about it, you should just take out a mortgage, live in that new home and pay for the monthly amortization. In most cases, your monthly payments end up being lower than the average rental rates.

Having proven that you need to borrow money at some point in your life, you obviously need the help of a good credit report. Otherwise, it will be difficult for you to get the best loan terms in the market – if you can get an approval in the first place. When we say loan terms, the best ones would include low interest rates and reasonable financial charges.

There is no way to gauge your creditworthiness.

The other effect of having no credit history is on your creditworthiness. Every time you apply for a loan, you need to prove to the creditor or lender that you can be trusted with that credit. What better way to prove that than by showing them your past credit behavior. And guess what? Your credit report is the best way you can prove that.

Since your credit report holds the history of all your credit accounts, any creditor or lender can see how you behaved. Did you pay on time? Did you hold too many debts at one point? How was your credit balance in relation to your credit limit? These are important consideration to gauge if you are a high risk borrower or not. The more appealing your credit history is, the more creditworthy you are. When you are considered to be very creditworthy, then you are a low risk borrower. That means the lender or creditor does not have to take steps to protect themselves in the event that you cannot pay back your loan. These protective measures usually come in the form of high financial charges and interest rates.

Of course, having a credit report is one thing. Having a good credit report is another. According to Bankrate.com, having no credit report, although it is not the ideal situation, is still a lot better than having a bad credit record. Having no credit history means you have a clean slate. Having a bad credit report means you have been a very naughty credit holder. The bottom line is – if you cannot maintain a good credit history, then you might as well just have no history at all.

Tips to build up your credit reputation

Building your credit history from scratch is easier than rebuilding a bad credit report. Here is a video from the Bank of America that will give you tips on how you can build your credit history from scratch.

When it comes to rebuilding your credit report, there are a couple of tips that you need to follow:

  • Borrow money wisely. First of all, you need to learn how to borrow money in a smart way. Unfortunately, some Americans will have to take more lessons when it comes to this. According to an article published on USNews.com, 37% of Americans are in a dangerous financial situation. It is revealed by the study done by Bankrate that 1 out of 3 consumers have more credit card debt than their emergency savings. If something goes wrong, it can put them in a very difficult financial position. You need to learn how to borrow wisely. Although a credit report requires you to use credit, you need to choose which debts can improve your life. Do not just borrow just for the sake of using credit.
  • Pay your dues on time. When you borrow money, you need to pay it back in time. The biggest consideration in your credit history is your payment behavior. If you cannot pay your dues in time, your credit report will suffer greatly.
  • Have multiple loan types. Multiple loan types do not mean having a lot of credit card accounts. Your credit card, regardless of how many you have is only counted as one. Multiple loans mean having a revolving credit (credit cards) and non-revolving credit (mortgage).
  • Be mindful of your credit balance. Credit utilization is also very important. This is the relationship between your balance and your limit. The nearer the balance is to your limit, the more damaging it is to your credit history.
  • Do not open too much credit accounts all at the same time. Opening too many credit accounts is also not good. You need to space your new accounts – if you really need them all. You need to learn how to time your applications so that it will not result in a lot of hard inquiries on your credit report.

A credit history is not really compulsory but it can help set up your future so you can be financially stable.

Want To Be An Entrepreneur? Better Keep An Eye On Your Credit Report

credit score, report and historyIf you want to start your own business, one of the things that you need to consider is your credit report.

We live in a society wherein being in debt is the norm. Just look at how our credit cards have become as prominent as cash in our wallets. For some people, if you want to have something done, you need to borrow money to be able to afford it. We would rather acquire something now and pay for it later instead of just waiting to save up for it.

When it comes to a business, that line of thinking becomes logical. If you want to improve your finances for a better way of living, starting your own business is sometimes the way to do it. After all, the profits from your business may be able to pay for your debts. But if you want to start a business, you need to make sure your current financial situation will allow you to do it. And when we talk about your financial situation, it means taking a good look at your current credit situation by looking at your credit report.

If your credit situation is not appealing, that might keep you from becoming an entrepreneur. Take for instance the start up story of Sir Richard Branson, noted businessman and investor. According to an article published on Entrepreneur.com, when Sir Richard started Virgin Records (now Virgin Group), he has a lot of the characteristics of a great businessman – except for excellent credit. This resulted in him borrowing from his savings and his relatives just to fund his start up business. Thankfully, he had other sources of funding for his new business.

What if you do not have that option? Will you just let go of your entrepreneur dreams? Or will you do something about your credit report so you can finance your dream business?

Your credit score will matter when you start a small business

Obviously, the answer to this is to make sure you credit score is in top shape so you can use it to take your financial life to the next level. You need to work on your creditworthiness because it can affect your start up in three ways.

When getting a business loan

It is very rare that someone has the cash to use for their start up business. This is why a business loan is usually needed by new entrepreneurs. According to an article from Entrepreneur.com, 25% of early-stage entrepreneurs use bank financing and credit cards to help with their funding needs. When it comes to credit from banks, they will most certainly take a look at your personal credit score. Since you are after a start up business, you do not have a business credit score yet. That mean the credit institutions will still rely on your personal credit reputation to see if you are worthy of getting a business loan.

Of course, there are other sources of funding like those from the US Small Business Administration or SBA. Their website, SBA.gov, holds information that you can use to find the right federal loan for your start up company. But while they offer loan programs, you need to know that the interest that they will impose on you will still depend on your credit score – if you qualify at all. If you have a bad score, then you will be given a high interest on your loan.

When getting partners or suppliers

Another thing that you need to be concerned about is acquiring business partners or suppliers. Unless you business will be purely reliant on your own skill, you will need suppliers. The bigger your dreams are for a company, the more likely you will need partners or suppliers. Given that, guess what they will look at before they get into an agreement with you? That’s right – your credit report. If you have a bad credit record, suppliers will hesitate to give you flexible payment terms. Your bad credit score may not keep them from supplying you with your needs, but they might be a bit strict when it comes to payment. With a good credit record, some suppliers allow businesses to pay after 90 days or even more. Since a bad credit record usually means you do not have good payment behavior, they will most likely give you a hard time getting favorable terms.

When bidding for clients

The last thing that can be ruined by a bad credit report is getting clients. When you are bidding for an account with a big client, they will most likely look at your credit score to see your financial reputation. Someone who fails to meet payment on time or have a lot of debt is not really someone that you want to go into business with. Do not give that impression to your clients. You need to appear clean to them so put your credit records in order. These clients will be responsible for giving you hefty profits. Make sure they will not be turned off by your past credit behavior.

Credit management tips to improve your credit records

Thankfully, there are ways for you to improve or fix your credit score. You just have to be committed to cleaning your act because proper credit behavior may involve breaking some of your financial habits. Here are some tips when you need to improve your credit records.

  • Use credit wisely. We are not saying that you should not use debt. In fact, having a credit report means you need to continually use credit. The thing is, you need to use debt wisely. Do not borrow just for the sake of borrowing. You need to know why you are borrowing money and use it as intended.
  • Pay your bills on time. Your payment behavior is 35% of your credit score – at least, this is true if you are using the FICO score. This score is used the most by creditors and lenders. While there are other formulas to compute your credit score, all of them place a huge importance to how you pay your bills. So pay off your dues in time and you can watch your credit report improve.
  • Keep your debt levels low. This is connected to borrowing wisely. If you know that you have a lot of debts already, try to keep a lid on your credit spending. Use cash or lower your overhead expenses so you can send bigger payments towards your debt accounts.
  • Monitor your credit report. Lastly, you want to make sure that you will be monitoring your credit report every now and then. Your personal credit records can become a victim of identity theft. This can ruin your score – especially if someone borrowed under your name and it remained unpaid for a long time. When you look at your credit report often, you can see if an unauthorized financial transaction happened. You can counter that immediately. Even if you start building your business credit records, you still have to monitor it carefully. According to Fundtastic.com, business credit reports have a higher chance of having errors. That is because some businesses have similar names and if your record was pulled out incorrectly, that can result in a wrong entry. You need to make the necessary corrections immediately to avoid problems in the future.

Starting your own business is a great journey to start. Just make sure that your credit report is ready to support you and open the best financial opportunities.

What You Need To Know About Medical Debt And Your Credit Score

stethoscope on top of coinsDid you know that medical debt is one of the reasons why a lot of Americans are having troubles with their credit scores? We all know how important credit scores have become in our society today. This score measures your creditworthiness. Before you are approved of a loan application, the creditor or lender will always check your credit score to determine how risky you are when it comes to payment behaviour. The idea is, when your credit score is low, there is a higher chance that you will not pay back what you borrowed from creditors and lenders.

But recent studies have shown that not all individuals with low credit scores are entirely irresponsible when it comes to debt. According to an article published on CBSNews.com, over half of the overdue balance on consumer credit reports is caused by unpaid medical debt. Most of them are unpaid because of reimbursement delays from health insurance companies. Other causes include medical billing errors and disputes that have yet to be resolved.

Apparently, there is some shady business going on when it comes to collecting medical bills. When the hospital, health facility or medical professional have unpaid receivables, they turn it over to medical debt collectors. These collectors go after consumers for payment – even when it is clear that the payment should be coming from health insurance companies. To pressure consumers into paying their bills from their own pockets, debt collectors file an unpaid report to the major credit bureaus. This results in a low credit score for a lot of consumers.

These findings came from the Consumer Financial Protection Bureau or CFPB. They have been compiling reports, complaints and observations with the intention to protect consumers from this seemingly unfair practice of reporting medical debt.

Based on the article from CBS News, the efforts of the agency is effective because a medical debt collector had been apprehended because of these shady practices. A settlement with Syndicated Office Systems had resulted in a $5.4 million payout to more than 23,000 consumers who had been wrongly hounded for medical bills. This payout is in checks of $100 to $1,000 – depending on how each consumer is affected by the illegal practices of the medical debt collection industry.

New rules when reporting health-related debt to credit bureaus

If you are currently burdened with medical bills, you need to understand the new rules that should protect you from getting a bad credit score.

Based on the December 2014 report published by the CFPB in their website, ConsumerFinance.gov, an estimate of 43 million Americans are found to have overdue medical bills. Most of these consumers are found to have ruined credit reports because of this debt.

According to the findings of the agency, there is something wrong with the way the system incurs, collects and reports medical debt. Among the things that was discovered to be wrong includes the following:

  • Confusing billing process for medical expenses. Some consumers incur a lot of bills – from the hospital, separate treatment sessions, professional fee, etc. These multiple providers can be quite confusing. Not only that the cost sometimes vary from one client to the next because of factors like the insurance, etc. This is why some consumers are unaware of how much they really owe in terms of their medical bills.
  • No standard practice in reporting overdue bills. The lack of standard procedure when reporting overdue medical debt is another reason why this is a big problem for consumers. There is no clear indication when their unpaid medical bills will end up in their credit report. Other debts will wait until after a pre-determined period passes before they report the unpaid debt to the major credit bureau. For medical bills, it can vary from 30 to 180 days. It depends on the health care provider when they will send the report.
  • Practice of “parking” unpaid debts on credit reports. This means the debt collector reports the unpaid medical bill and does not inform the consumer about it. This practice puts the consumer in danger of damaging their credit report without being given the chance of doing something to prevent it.

To deal with these problems, the CFPB required credit reporting companies to provide them with accurate reports on a regular basis. This will help them examine how to deal with the problems that consumers are facing when it comes to their medical debt. The agency would like to make the credit reporting market accountable for the accurate credit reports that consumers have. This market includes the credit bureaus (Equifax, Experian, and TransUnion), and the creditors and collectors providing the report.

Apart from the CFPB, a group of State Attorney Generals are also working on this problem too. According to an article published on Time.com, it will soon be easier for consumers to correct any errors on their credit report – especially if it involves their medical debts. The article mentioned how the three major credit bureaus have agreed to improve how they report medical debt and how they will deal with any errors that customers are complaining about. This change is part of their response to the settlement with Eric Scheiderman, the New York State Attorney General. The changes will be implemented six months from March 2015. The credit bureaus are expected to provide trained employees that will review the complaints of consumers and investigate accordingly.

Not only that, the credit bureaus are required to wait 180 days before they are allowed to add any unpaid medical debt in the report of the consumer. This is meant to give the consumer enough time to work on their unpaid debt before it damages their credit report.

According to the CBS News article mentioned earlier, some of the problems need to be put into law and thankfully, legislators are also working on it. In May of 2015, US Reps. John Carney (D-Delaware) and Andy Barr (R-Kentucky) introduced a bill known as the Medical Debt Relief Act. This bill seeks to allow the erasure of paid medical debts from credit reports within 45 days after full payment. It might be a long time before this is passed but the step in that direction is already taken.

How to keep medical bills from ruining your finances

While all of these steps are being taken, it is important for consumers to take their own steps to keep their medical debts from ruining their personal finances. According to the report from CFPB, there are 15 million consumers who only have medical debt on their credit report – nothing else. 20% of credit reports have at least one overdue medical bill. There are too many consumers being affected by the bad credit reporting practices for unpaid medical bills. You need to make some effort to keep your debt from ruining your financial life.

Of course, dealing with big medical bills is easier said than done. It takes dedication, self control and constant vigilance to help keep your debt from ruining you. Here are four things that you can do.

  • Keep yourself healthy. Prevention is better than cure. If you can avoid it, do not incur the debt. Live a healthy lifestyle so you do not have to spend on medical expenses.
  • Get insurance. If you know that your family is prone to certain illnesses, have yourself insured. It is better to be prepared by buying the right health insurance for you and your family as well. That way, you do not have to break the bank every time someone in the family falls ill.
  • Save up for emergencies. Apart from a health insurance, you can also avoid medical debt if you save up for these unexpected expenses. Grow your emergency fund so you have something to dip into when you need it the most.
  • Deal with your other debts. One way that you can also keep your medical debt from ruining you is by paying off your other debts. In most cases, people with too much debt are stressed. We all know how stress can cause a lot of health issues. Do not let stress rule your life so illness can stay away from you too.

Don’t Think Credit Is Critical To Your Everyday Life?? Better Think Again

Whether you think about it this way or not credit can have an incredible effect on your life and even on your employment. One good way to think of it is as a cloud that follows you everywhere you go. It can be a nice, fluffy, little cloud or a big, black cloud.couple going over bills

Learning where you stand

Your credit score, which is a little three-digit number, tells where you stand and how potential lenders will view you. If you don’t know your credit score one good place to get it is using Credit.com’s Credit Report Card. This tool will even divide your credit score into sections and show you a grade for each of them. For example, when you access it you will be able to see how your payment history, your debt and the other factors affect your score.

Automobile loans

When you apply for an auto loan your credit score will dictate the interest rate you get. Most auto lenders won’t review your financial history or read your complete report. They will rely instead on your score and the data on your application. If your score is 750 or above you will get the best interest deal available, which can be 0%. What happens if you have a low credit score? You’ll still be able to get that loan but it will come at a very high interest rate. Where can you get the best auto loan interest rates? The answer is generally from credit unions and online lenders and not auto dealerships.

Cell phones

You’re probably not aware of this but cell phone companies generally check your credit before they give you a service plan. If you have bad credit you may be required to put down a larger down payment or pay extra for your contract. Some cell phone companies don’t require a credit check so if your credit is bad your best bet would be to hunt down one of them. Also be aware that some service contracts give the company the right to review your credit at any time.

Renting in apartment

Perspective landlords and rental agencies usually will review your credit report. What they look for are missed payments and other negative information on your report that shows you might not be a reliable tenant. People that have bad credit are often required to put down a much larger deposit or to get a co-signer. In a worst-case scenario your application might be turned down. Unfortunately, if you have been making your rent payments on time this won’t help your credit score because this is not reported to the credit bureaus. However, this may change. More and more property management companies and landlords will now report a positive rental history, which can help you build your credit. One good tip is to ask your landlord if it currently reports your rent payments. If not, you could suggest that it use a service such as RentTrack where you pay your rent online. Your payments would then be reported at least to the credit bureau Experian.

Checking and savings account

Banks and credit unions don’t check credit reports when you apply for a checking or savings account. However they will use ChexSystems to review your history of banking negatives such as bounced checks before giving you an account.

poor credit scoreCredit cards

Make no mistake about this. If you apply for a credit card, the issuing company will review your credit score to determine whether you qualify and the terms you will receive. There are credit card offers that actually have different interest rates for borrowers depending on their credit scores. As a general rule cards with low APR’s or that offer rewards require high credit scores. While you might know that credit card companies will check your credit score when you apply for a card you might not know that some of them review your credit scores even when you are an existing customer and may then adjust their rates accordingly.

Potential employers

More and more employers now routinely check the credit reports of prospective employees. However, they must get your permission in writing before they can do this. What employers generally look for are major negatives or discrepancies. In the event a prospective employer takes “adverse action” based on your credit report, it must first notify you and then give you a copy of your report.

Insurance

When you submit an application for home or auto insurance, the company will use your credit information to determine your terms and rates. While the scores and reports that insurance companies use are a bit different than those used by creditors and lenders, your basic data and standing will be the same. The insurer must ask for permission to access your credit reports and may use that data to determine your “insurance risk score.” If you have a high score your rates will be better.

Utility accounts

You will probably need to give your permission but cable, electricity and other utilities companies will check your credit report. If you have a problem with your credit you will probably need to put down a bigger deposit, pay higher rates for your utilities or get a co-signer. If you live in a state that has community property laws such as California, Texas and Arizona, the utility companies might even check your spouse’s or partner’s credit history.

Mortgages

If you apply for a mortgage the lender will review all three of your credit reports and credit scores. Since a mortgage loan is typically much bigger then a student or auto loan, the review process is much more comprehensive. You’ll need to have a credit score above 700 to get a standard mortgage interest rate.

Child support

Agencies that enforce child support routinely check the child support payment and credit histories of delinquent parents. When they make an inquiry about your credit history this will not appear on your credit report and will not change your credit score. However, if you don’t pay child support this will be reported by the child-support enforcement agencies to the credit bureaus and can damage your credit score.

Student loans

If you or your parents apply for a private student loan the lender will check your credit report. However, the interest rates on federal student loans are set based on national rates so these loans do not require a credit check.

Omnipresent is the word

As you can see from what you’ve read in this article your credit is totally omnipresent or threaded throughout your entire financial life. If you have a good score of 750 or above, the world is your oyster. You should be able to rent an apartment, get a credit card, open a checking account or get a cell phone plan with no problem at all. Unfortunately, the opposite is true. If you have a poor score that big, dark cloud hanging over your head is going to make your life much more difficult.

Boost Your Credit History Without A Credit Card

credit historyEveryone needs to build a credit history. It is very important that you have yours as early as possible. This history is indicated in your credit report. It simply records your credit behaviour – how much you owe, how you pay them off and how responsible you are with all your credit accounts. If your record is good, you can get a high credit score. A high score will help you secure a lot of financial opportunities that are not available to those who have lower scores.

Some people actually think that this is a ridiculous requirement in our society. Why is there so much importance in building your credit reputation? After all the difficulties experienced during the Great Recession, is it really a wise idea to continue to care about credit? Wouldn’t it be better to just eliminate it from your life?

This is actually what some Millennials are doing. According to an article published on FoxBusiness.com back in 2014, 63% of Millennials have decided not to own a credit card. This was based on a survey done by Bankrate. In comparison, only 35% of 30-year olds and above do not have credit cards. If you think that this will help you stay out of debt – it is not entirely accurate.

Sad to say, our society, or the financial industry in particular, feel differently about credit. They view the use of credit as an important indication of your financial success – especially in relation to your credit report. A six figure income with a bad credit report to match is not something to be proud of. You may actually be better off earning a simple salary but with a good credit history.

One of the easiest ways to build your history is to use a credit card. After all, you need some credit input in your report. However, this is where people are having a hard time coming into terms with. Credit cards may be a common payment method but a lot of consumers have been burned by the debt that they went through in the past. This is why most of them are having a hard time building their credit reputation. There is some hesitation in using it for fear of falling further into debt – since credit card use come with high interest rates.

5 ways you can build your credit report without a credit card

Fortunately, there are ways for you to build your credit history without succumbing to the dangers of high interest credit cards. It is the easiest, but if you are not comfortable with it, that are other options. Here are some of them.

Use existing companies that you pay each month.

We all make monthly payments outside of our credit cards. These include utility bills and subscriptions like cable or the Internet. The companies providing these services to you are not required to report your payment behaviour to the three major credit bureaus (Experian, TransUnion, Equifax). However, they can submit a report if they want to – and if you ask them to report on your behalf. Simply call them and ask them to submit a report just so you can have a record of good payment behaviour. If you are renting, you can even ask your landlord to submit too. Any consistent and recurring monthly payment may be submitted to help add to the data in your credit history. Take note that since this is not a requirement for them, they could deny your request.

Get a small loan from a credit union.

Credit unions, although they provide almost the same financial services and products as banks, are actually quite different. Credit unions revolve around their members. This is why a lot of them have membership restrictions. If you find a credit union that you can join, open an account with them and apply for a small personal loan. They offer lower interest rates compared to the traditional banks. This will help you put some credit data in your credit history so you can show that you are responsible with your payments. In case, you find it hard to get an approval for a loan, you might want to open a secured loan wherein you will use a savings account that you have with them as collateral. This will lower your credit risk and thus increase your chances of getting an approval.

Apply for an installment loan from a retailer.

Retailers of expensive items allow customers to take out an installment loan on purchases. This will require you to make timely payments for a specific period of time. This is important if you cannot even apply for a loan with a credit union. Not only will this be a record in your credit history, it could also help increase your credit score because having variety in your type of credits will affect 10% of your score. Sometimes, in an effort to get customers to pay, retailers offer these loans with little or even no interest rate for the first few payments.

Opt for peer to peer loans.

This is a relatively new way to borrow money. It is usually done online so you need to explore this via the Internet. The popular companies offering peer to peer loans are Prosper and Lending Club. These are simply platforms where investors from the community meet with borrowers. That means, the financing for the loan that you apply for will be coming from investors in the community. The risk is lower so the interest rate for peer to peer loans are smaller compared to traditional banks. The chance of you getting a loan approval is higher here. And since peer to peer lending companies are required to report to the credit bureaus, your credit behaviour will be recorded in your credit history.

Utilize your student loans.

If you have existing student loans, you can use this to help display how responsible you are with your credit accounts. According to NOLO.com, these loans can help you build a payment history. Make sure you practice proper payment behaviour as it will be recorded in your credit report accordingly. And in case you are planning to go to graduate school, you may want to use your federal student loans to help you get more data into your credit report.

All of these options should give you a chance to build your credit history. Just remember that it is not ownership of the loan that will give you a good credit reputation. It is how you behave in relation to that debt. If you stick to your payment schedule and you always pay the right amount, then you can be assured of a credit history that can reflect a high credit score.

Tips to practice proper credit management

The truth is, it is all about proper credit management. Even if you have a high amount of debt (which is really not recommended), as long as you can keep up with payments, you will have a good record in your credit history.

The thing about your credit report is it needs consistent good behaviour. Even if you start with a good report, one mistake can ruin that good record. It is something that you need to take care of for as long as you want to make financial transactions work in your favour.

To help you practice credit management, here are some tips that we can give you:

  • Only borrow what you can afford to pay. This does not mean you should look at your income to determine how much you can borrow. You need to also consider how much debt you currently have and the expenses that you need to pay for every month. If you have to base it on your income, make sure that it is on your disposable income. This is the income that is left after all your other expenses and payments have been paid off at the end of the month.
  • Practice the right payment behaviour. This is 35% of your credit score. If your credit history shows that you do not pay on time and you fail to meet the minimum payment requirement, you will be viewed as an irresponsible credit holder. That will make you a high credit risk because lenders will view you as someone who cannot be trusted with credit. You will either be denied of your loan application or given a higher interest rate.
  • Monitor your credit report. Sometimes, people end up with ruined credit reports after being a victim of identity theft. CNN.com reported that in 2014, the top complaint from Americans (as compiled by the Federal Trade Commission) involves identity theft. The only way that you can detect this is by looking at your credit history every now and then. You need to look at the records to ensure that everything reflected there are all your financial transactions. If there is one entry that you are not familiar with, then you may want to check that out and have it removed.

Credit management will help you maintain a good credit history. But to practice proper credit management, you also have to practice the right financial management habits. This includes budgeting, saving and smart spending. Being cautious with your financial decisions will ultimately help you improve your current financial standing.

Here is a video from the Bank of America to help you build a better credit report.

Small Mistakes That Are Costing You A Good Credit History

credit history definitionIf you are confused about your credit score, then the best place to start is to understand your credit history.

Simply put, this is a record of all your credit transactions. Take note that it does not record all your financial transactions. It will only record credit that is under your name. So no matter how much money you have in your bank account, it will not matter in your credit report. All it will really care about are the debts that are piling up and being borrowed under your name.

Although this is not the end all and be all of your financial situation, whatever is on your credit history will have a huge impact on your personal finances. This is why it is very important that you take care of what is placed in this report. You need to make sure that there is adequate information and that it will show how you are responsible with your credit accounts.

Unfortunately, there are statistics that show how illiterate some people are when it comes to their credit report and everything connected to it. According to CreditCards.com, the survey done by the American Bankers Association revealed how people are confused about their credit report and credit scores. They think that they are the same.

Well they are not. Your credit history and your credit report can be likened with each other but a credit score is an entirely different concept. Your credit report contains the history of your debts. Whatever is on your history will be the basis when computing for your credit score. This score will determine the financial opportunities and products that you can avail.

It is very important that you educate yourself about your credit report, because any confusion that you may have about it might jeopardize the credit score that will be derived out of it. There are many things that you need to know and let us start with the financial habits that could be ruining your credit history.

These little mistakes may be bringing your credit score down

When something ruins the history stated in your credit report, you can bet that it will affect your credit score. Although the bulk of the information you will get from the Internet involves credit card debt and how it can ruin your credit history, you should know that it goes beyond that. There are so many other causes of your credit downfall. So let us identify the entries that could be viewed as credit report problems. Knowledge of what they are could help you avoid committing these mistakes.

  • Late home rental payments. Although they are not required to submit reports to the major credit bureaus, they are not banned from it. If you are regularly late on your rent, your landlord might report you – that can taint your credit history.
  • Making car rental reservations. When you plan on renting a car, one of the requirements that will be asked of you is your debit or credit card. Either of the two will help guarantee that any damage that you will inflict on the car can be covered. However, you need to know that using any of the two have different effects on your credit history. If you use your debit card, the rental company will be prompted to conduct a credit inquiry on you. The same is not true if you use your credit card. An inquiry on your credit report will have an effect on your score so be careful about this. The best way to go about this is to reserve the vehicle using your credit card and then settle the bill with your debit card.
  • Unpaid medical bills. This is actually not a small mistake but given the frequency of this debt, it deserves to be mentioned. According to WashingtonPost.com, 43 million Americans are currently burdened with delinquent medical bills. This data came from a report released by the Consumer Financial Protection Bureau (CFPB). It revealed that one out of five credit reports are tainted by outstanding balances on medical debt. This type of debt is something that you cannot avoid when you need it the most. But despite that, it can be just as destructive as an unpaid credit card debt. Do not ignore this debt and try to negotiate how you can pay it off.
  • Unreturned library materials. This may come in as a surprise. If you borrow a book or even a DVD from the library and you fail to return it, you will be charged with penalties. Some people know about this penalty but do not think twice about it because it is actually quite small – $0.25 a day. However, if your fine reaches $25, it will be fined further with $7.95. Most people, by the time it reaches this amount would have forgotten about it. But the library will make sure you will not because this is about the same time that they will forward your account to a collections agency. That could end up being a bad mark on your credit history. Think about it. If the lender sees that you cannot even pay a small amount, how do you think they will feel about lending you a bigger loan?
  • Delinquent tax payments. We all know how aggressive the IRS can be when it comes to collecting taxes. You can be sure that even if you run from your tax obligations, the IRS will track you and make you pay. Not to mention the record that they will place on your credit report. It can really take a downward spiral very fast.
  • Unfulfilled gym memberships. When it is time to cut back on expenses, one of the most common suggestions include gym memberships. If you fail to fulfill the terms of this contract, you will just be opening another way for your credit history to be tainted. Just pay off your obligations from this membership contract and cancel it. There are so many ways to stay fit without having to pay anything.
  • Ignored traffic tickets and violations. Whether it is a traffic violation or a parking ticket, these can be a cause for your credit report to receive bad marks too. While it will not be a devastating downfall, it will still reflect a great deal about your credit behavior.

How to rebuild your credit report

A lot of us have gone through financial hell in the past few years and we have our ruined credit reports to show for that. The good news is, this is one problem that you can recover from. Here are some tips that we can give you to help build, or rebuild a good credit history.

  • Choose the type of credit you will use. If your intention is to work on having a good credit history, then you need to use the right credit accounts. One of the accounts that you can use is an affordable secured credit card.
  • Understand the simple rules of good credit behavior. When you start using credit again, you need to implement the right credit behavior. This includes paying on time, paying no less than the minimum requirement, etc.
  • Be selective of how you use your credit. If it is not necessary, then do not buy it using your credit card. Also, make sure that you can afford to pay your dues and able to minimize the interest that you will pay on it.
  • Monitor your credit report every now and then. According to MyFICO.com, your credit repair should begin with this. Make sure you get a copy of your credit report and check if there are errors on it. If there are, you need to dispute it. Sometimes, you exhibit the right credit behavior but after becoming a victim of identity theft, you end up with a botched credit history.

Here is a video from the Bank of America to help you with tips on how to build your credit from scratch.

4 Possible Reasons Why You Have A Credit Report Error

magnifying glass on credit reportIf you find a credit report error, you need to act on it fast. The after effects of the Great Recession left a lot of Americans suddenly concerned about the state of their credit. And you really should be. Your credit report holds a lot of weight on your financial life – especially when you are relying on loans to get your ahead on your financial goals. So if you ever find an error in your own report, make sure you know what to do.

According to a report published on ConsumersUnion.org, the FTC (Federal trade Commission) revealed that one in every five consumers found an error in their credit reports. That means an estimate of 40 million consumers encountered problems with their reports. 5% or 10 million consumers had severe credit report mistakes that could make them pay more in terms of loan interest rates.

The same report mentioned that consumers found a lot of errors in their credit data. This includes finding an entry that did not belong to them. That could mean identity theft problems. On one side, some people said that they had a more simple credit report error – merely needing an update.

4 ways you can get an error in your credit report

But regardless of the error that you find, you need to correct that. But before you can deal with an error in your credit report, you need to find out what caused it in the first place. There are a couple of reasons to lead your data to be ruined – one more severe than the other.

Here are 4 reasons why you have a credit report error.

  • Your own mistake. We are all bound to make mistakes – even when it comes to our own information. This is why you have to be very careful about how you will fill out application forms for credit accounts or any loan that you want to make. Sometimes, there are cases when you need to write on the form by hand. If your handwriting is all over the place, whoever will encode your data might make a mistake. So make sure that if you are filing out something or providing your information, you double check what you are placing. Because that may end up as a serious error in your credit report. Try to be consistent in the information that you will provide. If it is your mistake, then you may want to call the financial institution that you submitted the information to so you can correct the mistake. You may have to call the credit bureau too so you can update your information.
  • The bank, lender, creditor, or similar entities’ mistake. These are the mistakes that are sent by the people you provided information to. These are the ones that submit the information to the credit bureaus. If it was not yours, then you may want to check out if the bank or the entity that submitted your information made a mistake. In the event that they are responsible for the credit report error, it might be harder for you to track if they did correct the mistake or not. Sometimes, you may have to go through the investigation to prove that they did make the mistake or not – at least, that depends on the institution. In any case, make sure that you follow up your case until the mistake in your credit report is edited. There are also cases wherein you are in the midst of a dispute and the creditor or utility company marked it off as a late payment or something. You may want to resolve this so your records can be corrected.
  • The credit bureau’s mistake. If you find a credit report error and you are sure that you did not make a mistake and the same is true for the bank, then it is probably the fault of the credit bureau that is collecting your data. These bureaus collect millions of data and despite a sophisticated database, they are bound to make mistakes too. They can mix the files or misreport your information. The repercussions of these errors could be severe – so make sure you dispute the mistake as soon as possible. At any case, their process is not fail-safe so always be on your guard.
  • The case of identity theft. If none of the other three checks out, then you may be a victim of identity theft. This is when someone else takes your personal and financial information to buy things and make you pay for it. In other words – they will steal from you. According to an article from CNN.com, there were 13.1 million cases of identity theft reported in 2013. In fact, they claimed that one American falls victim every two seconds. The thing about this is, only you can spot this credit report error. As long as it is done under your name, the credit bureau will put it in your report. But if you send them a letter to dispute an entry, that is the only time they will investigate. If you do not file a dispute, then the record will stay on your report and the crime will go unpunished.

The key to correct an error in your credit report is to know about it first. If you are not aggressive in your credit monitoring, these mistakes will not be corrected. No matter how careful you are with your money, a tarnished credit report can haunt you and keep you from pursuing your financial goals.

Problems that could arise when your credit report has errors

If you have a credit report error, you could be facing a couple of problems. Here are some of the things that you could encounter.

  • Wrong credit score. According to FINRA.org, people only bother to check their credit score when they are about to buy a home. If you do have an error in your credit report that you did not correct, you might find that it is enough to ruin your chances of getting your dream home. That wrong entry in your report may be responsible for you having a low credit score. We all know that a low score could mean the disapproval of your loan. If you are approved of the loan, you may be asked to pay a higher interest on it. Not only that, insurance companies can also ask you to pay higher premiums. These look into your credit score so make sure you keep it high by correcting any error that you see on your report.
  • Paying for debts you do not owe. In case your credit report error is caused by identity theft, you might find yourself paying for an account that you never borrowed. This is especially true if it took you a long time to discover the theft. The longer it takes for you to report an error, the harder it will be to prove that you did not open that credit account. Debt effects can be very devastating – much more if it was a debt you never got in the first place.
  • Missing out on opportunities. A credit report error can also make you miss out on a lot of financial opportunities. For instance, employers usually look at your credit report before hiring you. Potential business partners also look at this data to determine how well you manage your finances. A bad credit history could bring your reputation down.

In the end, that one credit report error could end up leading you to a lot of financial problems in the future. Make sure that you monitor your credit report regularly and dispute any incorrect information that you find – and do it immediately.

Wake Up, People! You Absolutely Must Know These Things About Your Credit Score

Video thumbnail for youtube video 6 Tips For Simplifying Your Financial LifeA study done in 2013 revealed some amazing facts about how ignorant many Americans are regarding their credit scores and credit reports. For example, 2/5ths of those surveyed did not know that credit card companies and mortgage lenders use credit scores to determine their eligibility for credit. Another 2/5ths incorrectly believed that personal characteristics such as marital status and age are used to calculate credit scores. Between 25% and 33% did not know when it is that lenders must inform borrowers of the credit scores used in their lending decisions. More than 25% do not know how to raise or maintain their scores. And 36% incorrectly believed that credit repair agencies are usually or always helpful in improving credit scores and correcting errors in credit reports.

Wake up, people!

If you don’t understand credit scoring and credit reports you could be facing big trouble. If you’re not aware of this, you definitely need a good credit score to qualify for an auto loan, a mortgage and other financing. And if you make just one misstep such as forgetting to pay a credit card bill, you could be on the slippery slope to serious credit problems.

Do you know who compiles your credit reports?

Your credit reports are compiled by the three major credit bureaus – Experian, Equifax and TransUnion. The information they use comes from banks and the financial institutions with which you do business and includes every credit contract you’ve ever had related to debt. Debt collectors even report to the credit bureaus. So if you have an old unpaid medical bill, this could pop up on your report and damage your credit score.

In addition, the three credit bureaus collect information from public records on tax liens, court judgments and bankruptcies. Any time you apply for any type of credit (called a credit inquiry), this will be reported to the three credit bureaus. In turn, the credit bureaus provide your credit report to the lenders when you apply for new credit.

Banks and credit card companies aren’t the only ones that access your credit reports either. Cell phone providers, landlords, insurers and utility companies will also ask for a credit report in determining whether or not they want to deal with you.

What about employers?

According to the Fair Credit Reporting Act, employers can check your credit reports but they have to get your permission to do this. Of course, if you’ve applied for that dream job and your prospective employer has asked to check your credit reports, you’ll probably feel pressured to say yes. If you say no this would be as good as saying that you have poor or bad credit. And under no circumstances are employers or prospective employers permitted to check your credit score.

The inverse ratio

There is an inverse ratio to credit scores. The higher your score the lower the interest rate you will be charged on an auto loan, a personal loan, credit card, and a mortgage. Even your auto insurance will cost less if you have a high score. Conversely, the lower the score, the higher your interest rates will be.

One freebie a year

You can get a free copy of your credit reports once a year. This is a perk that was legislated by Congress a few years ago. There is a website, www.annualcreditreport.com, where you can get all three of your credit reports either simultaneously or one at a time. Alternately, you can get your credit report free from each of the “big three” credit bureaus. You should get these reports and review them carefully to make sure they do not contain errors. If you do find an error in one of your reports you need to immediately dispute it with the appropriate credit bureau. What some people do is get their report from one of the credit bureaus every three months, which is a way to monitor their credit and immediately spot any fraud.

Man climbing range of credit scoresThey won’t include your credit score

Your credit reports will contain a lot of information but they won’t include your credit score. While there are a lot of different credit scores floating around the most important one is your FICO score as this is the score that most lenders use in determining whether or not to extend you credit. You can only get your FICO on the website www.myfico.com.

Where else to get your credit score

Getting your credit score used to be a fairly big job. But it’s becoming much easier. You can get your score free on websites such as CreditKarma.com and CreditSesame.com and from the three credit reporting bureaus. These won’t be your true FICO score but should be close enough to give you a good idea of how you stack up. Whatever your number is, don’t fixate on it. The important thing is to understand how you stand in the range being used. FICO scores range from 300 to 850. This means that a score of 800 would put you in the range of very good or excellent credit. However, the VantageScore, which was developed by the three credit reporting bureaus, has a range of 501 to 990. It also assigns a letter grade to scores. If you were to have a VantageScore of 800 you would be ranked as C or Prime, which wouldn’t be as good as an 800 FICO score.

It’s becoming easier

If you have a Discover card you’re probably seeing your credit score every month on your statement. The credit card companies, 1st Bankcard and U.S. Bankcard have said that they will soon be sharing FICO credit scores and related information with their customers. This is in response to the US Consumer Financial Protection Bureau (CFPB), which has been urging the credit card companies to do this because it believes the more information a consumer has, the better a job he or she will do in managing their credit. While this has not yet proven to be true, it certainly can’t hurt for people to be able to see their credit scores every month and whether they’re getting better or worse.

How your score is calculated

No, your age, marital status, number of children or any other personal information is not used in calculating your credit score. It is based on six factors: Your payment history, debts owed, length of credit history, amount of available credit, types of credit and your credit inquiries.

If when you get your credit score you find that it’s either poor or bad there’s nothing you can do about your payment history. History is, after all, history. You also can’t do anything about your length of credit history. However, there is one factor you could get to work on – which is your debt-to-credit ratio. It’s calculated by dividing your debts owed by the amount of available credit you have. For example, if you have available credit in the amount of $10,000 and $5000 in debts owed, your debt-to-credit ratio would be 50%. Since this accounts for 30% of your FICO score this is an area where you could do something to affect it positively. The two alternatives are to either pay off some of your debts or ask one or more of your creditors to increase your credit limits. Do either one of these and you would lower your debt-to-credit ratio and this should have a positive effect on your credit score. If you’d like more tips for improving your credit score, watch this short video courtesy of National Debt Relief.

The net/net

What all this boils down to is that your credit score pretty much rules your credit life. And since your credit score is based on your credit reports – or how well you’ve used credit – the best policy is to always use it sensibly.

4 Things to Know Before Remarrying in Retirement

Happy old couple looking at a cameraRetirement can come sooner than most of us expected. After a few decades working in an office, the time will come that we will retire that suit and probably trade them in for gardening clothes. Some are excited just thinking about retirement. They are already preparing a long list of things to do immediately right after retiring. But for some, they are anxious about retirement. Getting used to 40 hours a week minimum in the office seems an awful lot of free time.

Retirement also brings a good question in second marriage. As retirees try to prevent retirement funds from retiring before them, marriage is another issue. Divorce or death of a spouse is inevitable and for retirees, this is just as a reality as most for most of their younger counterparts. But their age and situation in life makes it just a little more complicated than most. Having a new partner in life can be quite a challenge after the initial feelings settle down.

Divorce is all too common in the country. Survey from Statisticbrain.com shows that 3.4 out of 1,000 gets divorced. This may seem small but multiply that with the current population and you get a lot of people leaving marriage. Retirees are not an exception whether leaving the marriage because it is not working anymore or the other partner dies. But some find another partner to spend their retirement with and this is where it gets tricky especially when it comes to finances.

Finding love the second time around in retirement

Finding love or companionship for retirees can and does happen. Love is not only for young people. Older citizens can love just the same as their younger counterparts, if not more. But talking about retirement and marriage should always include the topic on financial management. Money and finances should be talked about before tying the knot again in retirement.

USAtoday.com came out with an article about retirees finding love again and in the midst of pension, remarry. There are a few complications in marriage with retired people because of children, stepchildren, assets, credit, debt and other things that may not have been present during the first marriage.

Here are some things the retirees need to look out for before walking down the aisle again.

Discuss finances

Soon to be re-married couples talk about a million things before they tie the knot and one important topic is finances. More than knowing each others favorite food and places to travel to and if they will get a dog or a cat, sitting down and talking about finances is important to make the marriage work. It has a few more challenges because of the state in life the partners are in.

It now includes pension, savings and emergency funds. It could also include investments outside savings that needs to be talked about. Having a transparent line of communication and making sure the other is updated and in the same page as you are with the finances is important to make the new marriage works.

Expenses should be part of the discussion as well. If there are debts still being paid, bills and other utilities and other living expenses should be properly discussed to make the relationship work. It will be quite hard to live a normal day to day life when you do not even know who will pick up the bill for the cable, groceries or book that ticket for that vacation in Hawaii.

Credit reports

Credit reports is a reflection of how well you manage your finances. It shows a quick picture of your payment habits with just a number. It can say a lot of things about you as a borrower and reflects your level of financial literacy as well. Credit reports are important as well in maximizing other loan and credit opportunities that you might need in the future.

This is another topic that should be discussed before remarrying at retirement age. Check your credit score and talk about it with your soon to be spouse. If you find any errors, report them right away so you can fix your credit report. Talk about the financial struggles you had along the way and try to learn from them as a new couple. You can even talk about how you saved for retirement in spite of debt.

Important documents

There are documents that you might have prepared a long time ago that you would need to update when you remarry. Changing beneficiaries in your will and other documents is one them. It is best to talk to your lawyer about the changes needed with your new marriage and how to go about updating the information on legal documents you have.

Pre-nuptial agreement

A lot of people look at pre-nup agreements as a protection for the wealthier spouse. It is meant to separate the finances of the two prior to entering marriage. There are advantages to having a pre-nup at retirement age and it is best to talk about it with your soon to be spouse if you are both comfortable with it. Look at it as doing it for the kids, if any, because it could be the spark of nasty discussions down the road.

Here is a video about remarrying after retirement:

Marriage after retirement

Just as you are thinking of work ideas during retirement, you should also be working on some possible problem areas retirement brings to marriage. Here are a few of them.

  • Unemployment brings low self esteem. Some people have put too much premium in their work that retirement decreases their self-esteem thinking they are not doing anything worthwhile. They feel a big empty space has carved up into their lives and there is nothing they can do about it.
  • Health. Retired people are usually more prone to health related issues because of old age. There are more complications for older people and treatment might be longer and more expensive.
  • Lifestyle. Two people coming into a retirement status and having to find themselves together for 24 hours a day for 7 days a week are finding it challenging to merge their lifestyles together. Over the years, each partner has built up a routine around specific interests. The problem is that these interests might not be the same or even compatible with their partner.

In light of these problems surrounding a married couple in retirement, here are a few things that they can do to address them:

  • Find a hobby – Retirement should be based on a financial target and not by age. If done correctly, the  lack of self esteem may originate from not having to do anything anymore and not the paycheck. The best thing to do is to either look for a hobby that you can enjoy doing or better yet, expand a hobby you already have. It is best to include you partner into it and see if you both can enjoy incorporating it in your retirement years.
  • Regular check-up. Prevention is always better than cure. Visit your doctor regularly most especially when you get older. This is not only to address any possible medical situation that is creeping up but to give you peace of mind as well.
  • Thinking of your spouse. Building a lifestyle outside the interests of your spouse might have happened because of all the time away from the house and into work, Now that you are retired, it is a good idea to create a new one that factors in both of your interests. Take into account the the things that both of you like to do and build on that. She might love to cook and you’re the best salesman in the neighborhood. You can start a small business where your wife cooks and you sell them to your neighbors. It does not have to be the same, they can also be complementing each others interests and strengths.

Retirement is an exciting part of your life. If you find yourself re-marrying at this point, your finances should be one important consideration and topic before saying “I dos.”

 

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