Credit Builder Loans: What You Should Know

490456983A secured credit card can be a wonderful way to build a positive credit record. However, credit builder loans shouldn’t be ignored as an option for establishing a strong credit history.

How does it work?
There are a couple different types of credit builder loans that are the most popular. In the first type, the “loaned” money is actually put into a savings account for you at the financial institution issuing the loan. You make monthly payments on this money so that by the end of the payoff period, you have access to the money you paid, plus any interest that may have accrued.

The second type of credit builder loan is similar to a secured credit card in that you are essentially putting down a lump sum security deposit and then being extended credit in that same amount. In the case of this type of credit builder loan, you pay down the line of credit that was given to you as a result of your deposit.

How does it help?
Credit builder loans are reported to your credit files and show up on your credit reports just like unsecured personal loans. Because of this, the (hopefully) positive payment history can be a boon to your credit. Also keep in mind that having both a revolving account and an installment account on your credit reports helps your FICO score. So if you already have a revolving account – like a credit card or line of credit – on your reports, but not an installment account, a credit builder loan can add that installment account for you. However, if you already have another installment account like a car note, personal loan or mortgage in your credit file, you may not be helped much by adding another one.

Is it better than a secured credit card?
Neither a credit builder loan nor a secured card is inherently better. Both can enhance your credit profile when used properly. However, if you are worried that using a secured credit card might encourage you to make unwise purchases, a secured loan may make more sense for you.

What questions should I ask?
As with any loan, you should always make sure you understand:

  • The total amount of the loan
  • The interest rate you pay vs. what you earn
  • The term (length of payoff time) for the loan
  • The monthly payment
  • Loan origination or closing fees
  • Fees for missed payments
  • Credit bureaus loan payments will be reported to (the more the better)

It’s important to know that the interest you pay on a credit builder loan may be higher than what your deposit it earning. However, when used wisely, a credit builder loan can help you build the kind of credit standing that will save you thousands down the line on car loans, mortgage payments or other credit expenses.

Zapping Cell Phone Data Costs

482254717If you’re like a lot of people these days, a smartphone is integral to your day-to-day functioning in the world. As such, you may stream movies, use apps, or surf the web without a second thought. If you’re not careful, though, the amount of data you’re using can quickly mean a much larger phone bill than you’d like. Here are several ways to hold down your data usage costs.

Know usage and options
It’s important to know what your data plan is and how many gigabytes you get per month before you incur large overage fees. In addition to explaining your current plan, most cell service providers can let you know how much data you’ve been using for the past few months and which plan would best fit your needs. Take advantage of this to find the data option that best suits for desires.

Set limits or alerts
Major smartphones let you program into your device safeguards against using too much data. Research how to set up these roadblocks and you’ll enjoy a much less expensive ride on the information superhighway. If you want to really be on top of your data, you can even download an app to monitor your usage in minute detail.

Watch videos at home
When you’re stuck at the DMV or enduring a long public transportation ride, it’s tempting to kill some time checking up on the latest funny cat videos making the rounds. However, be aware that this is potentially a very costly diversion. Consider doing some reading or using a non-data gobbling app instead.

Preload your entertainment
If you consider watching videos a vital part of your on-the-go entertainment, download them at home using Wi-Fi and then cache them on your phone for later viewing.

Consider a text-only browser
A huge part of the data you download when browsing the internet comes from images. By using a text-only browser – there are several choices available – you can cut a huge chunk out of your data load.

Use mobile versions of sites
Mobile site options don’t just make it easier to navigate, they also cut down drastically on your data usage by limiting the amount of images and other data that needs to be downloaded onto your phone. Some sites may automatically take you to their mobile version, but other sites you visit a lot may default to the desktop version.

Avoid clearing your cache
If you’re especially tech-savvy, you know that clearing the cache on your phone can make your device run more smoothly by freeing up some internal memory. However, when you do this you delete previously downloaded images and other stored data. This in turns means you use more data when you re-visit sites and have to re-download everything that was stored during your last visit.

Be app wise
In general, it’s a good idea to know what you’re getting yourself into before you download an app. Not only is this a good idea for information security, but also for your data usage. Make sure you are aware of how much data an app will use before you add it to your collection. Also be sure to research low-data alternatives to your current go-to apps.

Use Wi-Fi
When you’re at home or in another place with a Wi-Fi connection, there’s no reason to be using up your allotment for data. Switch off the cellular data in your phone’s settings and switch it over to the Wi-Fi setting.

Restrict background data
Your apps may be hogging your data without you even knowing it. Select the setting to limit background data and reel in apps that are continuously “pushing” you data. When you install an app, select the choice to forego push notifications.

It’s tempting to think of your smartphone as a “Whatever I Want/Whenever I Want” kind of tool. However, if you get too carried away, your service provider may charge you whatever THEY want. By taking a few precautionary measures, you can avoid painful overages and keep control over your smartphone charges.

Opening the Hood on Auto Credit Scores

155571883You’ve accessed your credit scores in preparation for buying a vehicle. You’ve done everything in your power to get your scores as high as possible. Then you sit down with your lender only to be told they use something called “auto credit scores.” No need to get flustered. While there are a few key differences, auto credit scores are pretty similar to general credit scores. Once you know the ways they vary from your general credit scores, you can quickly understand how to master yours.

What’s different?
Auto credit scores normally put greater emphasis on:

  • Whether or not you’ve had an auto loan or lease in the past (having at least one is better)
  • Payment on vehicle loans or leases (missed payments are bad)
  • Settlement for less than the amount owed on an auto loan or lease (bad)
  • Auto loan or lease sent to collections (bad)
  • Repossession of a vehicle (bad)

How do I know which kind of score is being used?
As with any type of loan application, your best method is to simply ask the lender what type of score they will be using to consider your application. In the vast majority of cases, a lender will use an auto credit score for an auto loan or lease.

How do I get my auto credit score and report?
Before you run off to the internet trying to get your auto credit reports, know that the information used to compile auto credit scores comes from the information that is already in your regular credit reports from Equifax, Experian and TransUnion. You can get those for free once a year by calling 877-322-8228 or visiting Odds are that you won’t be able to get a copy of your auto credit report unless it is provided by a lender.

Depending on which score your lender is using, you may not actually be able to access your auto credit score either. This isn’t as bad as it sounds, though. If you can access your general credit score, such as the highly popular FICO scores, you should have a good idea of what your auto score will look like. In most cases, the general credit scores give you a good approximation of what your auto scores will look like.

How do I address my auto score?
To put it simply, always pay your vehicle loans or leases on time and avoid at all costs negative outcomes like collections or repossessions. Since auto scores do also consider other types of credit you have used – like credit cards or mortgages – it’s wise to pay those on time too. In addition, credit scores usually favor those who:

  • Keep balances low on revolving accounts, like credit cards or personal lines of credit
  • Keep revolving accounts open for an extended period of time
  • Have a diversity of types of credit
  • Limit their applications for new credit

Auto credit scores aren’t terribly complicated for the most part. Just keep in mind are that if you miss payments or fail to meet your obligations with vehicle leases or loans, doing so will bring down your score and may mean paying more to have access to a vehicle in the future.

Preparing Finances For A Maternity Leave

177535333When you’re welcoming a little bundle of joy into your life, unanswered money questions can distract from your bonding time and bring unnecessary stressors into your first days together. However, by planning ahead, you can create a maternity leave with far fewer financial worries.

Talk to your HR person
You don’t want to start planning your maternity leave based on false assumptions or outdated information. Schedule an appointment with your human resources contact to arm yourself with the knowledge you’ll need to begin designing your maternity leave financial plan.

Think about a flexible health spending account
While you’ve got your HR person’s ear, ask about how a flexible health spending account might help you save on your upcoming medical and childcare expenses. By putting pre-tax dollars toward these costs, you may be able to save a bundle.

Know your insurance coverage
Yes, you’ll want to know how your health insurance plan will cover you and your child going forward. But also know that short-term disability insurance may provide a payout during your maternity leave. Be aware that your plan provider may require that you sign up for this type of plan before you become pregnant.

Odds are that you’re aware of this, but caring for a new child turns your world upside-down and inside-out. Your finances certainly aren’t spared from this upheaval. Create a spending and savings plan for your maternity leave period that will recognize and incorporate these changes. While there will definitely be new costs, you may also be able find significant savings in areas like entertainment, transportation or dining out.

Save aggressively
Even if you work for an employer who offers paid maternity leave, it’s still a good idea to build up barrier against money problems in your baby’s first months. The beginning of a baby’s life is notoriously unpredictable cost-wise, so it’s better to be prepared than left guessing. If you don’t have an employer-provided paid leave, it’s even more vital to start stashing cash.

Consult a tax pro
One of the unintended – but potentially positive – ramifications of bringing a new child into your home is the change in your tax status. Claiming the Child Tax Credit or deducting childcare expenses can mean less burden at tax time.

Start to think about childcare
You don’t want to spend your first few months with your child worrying about how he or she will be cared for after your maternity leave is over. As much as possible, research your options for childcare now to avoid having to rush into any decisions later.

If you’re giving birth, chances are that by your third trimester you’ll often be too tired to sit down and focus on money questions for extended periods of time. By taking care of these issues as soon as possible, you increase your chances of having fewer financial worries and more time to enjoy your new blessing.

Credit Card Cash Advances: What You Need To Know

476751241If you’re in a bind and desperate for money, a cash advance via your credit card can seem like an oasis in the financial wilderness. Be careful, though. There are several key things you need to make sure you are aware of before plunging in.

Interest rate
A common mistake is to assume that the interest rate on cash advances is the same as the interest rate for purchases you make using the card. To avoid being burned, know the interest you’ll be charged before you borrow. Chances are it’s significantly higher than your rate for purchases.

Teaser rates
Does your cash advance come with a low initial rate that quickly jumps if you don’t pay the money back within a certain time? Make sure you’re aware of any rate hikes that could kick in.

Transaction fee
Like the interest rate, the transaction fee can be a real shocker if you haven’t done your homework. If the combination of the interest rate and fees makes a cash advance too expensive for you, explore cheaper options for coming up with some quick cash.

Grace period
When you make a purchase with a credit card, there is normally a grace period before interest is charged on the money borrowed. However, with cash advances, it’s not uncommon for interest to be charged from the moment you complete the transaction.

Payment rules
Since the money you borrow via cash advance gets added to your credit card balance, it’s important to know how the any payments you make for the card will be applied. For example, when you make your regular monthly payment, how much of that gets applied to the cash advance portion of your debt? You don’t want to encounter a situation in which you are only paying on your lower interest debt while the higher interest debt goes untouched.

Credit card cash advances should never be used in lieu of emergency savings or as an excuse to live beyond your means. They should only be considered in emergencies, and even then they should be weighed against cheaper or less risky options.

First-Time Landlady/Landlord Checklist

iStock_000007589790SmallGetting started as a housing lessor is a really big step. However, by breaking it up into well-defined smaller steps, you can take a lot of the stress out of putting the place up for rent.

Business type
From a personal finance perspective, becoming a lessor isn’t something it’s wise to rush into. Consult with a financial planning professional and/or an attorney to understand the ramifications of your new venture for your taxes, investments and other money issues. Knowing which type of legal entity you will want to use for your business is central to this new phase in your life.

Separate bank account
For legal and tax reasons, you need to have rent checks and other rental-related monies going in and out of an account different than the one for your personal finances. Contact your credit union or local bank about setting up a business account.

Alternate contact information
To avoid annoying – or downright scary – scenarios with tenants, you’re better off providing them with a phone number and address different than your personal ones. Get a P.O. Box at your local post office and have a number other than your cell phone as the primary contact point.

Contact sheet
Once you’ve set up the contact details you’ll provide to your tenants, it’s smart to provide them with a handy way of accessing that information. Also include – perhaps on a laminated card – information for the property management company (if applicable), local fire department, police station and any other vital entities.

Filing system
Unfortunately, it’s likely that at some point you’ll encounter a dispute of one kind or another with a renter. By keeping comprehensive and well-organized records of payments, communications, work invoices, and other key information, you make the process of resolving issues much easier. It will also help come tax time.

Yes, you’ll probably need nice photos of your unit for your advertisement or listing of the property. However, also keep in mind that your photos may need to stand as evidence of the condition of the unit prior to your tenants moving in. If there are problems with damage when they move out, you may need to be able to show before-and-after shots to make your case.

Rental application
“They seem nice” isn’t a solid reason for choosing your renters. You will need a proper application form to get information like name, Social Security number, employer details, etc. Once you have found an application template you like (whether from a legal professional or from the internet) fill it out with your own minimum requirements to establish a baseline of what you will accept.

Tenant checks
Don’t wait until you have applications rolling in to decide on your strategy for conducting background or credit checks. Perform an internet search engine query for “tenant screening” along with the name of your town/city/area well in advance of listing your unit. While you’re on the web, read reviews of different tenant research providers to find the most respected company.

Rental agreement
Sample rental agreements can be found on the internet, but be careful. You need to have paperwork that is both in compliance with local laws and that takes full advantage of the rights guaranteed to you. To make sure you are covered, have a local legal professional familiar with real estate laws in your area review the agreement.

Property management agency?
Handling the day-to-day aspects of a rental property can be a load. Consider paying for the services of a property management company to handle the niggling details that inevitably come up.

New locks
It may seem like an unnecessary additional expense, but changing the locks on any doors accessible from the outside is imperative. You can’t have a situation in which former tenants are just waltzing into your new lessees’ place.

Unit condition
At the very least, clean the unit, make sure necessary repairs have been made, and check the working condition of the heating, cooling, water, plumbing, electricity, etc. Be aware that in some areas, local laws stipulate that an inspection is required before a unit can be rented.  Check with a local legal professional who specialized in real estate issues to know your responsibilities in this area. Make sure to also ask about local requirements for smoke and carbon monoxide detectors.

You may think your unit is worth $1,500 per month, but if the local market doesn’t support that, you are going to lose a significant amount of money waiting for your dream renter. Take the time to research what similar places are going for in the area. By pricing your unit competitively, you stand a better chance of getting the right people to start renting quickly.  Remember to gather information not only on monthly rent, but also deposits.

The best way to find options for advertising your unit is to put yourself in the shoes of your potential tenants. By using the internet like you’re looking for a place, you’ll find local agencies that will come up first in internet search results. Craigslist is one example of an easy-to-use and popular way to list and rent out apartments.

Move-in checklist
To further protect yourself and avoid misunderstandings, use a move-in checklist with your tenants before you hand over the keys. This should include a detailed description of the condition of the unit and should be reviewed with the tenants point-by-point. At the end, have the tenants sign and date the checklist. This is also a good time to review the particulars of the lease with the tenants before having them sign it too.

No money, no keys
You may enter into your time as a landlady or landlord with visions of being the “nice” or “flexible” lessor, but there are some areas where you need to follow the rules pretty closely. Always collect first month’s rent and deposit BEFORE your tenants move in. That way, you save yourself from some potentially major headaches.

If it’s your first time renting out a place, you’re better off erring on the side of caution and over-preparing. As time goes by, you can whittle down some tasks, but in the beginning your best bet is to cover all the bases.

Snow Tires: Are They Worth It?

479116077The dog days of summer probably don’t having you contemplating your vehicle’s winter driving needs, but maybe they should. After all, fall is when older model snow tires typically go on sale as newer versions hit stores. A great deal can be had if you are willing to pick up last year’s latest and greatest. But it begs the question: Is it really money saved or is it money wasted?

Argument for
Winter tires have been shown to make driving safer in snowy or icy conditions. The money you don’t have to pay for a fender bender or higher insurance rates makes the expense worth it.

Argument against
A new set of four new snow tires can be around $1,000. The expense isn’t worth it, especially since safe driving can prevent most accidents.

Argument for
While the price may feel high in the short-term, using snow tires can double the life of your regular tires, thus keeping down your overall tire cost.

Argument against
Buying winter tires means constantly having to store at least one set of tires.

Argument for
Your insurance company may give you a rate discount for using snow tires.

Argument against
Having to repeatedly change tires gets expensive and puts unnecessary wear and tear on the rubber.

Argument for
If you can’t afford four snow tires, you can always get two for the back wheels. While an imperfect solution, it will still improve your winter driving safety.

Argument against
Snow tires wear quickly on cleared roads, meaning you are paying extra money to wear down your tires when there is no snow or ice.

As with most spending decisions, the final choice on snow tires comes down to what you want to prioritize. By identifying which of the above factors is most important to you, it’s possible to make the right call for your situation and needs.

Business Credit Score FAQs

Credit score on a digital tabletYou’ve heard a lot about your personal credit scores, but if you own a business, you may feel a bit in the dark about how your company’s credit is rated. Like your personal score, though, your business score is fairly straightforward once you understand the basics.

What is it?
As with a personal credit score, a business credit score is an attempt to measure the likelihood of repaying any particular debt. It’s simply a way for other organizations to use measurable data to try to predict the risk of doing business with you. You may also hear the scores referred to as “commercial” or “trade” scores.

Who calculates the scores?
The three major companies computing scores are:

  • Dun & Bradstreet
  • Equifax
  • Experian

As with personal credit ratings, your best bet is to make sure each of your scores with the leading business score calculators is in good shape.

How is it calculated?
Algorithms vary by the company crunching the numbers, but normally the main factors are:

  • On-time payment history
  • Public records, such as liens, bankruptcies or judgments
  • Number of business relationships (higher is better)
  • What percentage of your available credit is in use (lower is better)
  • How long your business has used credit (longer is better)
  • How many credit inquiries have been made (lower is better)
  • Type of business
  • Size of business/number of employees

What’s a good score?
Business credit scores use different scales than those employed for personal credit scores. For example, Dun & Bradstreet’s popular PAYDEX score ranges from 0-100 (higher is better) with a score of 75 or above considered preferable.

How do I start building a score?
If your business is a sole proprietorship or partnership, incorporate your business as either an LLC or a corporation to begin the process of getting scores. The act of incorporating legally separates your personal and business finances. It also lets you create business credit files separate from your personal ones. Next:

  • Apply for an Employer Identification Number (EIN) at
  • Get a Data Universal Numbering System (DUNS) number at and register your business for credit file data collection
  • Find companies willing to extend you business credit

Keep in mind that reporting business credit file information is voluntary and that some companies you do business with may not report at all. This is why it’s smart to check your credit files from the major compilers to see what exactly is being registered for your company.

How do I see the reports and scores?
You’ll need to visit the website of the company whose information you are interested in. The major ones are:

How often do I need to check it?
Generally speaking, lending professionals advise that business owners check their business credit scores at least once per quarter.

Why does it matter?
If you want to make your business into a big-time moneymaker, you will probably need to apply for a business loan at some point. A good score can mean not only qualifying for a loan, but doing so with the best terms possible. It’s not just about lenders, though. Keep in mind that anyone who potentially encounters risk by entering into or maintaining a business relationship with you may check your scores too. Simply put, a good score can help make it easier and cheaper to do business.

How do I raise the score?
The types of behavior that typically will have the greatest positive effect include:

  • Making payments on time
  • Avoiding liens, bankruptcies or judgments
  • Increasing your number of business relationships
  • Keeping your percentage of available credit in use relatively low
  • Generating revenue
  • Notifying creditors and credit file compiling companies if you find errors on your reports

Is the business score all I need to worry about?
Be advised that some lenders look at a combination of your business and personal scores. In other words, don’t necessarily think that you can skate by with poor consumer scores as long as your business is looking peachy.

Having a strong business score can make your operating costs significantly smaller. For that reason alone, it’s definitely worth it to look into making the most of your score.

What Students Can Do About Student Debt

491517475If you’re like most students, you’re putting off thinking about repaying your student loans and other debts until you’re out of school. After all, you’re probably not earning a lot of income and you’ve got other, more pressing things to worry about. However, by starting to think about how you will pay back that debt while you are still in school, you’ll make the process easier for yourself once you leave.

Create a plan
College is about having freedom, but if you are a little too free with your money, you could risk putting yourself in bad position once you need to start paying your post-college bills. The first step is to create a budget for your college life, updating it as living situation or other key factors change. This can help you free up some money that can be earmarked for your loans. As you get closer to graduation, make another spending and savings plan to reflect your financial life after graduation.

Consider working
If you’re not already doing so, think about getting some part-time work. That is, of course, if your schedule and class load allow it. By squirreling away some money, you give yourself a little more security for when you need to start making the big payments.

Don’t drag it out
There’s a strong temptation to think of your college years as a way to delay entering “the real world.” However, if this approach is leading you to take a more leisurely class load or switch majors multiple times, the bottom line is that you’re going to end up paying a lot more back once you do get out of school. Do your future self a favor and keep your debts as low as possible.

Pay off other unsecured debts
Student debt is tough enough to deal with. You don’t need mounds of credit card debt or other unsecured obligations weighing you down too. Do your best to have all unsecured debts eliminated before you graduate.

Know when you start paying
Without a doubt, you’ll spend a lot of time thinking about your post-school plans as you get closer to graduation. Part of that process needs to be understanding when you have to start paying on your student loans. Each of the different types of federal loans has a grace period after college during which you don’t have start paying. They are:

Stafford loans: Six months after graduating

Plus loans: Depends on age and type, ask your loan servicer

Perkins loans: Nine months after graduating

For private loans, contact your loan servicer. By knowing these important dates and having a plan in place now to deal with payments, you avoid the shock of suddenly having an unexpected payment to start making. The months leading up to graduation are also a good time to contact the servicers for your loans to discuss your repayment options.

Start paying if you can
It may be tough to fit into your budget, but making payments on your unsubsidized loans while you are still in school can help keep the interest that accrues under control. If you are unsure if your loans are subsidized (interest is paid for you while you are in school) or unsubsidized, contact your loan servicer.

Student debt doesn’t have to a looming monster waiting for you just on the other side of graduation. Always remember that there are steps you can take now to reduce the impact of your loans to your financial health later.

Borrowing From A 401(k): Your Decision-Making Guide

BU010806Taking a loan from your 401(k) can help you cover expenses in a time of emergency need, pay off high-interest debts, or get seed money for a larger opportunity. However, it isn’t a decision that should be entered into lightly. To make sure you are making the right choice for your situation, carefully measure both the positive and negative aspects of the decision.

Potential pros

  • 401(k) loans don’t require a credit check.
  • The interest rate for 401(k) loans tends to be competitive.
  • You repay the interest on the loan to yourself instead of a financial institution.
  • Application fees are usually very low.
  • The application process can be quick and easy relative to other types of loans.
  • It may be possible to set up repayment of the loan as an automatic deduction from your paycheck.
  • There is no prepayment penalty.
  • A loan is preferable to a disbursement, which will result in a large loss of money due to penalties and taxes.

Potential cons

  • You pay taxes twice on the money loaned: once when you initiate the loan (since the money is post-tax dollars) and then again when the money is paid out in your retirement.
  • Any time you take money out of your 401(k) – even temporarily – you risk missing out on growth potential for your investment.
  • If you lose your job or leave it, you have to repay the full amount of the loan within 60 days. If you can’t repay, the money you took out is considered a disbursement and you will have to pay early distribution penalties as well as federal and state taxes.
  • Depending on the rules of your employer, you may not be able to make contributions to your 401(k) while you are repaying the loan.
  • Since 401(k) loan payments don’t show up on your credit reports, you lose out on an opportunity to add positive information to your credit file.
  • Retirement funds are usually protected in bankruptcy, but 401(k) loans are not. If you are at risk of bankruptcy, you may be jeopardizing your retirement money by taking out the loan.
  • Relying on 401(k) loans can create a slippery slope; if you find yourself engaging in unhealthy financial behavior because you know you have the retirement money to fall back on, you could be creating a major problem for your finances.

Weighing your options

Retirement savings should never double as your emergency savings. In fact, 401(k) loans are generally seen as a choice that should be kept pretty far down the list of loan options. Because of the potential for negative consequences, it’s important to consider a 401(k) loan against the alternatives before making any decision.