And the Oscar goes to . . . Your Credit Score!

by Janice Forostiak, Marketing Department

An award-winning credit score can take years to build . . . and a few bad months or years to destroy.

Do you know your credit score? We’ve all seen those cute TV ads featuring the men in pirate hats — we probably even know the song by heart. But it’s a good idea to listen to what they’re saying and take action. Here’s why: many lenders are basing loan rates and terms on your credit score.

What is your credit score? Simply put, it captures your financial picture in a quantitative way, taking into consideration your payment history, lines-of-credit available, outstanding balances, and much more. A good credit score can make the difference in getting a loan to buy a house, car and many other items.

So, what is a Good Credit Score?It depends! Each lender decides how to use these numbers. But here are some basic guidelines:

760 – 850: Excellent
720 – 760: Very good
680 – 720: Average – very good
620 – 680: Fair – poor
Below 620: Poor

How do I get a copy of my credit report? It’s good to know what prospective lenders are looking at when it comes to your financial picture. You can get a free copy of your credit report today by logging onto www.annualcreditreport.com. This central site allows you to request a free credit report once every 12 months from each of the nationwide consumer credit reporting companies: Experian, Equifax and TransUnion.

So what happens if you have a less-than-stellar score? Life is not over, and that score CAN be improved! But you have to take some steps to do it.

How do I rebuild my credit score? Bankrate.com has a few suggestions:

1) Correct errors. There are plenty of reasons that your credit report isn't accurate. Perhaps your identity was stolen, or you paid off a debt but the creditor never reported it.

To correct an error, submit details of the error in writing, including corresponding documents, to the credit bureau that's recorded the error. It has 30 days to investigate and make a determination about its accuracy, the Federal Trade Commission says. If a mistake gets scrubbed from your credit report, you could see your score jump by 50 to 100 points.

2)Pay down your balances. Thirty percent of your credit score is based on your credit utilization ratio -- the amount of credit you've used compared to your limit. If that ratio is higher than 30 percent, it's going to have a negative impact on your credit score. Put a big chunk of cash from a savings account or tax refund toward your debt to lower that ratio and boost your credit score.

3) Start automating payments. Improving your credit starts with paying your debt on time. If late or missed payments have led to bad credit, it's easy to make sure your bills are paid automatically and on time. Set up electronic payments to pay off credit cards, mortgages and other debt. This will ensure you never miss a payment and improve your credit score.

As always, your credit union branch representatives are always on hand to assist you in understanding your credit score and ways to help you trim debt and improve your financial position. Put us on speed-dial and we can help you work towards a better financial picture!

Is it an Income Problem..... or a Spending Problem?

by Janice Forostiak, Marketing Department

I had lunch with a friend recently, and was forced to listen for the 100th time about how little money she has leftover at the end of the month. I felt some sympathy, and yet . . . in the course of our conversation, I got a peek into her spending habits when she told me how often she goes out to eat, goes to the movies, etc. etc.

Not to begrudge anyone's personal frills, but these things add up if you’re not watching how often or how much you spend. Suddenly, a movie a week plus going out twice a week adds up to “I can’t make ends meet” or worse, “I can’t pay the mortgage.” What do you do? Get a second job? Go into debt? Not so fast. Maybe it’s a good time to examine where all your money is going and make a budget. MSN Money offers some guidelines to uncovering the problem. Then, Signal Financial can help you with the answers.

Some money myths, busted by our friends at MSN Money:

1. You Don’t Have Enough Money to Follow a Budget
No matter how much — or how little — money you have, it’s always important to be financially responsible. It’s impossible to keep track of your funds if you don’t know where they’re going. Following a budget helps you monitor your finances regardless of the amount of money in your account.

2. It’s Cheaper to Eat Fast Food Than Buy Groceries
This ridiculous rationale is the mantra of those who hate to cook, but barring a few rare exceptions, it’s simply not true. According to the United States Department of Agriculture, couples in the 19- to 50-year age range following a modest food budget spend approximately $143.10 per week on groceries, as of November 2014. However, the average fast food meal costs approximately $12.75 per person, according to The Christian Science Monitor. For eating out to be cost-effective, each person would only be able to have 5.6 meals per week — not including tax and tip.

3. If You Can Finance It, You Can Afford It
This terrible reasoning causes many people to fall deep into debt. Just because you can afford to make payments on a new TV, flashy car or other expensive item doesn’t mean it’s a good idea. When you finance something, you’re agreeing to pay interest on it, which substantially increases the number on the price tag. Rather than wasting your money on interest, save up and purchase it outright.

4. Take Out a Loan to Build Credit
Don’t take out a loan that you’ll have to pay interest on to build credit. Instead, open a credit card and pay it off in full each month. This will allow you to establish credit without incurring any added fees.

5. It’s Cheaper to Buy a New Car Every Few Years Than to Hold Onto an Old One
Consumer Reports notes that over the first five years of ownership, the median car costs more than $9,100 a year to own. However, if you keep the vehicle for eight years, this cost can be significantly decreased to an average of $7,800 per year. So keep the clunker as long as you can — until the repair bills outweigh the cost of a new car.

Finally, Signal Financial is here to help! Start with our budget worksheet by clicking here. Then, our qualified branch staff will be more than happy to evaluate your financial picture, recommend product solutions or even refer you to CAAB (Capital Area Asset Builders) for some more direction.

Source: MSN Money