Category

Your Credit

Oct 17
0
how divorce affects your credit

Finances After a Divorce: 6 Things to Know

By | Personal Finance, Your Credit

Divorce can be a trying period in your life, but you’ll feel like life is a little closer to normal if you can regain your financial footing as quickly as possible. Read these tips to understand the impact on different areas of your finances after a divorce. In some cases, you may even discover a few perks depending on your situation or final divorce settlement.

1. You Can Access Retirement Funds Penalty-Free

If you receive a qualified relations domestic order as part of your divorce proceedings, you can take out an early withdrawal from your retirement account without being assessed for a penalty. Typically, you’d be charged a 10% fee on any distribution before the age of 59 ½. You will, however, be responsible for paying income taxes on anything you withdraw as part of your divorce. You can avoid taxes if you choose to roll your retirement funds into an IRA. Just be cautious not to jeopardize your financial future. Accessing retirement funds penalty-free can help improve credit if you’re trying to avoid debt or collections while going through a divorce.

2. Alimony Tax Laws Have Changed

If your divorce settlement is finalized post-2018, you’ll see some drastic changes in how alimony and child support are treated in terms of taxation. Pre-2019 agreements allow for alimony to be used as a tax deduction for the payer and counts as taxable income for the recipient. Under the new tax law, however, these rules are completely eliminated. There is no allowance for using alimony payments as a tax deduction and recipients do not have to include these payments as part of their taxable income. In short, this is a win if you’re on the receiving end, but could be a minor financial blow if you’re hoping to get a tax deduction for your upcoming divorce settlement.

3. College Financial Aid Goes Through the Custodial Parent

If your children are approaching college age, it’s important to understand how financial aid works when the parents are divorced. Rather than having to count both parents’ income on the Free Application for Federal Student Aid (FAFSA), only the custodial parent’s income must be included, which can potentially increase your child’s chance of receiving federal aid. Note, however, that child-support and alimony payments received from the non-custodial parents also have to be included as part of the FAFSA paperwork. If parents have a 50% custody agreement, the custodial parent is considered the one with whom the child stayed the most number of days in the preceding 12 months. With a bit of planning with your ex-spouse, you may be able to minimize your family’s financial responsibility by making the person with less income the custodial parent.

4. Joint Debt Can Be Assigned to One Person

You may feel happy that the judge assigns joint debt like a car loan or personal loan to your ex-spouse, but the situation has the potential to seriously damage your credit score. If your ex-spouse fails to make payments on the loan, whether on purpose or out of financial hardship, those missed payments will be reflected on your credit report. It can take up to seven years for a single late payment to naturally drop off your report unless you’re able to successfully initiate a credit dispute and get it removed before then.

5. Set Yourself Up for Credit Protection

In order to protect your credit score and financial future after divorce, check your credit report for any errors. You may want to sign up for credit monitoring services to track payments for accounts that still have your name on them. Additionally, remove your ex as an authorized user on all of your credit cards and any other lines of credit you may have. Look into refinancing joint loans so you can eventually separate your credit from your ex’s for good.

6. Hire a Pro to Expedite Credit Repair

If you’ve already experienced credit damage as a result of your divorce, consider hiring a professional credit repair firm to help get it back on track. Whether you’re feeling overwhelmed or simply want to move on to the next stage of your life, fixing your credit is a great first step to a clean slate. You can even sign up for a free consultation with Ovation to find out if you’re a good candidate for credit repair.

A divorce usually isn’t a walk in the park. But with a bit of background knowledge and some advance planning, you can minimize its financial impact and move on to brighter days.

Sources:

http://www.finaid.org/questions/divorce.phtml

Jul 03
2

5 Credit Mistakes You Need to Avoid

By | Your Credit

It doesn’t matter whether you’re trying to improve your credit or build a positive credit history from scratch, there are a few financial moves you should almost always avoid. Even one small misstep can result in lasting damage, undoing all the hard work you’ve already achieved.

Take a look at five of the most common credit mistakes and how you can prevent them from hurting your own credit report.

1. Making Late Payments

The largest factor determining your credit score is your payment history, making it extremely important to avoid paying any of your bills late. Obviously this includes any type of financing payments, like credit cards, student loans, mortgage, car loans, and any other kind of personal loan. But even things like your cell phone bill or utility payments have the potential to impact your credit report if you leave them unpaid for too long.

How much leeway do you have with your payments?

Your creditor can of course charge late payments according to your user agreement, so it’s always smart to pay by the due date. If you do happen to miss that, you have 30 days until the late payment can be reported to the credit bureaus. Once a negative item like that appears on your report, it can stay there for seven years, unless there’s been some type of credit error.

2. Reaching Your Credit Limit

Another credit mistake to avoid in order to fix credit or build it is to balance your credit utilization. How much you utilize each line of credit available to you also has a major impact on your credit health.

For instance, maxing out $5,000 on a single credit card is generally more harmful to your credit than spreading that same amount over multiple cards. The is because your finances seem more precarious if you don’t have much of an emergency buffer through your various lines of credit.

A quick credit repair tactic is to either pay down your maxed out cards or ask for a credit limit extension. If you take that route, just make sure you don’t actually use the extra room on your card.

3. Closing Accounts for the Wrong Reasons

When you have problems with accumulating credit card debt, your immediate reaction may be to shut down your accounts. But that can actually hurt you instead of helping to improve your credit. Here’s how:

First, your average account age is part of the calculation determining your credit score. When you close a credit card, the card eventually drops off your credit report and lowers the length of your credit history.

Second, when you close one line of credit, that automatically increases your overall credit utilization if you still have outstanding balances on other accounts.

Avoid this credit mistake – when is it a good idea to close an account?

If you’re paying an annual fee and not getting any kind of benefit, it might be time to say goodbye. Additionally, you may want to close a card after a credit dispute over a fraudulent account.

4. Applying for Multiple Credit Cards or Loans at Once

Every time you apply for any type of financing, you’ll see a new inquiry appear on your credit report. Some lenders or credit card companies start off the pre-approval process with a “soft check,” which doesn’t hurt your credit repair efforts. But once you fill out a formal application, they’ll usually perform a hard check.

These inquiries stay on your credit report for two years and can damage your credit for one year. Even though the drops are usually just minor, several inquiries can really start to add up. If you want to fix your credit, pay attention to how many hard pulls are being done.

5. Ignoring the Need for Credit Repair

Getting help with the credit repair process is oftentimes a good choice for many Americans. In fact, the FTC has performed lengthy studies indicating that at least 70% of the population believe they have unresolved credit disputes plaguing their reports.

At Ovation Credit, it’s easy to find out if you would benefit from professional credit repair services. See if it’s the best option for your personal situation by signing up for a free consultation on our site.

Sources:

https://www.myfico.com/credit-education/whats-in-your-credit-score/

https://www.ftc.gov/news-events/press-releases/2015/01/ftc-issues-follow-study-credit-report-accuracy

Mar 15
0

Build, Grow & Repair Credit

By | Your Credit

Whether you’re new to having credit or you’ve had credit cards for years, growing your credit, protecting it and repairing your credit takes work. This guide can help you manage all of your debts and improve your credit score.

Topics in This Guide:

Build or Rebuild Credit at Any Age:

  • Access and Review Your Credit Reports
  • How High Balances Affect Your Credit
  • How Long Does it Take to Repair Credit?
  • How to Avoid Paying Credit Card Interest
  • How to Improve My Credit Score
  • How to Repair Credit Mistakes
  • How to Repair Credit When You Don’t Have a Job
  • Identity Theft and Your Credit
  • Using Your Tax Refund to Pay Off Credit Cards

Credit and Mortgages/Refinancing a Home:

  • How to Pick the Best Type of Mortgage
  • Refinancing a Home and How it Affects Your Credit

Let’s begin!

Build or Rebuild Credit at Any Age

If you’re in college, you might ask yourself, am I “too young” to start building credit? The best time for credit-building is when you have a reliable job and pay your bills on time every month.

Your credit report is the history of your credit payments, and items stay on your reports for up to 10 years, or longer for student loans. Typically, you’ll have credit cards, lines of credit, student loans and installment loans. To build credit, use credit moderately and pay the balances quickly.

Access and Review Your Credit Reports

You can receive a free credit report annually from AnnualCreditReport.com using a secure, private computer. You need to enter your social-security number, address and date of birth. Then you can view credit reports from Experian, TransUnion and Equifax and make copies of your report. Remember never to save it on a public computer.

Familiarize yourself with your credit report. It shows accounts that are open, closed, paid-off and in collections. It also gives your payment dates. It may include student loans, installment loans, bankruptcies or other accounts.

Tip: You can access a free credit report from AnnualCreditReport.com.

How High Balances Affect Your Credit

When you carry high debts, you can damage your credit score even if you pay minimum balances on time. High balances let creditors know that you might be struggling to make payments.

How Long Does it Take to Repair Credit?

To repair your credit, businesses have 30 to 45 days to respond to disputes. After that, disputed items like collection accounts are removable.

How to Avoid Paying Credit Card Interest

If you pay your full balance each month, then you won’t have to pay interest. Always pay on time to avoid late fees.

How to Improve My Credit Score

Your credit-card payment history makes up 35 percent of your credit score. To improve your score, keep your balances low. Pay on time and never let accounts go into collections or charge-offs that are 180-days past due. If you fall behind, then make the payment as soon as you can.

How to Repair Credit Mistakes

Maybe you’ve done a search online for “how to fix my credit.” First, review your credit reports and flag anything that you don’t recognize or anything older than seven years. To dispute credit mistakes, select the option “dispute” when your credit report is open and give the reason. For example, maybe you don’t recognize the account, or it’s older than seven years.

Creditors have 30 to 45 days to respond, but you might hear back from them sooner. If they don’t respond, then you can often remove disputed items from your account’s report.

How to Repair Credit When You Don’t Have a Job

If you’ve lost your job and fallen behind on payments, talk to the collection agencies about making smaller payments. You may be able to remove collection accounts older than seven years if you dispute them on your report. Never discuss bills older than seven years with collection agencies because any correspondence reopens the account.

For further help, check with Ovation Credit for credit-repair assistance.

Identity Theft and Your Credit

If you want to know how to dispute credit report charges you don’t recognize when you’re on a credit-report site viewing your report, then select the option to “dispute” on your screen and give further details.

If anyone has stolen your identity, then contact the credit-reporting bureau and your credit-card company. You may need to file a police report to block any further fraudulent transactions on your account. Having a company that monitors your credit is very beneficial to avoid situations like this.

Using Your Tax Refund to Pay off Credit Cards

Use tax refunds to pay off credit-card debts. The average refund is $3,000, and you’ll improve your credit score. With better credit, you can get lower interest rates.

Credit and Mortgages/Refinancing a Home

How to Pick the Best Type of Mortgage

To pick the best mortgage, talk to your bank about mortgage options. FHA mortgages or those by the United States Department of Veterans Affairs can be more-affordable options. U.S. Department of Agriculture mortgages and the first-time buyers program are also worth considering.

Refinancing a Home and How it Affects your Credit

Refinancing your mortgage is taking out a new loan to replace your current loan. People take this step to lock in lower interest rates. When banks run a credit report, it can lower your score slightly. If it’s only one inquiry, then it may not affect your credit that much.

Bottom Line

Credit cards often lead to debts and huge responsibilities. By paying your credit-card bills on time, you can have a good credit score and better interest rates for years to come!

References:

www.nerdwallet.com/blog/mortgages/how-to-choose-the-best-mortgage/

http://blog.credit.com/2017/10/my-debt-was-charged-off-what-does-that-mean-120856/

 

Jan 30
3

Repair Your Credit With Your Tax Refund

By | Your Credit

Americans love to spend their tax refund on new cars or dream vacations. If your credit is in trouble, then this year you should consider using that tax refund to get your credit back in shape.

Tax Refund Credit Repair

Improving your credit score will help you get a lower interest rate on that car loan, and it can also help you get the credit you need for your dream vacation. A repaired credit score will pay for itself several times over, and all you need to do is make the right investments with your tax refund.

If you are planning any large purchases, (mortgage, car loan, home renovation loan, etc.), then it is important to repair your credit and achieve the highest credit score possible. Lenders like to see responsible borrowers who have taken the time to repair their credit and then have maintained that good credit for months or years. The sooner you get started repairing your credit, the sooner you can start reaping the rewards with lower interest rates that could save you thousands more in the long run.

Paying Down Your Account Balances

One of the biggest myths about managing credit cards is that you have to pay your balances off every month to keep a great credit score. For people new to managing credit, this idea may sound like it would cause stress and anxiety, but this is not true.

You can apply your tax refund to paying off portions of all your balances, and you will still help improve your credit score. It’s always helpful to leave a small unpaid balance on your credit cards each month to show the credit companies that you are committed to using your credit in a responsible way.

When your credit score is calculated, one of the major considerations credit reporting agencies make is how you manage your credit. The idea of maintaining a balance on your credit cards as opposed to always paying them off helps show your ability to manage your finances and regulate your spending.

Paying Off Old Accounts

While it is a good idea to leave a small balance on your active credit accounts to boost your credit score, that changes when discussing old accounts. If you have old credit accounts that have been closed but still have a balance, then you should use your tax refund to pay those balances off and get those accounts off your credit report.

The first place to start would be to contact the customer service department of the company that issued the old account. If the account is several years old, then it may have been sold to a collection agency. You can ask the account issuer if they can give you the information to contact the collection agency, or ask the issuer if they would negotiate a settlement to get the account off your credit report.

Paying off very old accounts can be tricky. The account issuer may negotiate a payoff balance with you, but they might forget to report the account as paid to the credit agencies. You should monitor your credit report every 30 days and make sure the paid off account has been removed. If it has not been removed after 30 days, then contact the issuer to get the account removed. Be sure to ask for everything in writing, and make notes of the calls you make to the issuer.

Buying a Car

Your bad credit is hurting you in many ways, especially when it comes to trying to buy a car. When you get your tax refund, you can use that extra money to get a better deal on a car, even with your bad credit.

With bad credit, you will have to pay a higher interest rate and possibly some extra fees to get a car loan. When you offer a larger down payment, you can get a better interest rate and offset many of those extra fees the finance companies will want to add.

Starting a Savings Account

A savings account, in and of itself, is not going to have a significant effect on repairing your credit. However, maintaining your credit account balances is critically important when you are trying to improve your overall credit score. Instead of spending that tax refund this year, it would be better to put it into an interest-bearing savings account and use it to help pay down your balances each month.

Credit card companies like consistency when it comes to paying your monthly bills. This means you need to pay your bills on time each month, and you need to make no less than the minimum payments. When you have a tax refund growing in an interest-bearing savings account, you have the financial reserves you need to make your payments. Over time, this will significantly improve your credit score and repair your credit profile.

You work hard all year and you look forward to enjoying your tax refund each year, which is a perfectly normal expectation. But if your credit profile needs repair, then you should consider investing this year’s tax refund into improving your credit. There are simple steps you can take yourself that will help get your credit back on track and raise your score.

Another investment you can make with your tax refund is to utilize the professional credit repair services of an organization such as Ovation Credit Services. With these kinds of services, you have access to the comprehensive and personalized advice you need to get your credit back on track.

 

Sources:

https://www.bankrate.com/finance/debt/7-simple-ways-improve-credit-score-1.aspx

https://www.thebalance.com/buying-car-bad-credit-960978

http://time.com/money/4143677/paying-my-credit-card-in-full-hurts-credit-score/

www.thebillfold.com/2013/11/i-need-to-pay-off-a-balance-on-a-closed-account-and-repair-my-credit-help-me-please/

Oct 12
0

Improving Your Finances: Debt Settlement vs. Credit Counseling vs. Credit Repair

By | Your Credit

If you’re struggling with improving your finances, you may have seen several different services offering to help. Each type of service has a different goal, so picking one over the others could change the amount you have to pay toward your debt, and the impact on your credit score may vary by service. Which service you should choose depends on your debt, your goals and budget.

Improving Your Finances

What Are the Basics?

While the broad goal is to improve your financial situation and credit score, each service has a different primary purpose.

  • Debt settlement seeks to reduce the amount you have to pay. This could be by offering a lump sum payment for pennies on the dollar or negotiating a payment plan that won’t pay off the full debt.
  • Credit counseling works on improving your finances  by helping you develop better habits like sticking to a budget and finding ways to pay off your debt as quickly as possible. It may also help you do things such as negotiate for lower interest rates, find a personal loan and use balance transfers, but in most cases, the end goal is to pay off your debt in full.
  • Credit repair focuses primarily on your credit score and removing negative items from your credit report. Paying down your debt may be part of this, but it is only one possible tool, not the ultimate goal.

Is One Type of Service More Legitimate Than the Others?

Many providers who only offer one of the debt settlement, credit counseling or credit repair services will try to diminish the other two services, even to the point of implying that they’re a scam. The truth is that as long as you pick a reputable company, each type of service is perfectly legitimate.

Of course, because the different services have varying methods and potential outcomes, there could be one that is better for improving your finances than the others.

Does the Amount of Debt Matter?

Certain programs may set minimums or maximums for the amount of debt they’ll work with, but the rules aren’t set in stone. There are a few general guidelines to consider:

  • If you’re struggling but still able to make at least your minimum monthly payments each month, credit counseling may help you find a little breathing room without damaging your credit score.
  • If you can’t keep up with your payments but haven’t taken a big credit score hit yet, debt settlement may help minimize the damage.
  • If you’ve already gone into default, had an account charged off, or entered or considered bankruptcy, it may be time to shift your focus to credit repair.

What Happens to My Credit Score?

In terms of credit scoring, there are clear winners and losers when it comes to improving your finances.

  • Credit counseling: Because credit counseling focuses on finding ways to pay your debt in full, it will not hurt your credit score and may actually help you to build positive credit history over time. Even if you negotiate lower interest rates or transfer balances, it still counts as a paid-in-full account.
  • Debt settlement: Debt settlement will almost always lower your credit score. Since the creditor loses money on a settlement, settled accounts are marked negatively on your credit report. However, continuing to add missed payments or having an account charged off could lower your credit score even more.
  • Credit repair: In theory, credit repair can only raise your credit score, but that only tells part of the story. If you switch into credit repair mode before your accounts are paid, settled or discharged in bankruptcy, additional negative items could still be added to your credit report.

How Long Does it Take?

There are no clear-cut answer for the amount of time it will take improving your finances and each service. It varies widely based on your exact situation.

  • Credit counseling often involves either one-on-one sessions or attending classes. Depending on the timing and how quickly you’re able to follow their suggestions, you could start seeing results in days or weeks. Bigger changes, and actually paying your debt completely off, could take months or even a few years.
  • Debt settlement depends entirely on the status of your account. If you have an account in collections with a debt collector willing to settle, it may take a single phone call. If you have a high credit card balance but have managed to make your minimum payments on time, the issuer may require you to enter into a special program before they’re willing to settle. Overall, expect anywhere from a few weeks to a few months.
  • Credit repair is another process that can take anywhere from days to months. Creditors have 30 days to respond to credit bureau disputes or updated information on an open dispute. Some may fix obvious errors faster, but there is often a processing backlog that pushes them right up against the deadline. If you’re trying tactics like goodwill letters or pay-for-deletes, expect several rounds of back-and-forth letters or phone tag.

Which Should I Choose?

When you consider the above information and how willing you are to spend your limited free time, the answer may be all three. Remember, credit counseling will help with improving your finances by teaching you good spending habits, debt settlement will help with debts you can’t pay in full and credit repair will help reverse damage to your credit report. Whether you need one, two or all of these services, you are free to customize a plan that meets your needs.

Sources:

  • https://www.experian.com/blogs/ask-experian/the-difference-between-credit-counseling-and-debt-settlement-2/
  • https://www.consumerfinance.gov/ask-cfpb/whats-the-difference-between-a-credit-counselor-and-a-debt-settlement-company-en-1449/
  • https://www.consumerfinance.gov/ask-cfpb/what-is-credit-counseling-en-1451/
  • https://www.consumerfinance.gov/ask-cfpb/what-are-debt-settlementdebt-relief-services-and-should-i-use-them-en-1457/
  • https://www.consumerfinance.gov/ask-cfpb/a-credit-repair-firm-sent-me-an-offer-outlining-their-credit-repair-program-should-i-enroll-en-327/
  • http://blog.quizzle.com/2010/09/debt-consolidation-vs-credit-counseling-which-is-right-for-you/
  • http://www.bankrate.com/finance/debt/debt-management-vs-settlement.aspx
Jul 28
0

Protect Your Credit from Other People’s Credit Problems

By | Your Credit

Many people think its just about building your credit but you also have to protect your credit. Whether you already have great credit or have been steadily improving your score over the years, you’ve worked hard to get where you are. It can be tempting to use your good score to help loved ones when they come to you for assistance, but doing so can damage your credit standing. If you want to protect your credit and financial future, you should think hard before you help someone out. Simply say no when there’s a chance your assistance could hurt your credit. Read these 6 tips before you agree to “help” a friend or family member.

Protect Your Credit

1. Think Carefully Before Cosigning

If you have family members or close friends with bad credit, they might ask you to cosign with them on a loan at some point. Maybe they need to buy a car or get a rental lease and need your help. But the problem is that if they default on the loan or rental contract, their credit won’t be the only thing affected. As a cosigner, you’ll be expected to make any payments they default on. If you can’t make those payments, your credit will be negatively affected. For this reason, you should protect your credit by avoiding cosigning for loved ones, especially if you know they have a history of not making their payments on time. The only exception is if you can afford to pay for the loan yourself should the worst occur, and if you know your loved one is responsible with money and just needs help establishing credit.

2. Don’t Let Other People Use Your Credit Cards

Just as you shouldn’t give just anyone access to your good credit, you also shouldn’t let others use your cards. Maybe someone has asked you if they can become an authorized user on your credit card, or perhaps they want you to make a major purchase on your card and they promise they’ll pay you back. Either way, the debt is yours in the long run. If they suddenly can’t repay the amount they used on your credit card, you’re responsible for it. This means you either have to pay for the bill yourself or allow your credit to be ruined when you don’t pay it.

3. Don’t Rent with Unreliable People

If you need to rent a house or apartment and need a roommate, make sure you can trust him or her to help you pay rent on time every month. Otherwise, you’ll end up with late fees, and your landlord may even report you and your roommate to the credit bureaus once you’re more than a month late on rent. So if you have a best friend who is frequently unemployed and can rarely pay bills on time, do yourself (and your credit score) a favor and don’t rent with him or her–unless you can afford to pay the entire rent by yourself every month. And of course, if you own a house and you want to rent it out, perform a credit check on your new renters to make sure they have a history of paying bills on time.

4. Don’t Make a Habit of Lending Money to Friends or Family

The rule of thumb for lending money is to only lend what you can afford to lose. This means if you lend someone $500, you’d better not be depending on getting that back, because you probably won’t. If you have the money to lend, just give it as a gift if you feel the need to help a friend or family member. However, if the same people are constantly asking you for money, giving it to them may be enabling them. Instead of being a crutch for their bad money management habits, offer to help them make a budget or find a second job to pay their bills. This will protect your credit and go farther than lending them money every once in a while.

5. Build Up an Emergency Fund

Sometimes bad things happen that are out of your control, and you can’t help that. But what you can do is be prepared, and usually having extra money on hand is part of that. For example, maybe you picked a great roommate who can normally pay her bills, but she lost her job and won’t be able to pay rent this month. If you can’t cover the full payment, your credit could be affected and you might even be evicted. Having at least three months’ worth of expenses in savings will help you keep a roof over your head while your roommate finds a new job. Of course, it will also help you in case your own emergency occurs, such as if your car breaks down, you lose your job or you have a sudden health crisis.

6. Protect Your Credit by Focusing on Your Own Financial Goals

Having an emergency fund is a good start if you want to improve your financial security. But you should also have other goals when it comes to money. For instance, buying your own home is a great goal to have if you want to invest in your future rather than throw away money on rent every month. If you already own a house, upgrading it every few years is a good way to improve your investment, so you should save up money to do that. And if you have any debt–such as credit cards or student loans–you should have a plan to pay it all off so you spend as little as possible on interest.

If you need help improving your credit–or want to tell a loved one where to go for financial help–come to Ovation Credit Services. We offer a free credit consultation, so contact us today to get started!

Sources:

https://blog.equifax.com/credit/should-i-co-sign-on-a-loan-for-a-family-member/

https://www.nerdwallet.com/blog/finance/money-rules-of-thumb/

http://www.investopedia.com/financial-edge/1011/top-5-ways-to-protect-yourself-against-problem-renters.aspx

Feb 14
0

Taxes and Your Credit – Are you ready?

By | Your Credit

Your taxes are due by April 17 this year. There’s a lot of preparation that goes into being ready to submit your return. From assessing your current debts to avoiding tax offsets, it’s important to know everything about how your credit plays into your taxes.

Are you ready for the 2017 tax season?

It’s right around the corner, and you’ll want to prepare yourself now!

Taxes and Your Credit

Filing Your Taxes

You need to file your taxes. It’s also important to keep good on anything you owe to the IRS, as leaving an unpaid debt can result in serious damage to your credit score. This is because the federal government will opt to place it on your credit report.

Tax liens are no laughing matter. You can see your FICO score drop by more than 100 points. It can destroy even the best of borrowers; thankfully, you can submit a removal request to get the lien off your credit report.

There’s no guarantee your credit rating will improve after the lien is taken off your report. It can still weigh on your score calculation for up to seven years. Your best bet is to plan ahead of time if you expect to owe the IRS money. It’s usually possible to set up a repayment plan and avoid the credit-damaging implications altogether.

Before You File

Go over your credit report and all your outstanding debts. Figure out if you have any debts that could be taken via tax refund garnishments. Further, make sure you don’t have any judgments against you with bank levy approval. It will put all your funds at risk of seizure and, unfortunately, creditors tend to target your tax refund deposit.

Here are five quick questions to ask yourself before filing:

  1. Do you owe the IRS anything? If so, read up on the IRS’s Payment & Installation Agreements to avoid losing a large lump sump out of your refund.
  2. Do you have other federal or state debts? If so, negotiate a repayment plan to avoid wage garnishment — check your state’s laws first.
  3. Did you default on student loan recently? If so, it can lead to a student loan tax offset, which means a smaller refund for you.
  4. Did you avoid paying any fines or tickets? If so, the result varies by state, but some cities go as far as adding it onto property tax bills.
  5. Are you planning to file for Chapter 7 bankruptcy? If so, you might want to do it now — you’ll get your 2016 tax year refund, but nothing next year.

This is just the premise of what you should consider before you do your taxes. A more complex approach will be necessary if you answered “YES” to any of these questions.

Warning: Your spouse’s financial safety can be put at risk if you owe. If no settlement is made on your debts with the IRS and you filed together, the right to garnish tax refunds and wages will apply for your partner also. Things will get even more confusing if you live in one of the common-law states, but that’s a whole different topic.

Your Tax Refund

In 2015, the IRS reported that 83 percent of American taxpayers received a tax refund. Some did not, due to making too much through the year. However, it’s fair to conclude that the typical average credit borrower did receive at least some money back.

A lump of cash is the perfect kickstart toward your credit recovery goals. If you receive anywhere near the average tax refund amount ($2,701 in 2015), it will make a huge difference.

How Does Debt Impact Your Tax Refund?

Any bad debts, such as accounts in collections, can cause you significant financial troubles. In some cases the creditors might succeed at garnishing part of your wages. A creditor can even go as far as emptying your bank account if the court approves a bank levy request.

The creditor has the right to remove up to 100 percent of the amount owing.

Before filing your taxes, make sure any debt disputes are in order. Collection agencies look at tax season as “go time” for planning and executing wage garnishments.. If you have anything in your bank account, a court-approved levy could take it all.

What You Don’t Have to Worry About …

Do you have an annoying creditor that wants you to pay off a debt now?

Are discussions about repayment plans not leading anywhere?

If so, a typical creditor needs to take you to court and get a judgment against you. This will take a while, and chances are you’ll receive your tax refund before it’s done.

The majority of tax refund garnishments occur because of back taxes, child support and other legal judgments. Wage garnishments are a bit less complicated than bank levies, but they still require court approval first.

Take Advantage of Your Tax Breaks

It’s important to educate yourself on all the ways you can reduce what you owe and increase what you get back on your taxes. Not every tax break will help you, and sometimes what seems like a fair claim won’t get approved.

Regardless, below are some tax breaks and deductions worth noting:

To see more potential tax deductions, check the IRS’s Miscellaneous Deductions for the 2016 tax year. This covers the lucrative savings that many Americans fail to notice. If you want to run through the basic deductions, read the IRS’s page on Credits & Deductions for Individuals.

A Note for Homeowners

Things get more interesting if you’re a homeowner.

You’ll need to be careful when managing Private Mortgage Insurance (PMI). It’s essential if you don’t have at least 20 percent to put down on a purchase or refinance. When you reach at least 20 percent equity in your home, it’s no longer needed.

You might be underestimating the expensiveness of PMI premiums. It doesn’t just add a cost but rather, it takes away from affording other expenses. Hundreds, if not thousands of dollars, can be wasted. Your goal should be to remove the insurance as soon as you meet the equity requirement.

You may have the right to deduct your mortgage insurance premiums. Tens of millions of Americans can, and yet very few homeowners do. The biggest requirement for claiming a PMI tax deduction is having an adjusted growth income (AGI) of less than $100,000 for the 2016 tax year.

This tax break is meant for struggling families that own homes. It’s a small savings, but everything helps. The U.S. housing market is going up, and this is freeing more equity for the average homeowner. Keep an eye on your situation, because removing the PMI premium could be possible if the market increases the equity in your home.

Credit Repair and Taxes FAQ

1. Can the IRS Garnish My Wages/Tax Refund?

The IRS, within federal guidelines, has the right to garnish your tax refunds and wages to recuperate funds owing from previous years. Most of the time you can set up a payment plan to alleviate the situation before it escalates.

2. Can Child Support Debt Impact Your Tax Refund?

The state government can garnish any remaining funds on your tax return to cover what’s owed on your child support bill. This can continue until it’s paid off; likewise, there’s a risk of wage garnishment when you deal with child support debt.

3. How Will a Student Loan Affect Your Tax Refund?

The only real risk exists if you have defaulted on a student loan debt. This gives the federal government the power to garnish funds via a tax offset. Your significant other, if you filed together, could also have funds taken from their tax return.

4. Will a Tax Lien Hurt Your Credit Score?

Yes. As mentioned earlier, you can see your score drop by more than 100 points if there’s a lien against you. The only fix for this is to request its removal once you pay what’s owed, but it will continue to impact your credit for up to seven years.

5. Are Credit Repair Services Tax Deductible?

This is one of the tax deductions that slips by most Americans. If you get credit repair assistance, there are some components that will be tax deductible. The main write-offs are for attorneys, such as when dealing with bankruptcy or identity theft.

Sources:

https://www.irs.gov/uac/tax-refund-withholdings-and-offsets

https://www.irs.gov/pub/irs-pdf/f12277.pdf

https://www.irs.gov/individuals/payment-plans-installment-agreements

https://www.garnishmentlaws.org/

https://www.irs.gov/uac/newsroom/tax-refunds-reach-almost-125-billion-mark-irs-gov-available-for-tax-help

http://www.cpapracticeadvisor.com/news/12116556/average-income-tax-refund-for-2015-increased-to-2701-irs-caught-908-million-in-fraudulent-refunds

http://www.bankrate.com/finance/debt/3-ways-to-fight-a-creditor-s-account-levy.aspx

https://www.irs.gov/uac/credit-and-debit-card-fees-related-to-tax-payment-are-deductible

https://www.irs.gov/taxtopics/tc456.html

https://www.irs.gov/taxtopics/tc456.html

https://www.irs.gov/taxtopics/tc453.html

http://www.forbes.com/sites/robertwood/2015/03/19/which-legal-fees-can-you-deduct-on-your-taxes/

https://www.irs.gov/pub/irs-pdf/p529.pdf

https://www.irs.gov/credits-deductions/individuals

https://www.irs.gov/publications/p936/ar02.html

https://turbotax.intuit.com/tax-tools/tax-tips/General-Tax-Tips/Federal-Guidelines-for-Garnishment/INF14841.html

Dec 28
0

Start Living a Better Credit Life

By | Your Credit

Better Credit Life

We all struggle with the stress that money creates. Take it from Antoine Walker, a former Miami Heat star that ‘went from $108 million to bankrupt‘ in less than a decade. This serves as a reminder: it’s not how much you make, but how you use it.

If you have a stable job, it is possible to live a Better Credit Life as long as you put the time and organization into your financial planning. Ready to get started? Here are 10 ways for you to start living a Better Credit Life:

1. Plan for Disaster from Day One

If you anticipate a financial crisis, then there will never be one. So planning for the near and mid future will keep you safe in the long run. And you have no excuse; just join the millions of Americans that already use budgeting and personal finance tools. Having a budget and sticking to it, is a sure way to stay on track to a Better Credit Life.

Simply download Mint, YNAB, or another highly-rated app, and finally take charge of your financial freedom today!

2. Watch for Credit Report Errors

It’s surprising how often errors end up on credit reports. Stats suggest this impacts 1 in 20 consumers, which is five-percent of Americans. While some errors are more damaging than others to your credit score, as many as 1 in 250 consumers are behind more than 100 points from errors.

You can request a free copy of your credit file from AnnualCreditReport.com once a year from each credit bureau. Further, with our services you’ll find out if there are any errors right away – as we provide a copy of your Equifax and TransUnion files.

3. Examine All Your “Fees”

Most Americans have no idea how much goes to waste on preventable fees. It’s said that hundreds of dollars are spent every year on unknown costs. According to the Ponemon Institute, an average of $942 is spent on hidden fees each year.

Online banking has made a difference, but there are new ways to lose money without realizing in the digital age. Get digging and see where you’re losing!

4. Negotiate What You Pay

Many things are made cheaper so compare costs and cut deals where you can. As you look for high fees, this might open you to ideas like switching bank accounts and utility providers.

Don’t ever be scared to negotiate – for instance, most cable, phone and Internet providers have a user retention line. Most that inquire end up getting a moderate to large discount on their services.

Heck, even some “extreme couponing” could make a big difference!

5. Consolidate Your Large Debts

Your total amount owing is the second biggest variable of your FICO score. So it only makes sense to limit your overall debt.

FICO’s algorithm weighs revolving debt higher than installment debt. This means temporary loans set with payment installments (like a student loan) will drag your score down less.

Therefore, by obtaining a consolidation loan for your credit cards (which are revolving debts), you can eliminate the biggest credit hindrance of all.

6. Build a Relationship at a Credit Union

You stand a better chance getting a home loan with moderate credit at a credit union than a traditional bank. This is especially true if you get familiar with the staff at your local credit union. Further, you will find many rates are better, insufficient funds fees are easier to waive and other perks.

7. Don’t Become a Data Breach Victim

Your information on the web is never safe. Make sure to audit your Internet safety from time to time. The single most effective way of doing this is by checking whether your email was hacked. If your data was leaked on the web, you will be able to find out through HaveIBeenPwned.com’s search tool. Further, you can set up email alerts to inform you if a data breach occurs.

8. Plan for Christmas in January

You should look at your past year of finances and what you expect to make and spend for the following year all at once. Do this after Christmas is over and prepare your budget for the next winter holidays. If you don’t want to buy the items right away in case it’s not appealing later, stash the money in gift cards or make a savings account for this purpose.

9. Shop Online for the Best Cards and Loans

Whether you need a consolidation loan, a travel rewards card or even an auto loan, you should compare the best rates online. Sites like BankRate.com make it easy to see which cards and lenders provide what you need.

10. Honor Your Debts

Everyone wants to disavow their debts, but no one wants to go bankrupt. The key is to forget how owing money can damage your life. Since 15% of your FICO score is based on your credit length – it’s better to keep your lines open. So when you pay off a card, don’t close the account!

Even taking on a higher credit limit is good – it improves your credit utilization rate, so long as you don’t waste the new funds.

Conclusion

Never give up on the idea of living a Better Credit Life, because it’s available to you with a little discipline. Even if you need credit repair help or require consolidation loans to make it happen–as the saying goes, “Where there’s a will, there’s a way…”

Sources:

http://money.cnn.com/2015/07/24/investing/antoine-walker-nba-bankruptcy/

https://www.ftc.gov/news-events/press-releases/2013/02/ftc-study-five-percent-consumers-had-errors-their-credit-reports

http://www.forbes.com/sites/adamtanner/2014/04/14/these-sites-tell-which-of-your-accounts-have-been-hacked/

http://fraud.laws.com/false-adversiting/surcharges-and-hidden-fees

Oct 19
0

Boo! Credit Scores Can Be Scary, Fear Not with These 5 Secrets

By | Credit Scores, Uncategorized, Your Credit

Credit score repair company

Credit Scores can seem scary when you think about how that three-digit number can affect so many financial decisions in your life. Frightening enough, that score can then scare away lenders when you’re applying for a loan or a mortgage. The ones not frightened away give you a horrifying interest rate!

Before you go and hide under your covers, here are 5 ways to calm your fears and improve your credit score.

1. Pay Off Your Balances, Especially Large Ones, Quickly

This pointer might sound obvious, but the sooner you can eliminate your balances, the healthier your credit score will be. If you make a hefty purchase with a credit card, try to pay it off right away, even if you must sell a favorite possession to obtain the funds. When you do so, you might find that your score goes up substantially. Plus, you’ll lower the interest rate you’re paying. At the very least, try to pay down your highest balances to the greatest extent that you can.

If you’ve routinely paid your credit card bills late, don’t fall into despair and assume that punctual payments won’t do you any good now. Instead, start paying those bills on time. Despite your history, your credit score will eventually reflect your newfound effort. What’s more, you’ll get into a good habit.

Remember as well that you can use an online service that will automatically pay your credit card debts each month. Such a tool will ensure that you won’t ever forget one of your bills.

2. Consider a Debt Consolidation Loan

You could speak to a financial expert about taking out a debt consolidation loan. This solution isn’t ideal for everyone, but perhaps you’d benefit from one.

First, you might find it easier to pay off your credit cards by combining the amounts of money you owe to various credit card companies into one sum. It might feel less painful to make a more substantial payment each month rather than a series of smaller payments. Plus, you won’t accidentally overlook a payment that you owe. Even more appealing, your overall interest rate will be lower. And taking out such a loan might soon result in a higher credit score.

3. Bring Your Credit Utilization Ratio Down

Your credit utilization ratio is the portion of your total credit limit that you spend every month. This ratio should be less than 30 percent. Of course, that number might sound low, especially if your limit is less than $1,000.

Keep calculating your credit utilization ratio each month. If you find that it exceeds 30 percent, try to pay more with cash or a debit card. You could also try to make fewer purchases, rely on coupons and discounts more often or start shopping around for less expensive products and services.

Another way to improve your credit utilization ratio is to ask for a higher line of credit. That way, you might not need to reduce your spending rate. If you have any credit cards that will grant such an increase without investigating your credit, consider making this request. Just be certain that none of those companies plan to do a hard credit check; having such an inquiry performed lowers your score a little.

4. Don’t Be Afraid to Use Your Credit Cards

Even though it’s important to keep your credit utilization ratio down, you should still be making regular purchases with all of your credit cards. Spending with your plastic and then making your payments in full is a highly effective way to raise your credit score. By contrast, when you completely avoid taking your credit cards out of your wallet or purse, you’re not doing anything positive for your credit report. And closing one or more of your credit cards could actually hurt your score.

On top of that, using your credit cards might allow you to collect exciting rewards. Possibilities include securing special deals on airfare and hotel stays as well as getting cash back when you buy certain items. Why pass up those goodies?

5. Seek Help from an Outstanding Credit Repair Service

Finally, a dependable credit repair service can help you boost your score and maintain that higher number over the long haul. It can keep careful track of your credit report and identify any mistakes or irregularities that might be unfairly damaging your credit.

The experts who work at such a company could also sit down with the credit card companies and other parties you owe money to. And they might be able to hammer out new agreements that are more lenient and favorable to you.

So there you have it: five financial tricks that can lead to real credit treats. These actions could provide you with the monetary rewards ― including better loan terms and insurance rates ― and the peace of mind that come with a healthy credit report.

 

Sep 09
0

Credit Score – 4 Reasons It Matters During Retirement

By | Credit Scores, Your Credit

Retirement and Your Credit Score

You’ve reached your retirement years. Congratulations are in order. What’s more, you might have enough money to live on thanks to some combination of savings, investments, a pension and Social Security payments. On top of that, you might not be planning to make any major investment, such as a new home, in the future. So who cares about your credit score, right?

Well, this idea is a common misconception among seniors. In fact, your credit report will matter a great deal to you for the rest of your life. Without one that’s above average, you won’t have access to the following financial benefits.

1. Loans

For one thing, your car could stop suddenly working due to age, an accident or another problem. If you want a decent chance of securing an adequate car loan, you must have good credit.

Likewise, the need for an emergency loan might arise. It’s certainly horrible to think about, but household accidents, abrupt illnesses and other crises can happen at any time. To avoid paying an exorbitant interest rate on such a loan, a high credit score is again essential.

2. Refinancing

The Consumer Financial Protection Bureau reports that 30 percent of Americans who are at least 65 years old make mortgage payments. In addition, the research company Strategic Business Insights has found that about 40 percent of Americans who are between the ages of 60 and 64 have mortgage obligations.

If you’re in one of those groups, you might want to ease your burden at some point by refinancing your mortgage, especially in a time of low interest rates. However ― and you may be noticing a pattern here ― you won’t be eligible for those low rates if you lack an acceptable credit score.

Not to mention, if you ever find yourself in trouble financially, you might wish to negotiate a cash-out refinancing. Doing so should be a last resort, but if you’d like access to such funds, you’ll probably obtain better terms with a strong credit report.

3. Rewards Cards

You might have a longtime aversion to using credit cards. And it’s true that a person who has trouble paying off credit cards would be wise to avoid them altogether.

On the other hand, if you’re diligent about paying your debts, your plastic can actually provide financial relief. That’s because it can give you so many rewards.

For instance, a cash back card will essentially supply you with free money as you make purchases, and those bonuses can really add up over time. Plus, credit card companies often give people small sums of cash just for signing up.

Frequent travelers can especially benefit from credit card usage ― by using platinum rewards cards in particular. That’s because those cards can help you earn free nights in hotels as well as discounts on airfare, rental car insurance, luggage fees and more.

However, if your credit score is poor, it’s unlikely that you’d be eligible for any cash back cards, let alone one at the platinum level.

4. Insurance Rates

It’s wise to keep looking for the best insurance rates you can, even if that means switching companies from time to time. Why spend money on your insurance unnecessarily?

It might not seem fair, but home and car insurance providers might take your credit score into account when they’re determining your monthly rates. Yes, a low score can mean higher costs.

The thinking behind this strategy is that people with good credit scores are responsible individuals and less likely to cause car accidents, leave their homes unsecured, start fires by accident and so on.

So How is Your Credit Score?

At this point, you might realize that you’ve been neglecting your credit score for a while; you might even be starting to worry. Fear not. There are plenty of ways to boost it. To give you just a few examples:

  • Always pay all your bills on time.
  • Remember that not using your credit cards won’t help your credit score. If a credit card company ends its relationship with you because you’re not taking advantage of its card, it could hurt your credit score. For the same reason, try not to close your credit cards.
  • Use your credit cards for small, regular purchases, and make a habit of paying them off on the same day every month.
  • Keep searching your credit history for errors. If you have a friend or a relative who’s a financial expert, she might be able to help you find a mistake. Then contact the credit reporting agency that made the error to argue your case.
  • Obtain outstanding credit repair services, and watch happily as your score rises.

Finally, you’ll find that good credit brings an additional benefit, one that’s intangible yet invaluable: peace of mind. If your children or grandchildren need monetary help or if life throws an expensive curveball your way, you’ll have the means to improve the situation. After all, you’ve worked hard all your life. You deserve to enjoy your golden years without fearing financial hardships.

Sources:

http://www.aarp.org/money/credit-loans-debt/info-2015/credit-score-changes-for-consumers.html

http://abcnews.go.com/Business/credit-retirement-important/story?id=29789894

http://www.fool.com/investing/general/2016/01/29/why-your-credit-score-matters-during-retirement.aspx

http://www.foxbusiness.com/features/2016/03/18/keep-your-credit-score-in-good-standing-it-never-retires.html

http://www.forbes.com/sites/moneybuilder/2014/05/02/11-ways-to-raise-your-credit-score-fast/#3d14483c1716

http://money.usnews.com/money/blogs/on-retirement/2013/05/28/5-reasons-your-credit-score-matters-during-retirement

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