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College Students – Don’t Make These Common Financial Mistakes

By | Personal Finance, Uncategorized

College can be expensive, and some college students add to the price tag when they make financial mistakes such as using student loan money for a trip. Another mistake some make is going to a pricey college for four years when they could go elsewhere for two years and transfer. Here is an exploration of these mistakes.

College students financial mistakes

Using Student Loan Money for Unintended Purposes

Many times, students have money left over from their loans after tuition, room and board, and other direct expenses are taken care of. These loans are supposed to cover educational expenses and educational expenses only. Related expenses such as essentials for a dorm room could be okay. But a vacation during spring break or splurging on renting a high-end place — most likely not. Yet, quite a few college students see that leftover money as “free money,” not realizing that years of compounding interest rates could end up doubling the price tag of that spring break trip.

The solution is usually to anticipate your expenses well and to accept only that amount of student loan money. If you don’t have the money, you won’t spend it.

Not Taking Advantage of Financial Opportunities

Going to college inexpensively has become trickier, but there are still some ways, especially if you live in certain states. For example, community college students in Tennessee, Rhode Island, Oregon and New York will be able to attend for free by 2018 (or are already able to), provided that they meet residency requirements, GPA requirements, income requirements (sometimes) and a few other regulations.

Some other states also have similar programs. For example, tuition in Minnesota is free if you study a high-demand subject. California also gives one year of community college free, and low-income students have been able to attend with their per-credit fees waived since 1986. Virginia’s community college students get a $3,000 annual grant when they transfer from a state community college to a participating four-year college. In short, ways to save can be found in many places, cities and states.

What does all this mean? It means that some college students who aim for four-year degrees should seriously consider attending community college first and then transferring to a school offering a bachelor’s program. The difference could be many tens of thousands of dollars and paying off student loans much more quickly.

College Students Using Credit Cards Irresponsibly

Some students graduate owing as much as $7,000 on their credit cards; the average student graduates with $3,000 in the negative column and has four or more cards, according to Sallie Mae. College is the first taste of freedom for many students, and even those who charge only $20 here and there, or even just $500 a few times a year, could find themselves at risk of hurting their credit scores sooner rather than later.

After they graduate, they may be looking for work while juggling obligations in the way of rent, student loans and credit cards. It takes just one missed payment for a credit score to suffer.

Responsible credit card use in college often means:

  • Having a sound reason for getting a card
  • Using a card with low credit limits and interest rates, and no annual fee
  • Paying your balance fully every month
  • Having one card
  • Charging something only when you know you can afford it
  • Being the sole user of your card (not lending it out to friends)
  • Not getting cash advances

If you think you may be prone to abusing your credit card, go ahead and close the account. On the other hand, if you have already graduated, credit repair services could help you get back on track.

College should be a time of great freedom and learning. Making good decisions can set you up for life, but it can take only one financial misstep to hurt you.








Financial Milestones – Roadmap For Success

By | Personal Finance

While there are many financial milestones to celebrate at every age, some of the most significant milestones could be life-changing.

From getting that first paying job to putting a college degree into practice, these milestones can form some of the greatest memories and set a financial foundation for success later in life.

Knowing what financial milestones are important will help you get a head start on planning and be able to work toward a successful financial life.

Your Financial Milestones Roadmap

Financial Milestones

Becoming an Adult (18-29)

What many people don’t realize is that between the ages of 18 and 29, you should be working on your first financial milestones. On top of landing your first job and buying a new car, you may take out student loans to attend college. To qualify for good interest rates, you’ll need to start building your credit. You could take out a line of credit or get your first credit card, as long as you use it responsibly. If you’ve already made some mistakes with credit, don’t stress too much, you are still fresh in the financial path so use this time to invest in credit repair to get yourself back on track.

Pay any loans or student debt on time each month, and be mindful that any debt you obtain will need to be paid back in the end. You may also plan to move out of your parents’ house and want to start looking for a home to rent or buy. Having good credit will make these goals easier to obtain. A great way to build credit while paying rent, is to use a rent-reporting service to get your rent payments on your credit report.

You should also start planning a budget and learn about investing. You may have the opportunity to start a 401(k) — especially if it is available through your employer and sometimes they will match a certain percentage, you should definitely take advantage of this. If a 401(k) is not provided through your employer you can look into a Roth IRA for your investments, if you have the option to do both, you should. This will give you a solid financial foundation that will carry you far later in life.

In Your 30s

By your 30s, you should be enjoying a comfortable place to live and perhaps owning your own home. You may have several retirement accounts, whether you have a 401(k) or a Roth IRA, continue making contributions to those funds and increasing that amount when you can in order to get the most return. If I said I would give you free money wouldn’t you take it? Keep improve your knowledge of investing by studying up on exchange-traded funds, stocks and bonds, as well as funds that can be matched by your employer. If you are fortunate enough to work for a company that has matching 401(k) make sure you are maxing out that opportunity.

This may be a good time to diversify your investments, choosing from a variety of stock options and markets, such as real estate or commodities. You should also be investing in yourself, pursuing an advanced degree or professional development that will accelerate your career.

In Your 40s

By your 40s, your retirement accounts will continue to accrue, and you should have started investing or saving money for your children’s college expenses. Look into a 529 plan or other college savings plans to see which one suits you best. Max out your retirement funds so that you can leverage them later in life, and contribute up to 6-8 percent of your earnings to get the most out of employer matches.

Reward yourself for achieving financial stability, make sure to make a “vacation” savings account so you can be enjoying this hard work you have been doing. Discuss health care needs with your parents in order to avoid surprises later on. Also it may be a good idea to start an investment account that is separate from other accounts, and set it up to automatically draw funds. With the help of a financial advisor, you can turn these funds into moderate-risk investments that you’ll benefit from down the road.

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In Your 50s

By your 50s, you may have started thinking about retirement and be counting down the years to the big day. Sit down and make some calculations to determine your family’s current financial needs, how much you will need in your retirement, and what your goals are for this stage and on in your life.

For your financial milestones, consider buying a vacation home, timeshare or rental property, which you can lease out in order to generate extra income. Learn about financial options available, such as Social Security, Medicare and pension benefits. Resist the urge to withdraw funds from your retirement accounts prematurely, unless you are prepared to pay large penalties.

In Your 60s

By your 60s, you may decide to retire. Your golden years can also be a time of resilience or unpredictable life changes, so each individual will face something different at this stage. You can start collecting Social Security and planning for the long term, so your retirement and health care funds last as long as you need them. Make sure your will is filed and updated. You may also want to consider changes at home, whether that means modifying your house to age in place or moving to a retirement home or supported community.

In Your 70s and Older

By your 70s, you will likely be well into your retirement years. It might even be beneficial to produce hobby work on the side and sell it at community fairs. This is a crucial time to look at your finances to decide if you need to cut back on spending or if you can be generous with charitable gifts. Ensure that any withdrawals follow a predictable, stable plan, and use your money wisely. By your 80s or 90s, your life will have changed more than you ever imagined it could. This might be a good time to downsize and move into a smaller home that suits your life as it is now. If your retirement funds have made it this far and you can still afford some degree of charitable giving, you’ve done well.

Tracking your financial milestones and setting goals, will help relieve the financial stress that pursues when you have not prepared yourself. With careful planning, saving and investing, you can ensure that both you and your family will be cared for well into the future.

The Balance

Good Debt vs. Bad Debt

By | Debt

Good Debt vs Bad Debt

If you’ve been trying to improve your credit score, you probably already know that “debt” can be a scary word. As such, you’ve likely been trying to avoid it as much as possible. But according to many credit experts, not all debt carries the same weight when it comes to how it affects your credit score. In fact, some types of debt are considered good debt — or at least not likely to harm your credit score. Here’s a look at how certain types of debt may affect your credit rating.

What Separates Good Debt From Bad Debt?

The first thing you should know is that any type of debt that is considered an investment tends to be good debt. This means if you’re taking on debt to buy an item or service that will improve your net worth in the long run, it’s likely good debt. In short, common examples of good debt include mortgages, student loans, business loans or anything that will save you money in the future.

On the other hand, bad debt won’t make you wealthier or help you save money. Most people who rack up bad debt do this by using credit cards to buy items they want and then make minimum payments on those cards so the interest continually accumulates. Basically, if you’re just using credit cards or taking out loans to buy disposable items, you’re collecting bad debt and will likely lower your credit score.

Types of Good Debt

Mortgage Loans

One of the best types of debt to take on is a mortgage because houses usually increase in value over time, unlike most other items you might buy. You will likely recoup the costs of your house and then some when you sell it, so taking on a mortgage loan is considered a good investment for most people. And even though you pay interest on this type of loan, it’s far lower than most credit cards, and you can deduct it on your taxes.

Student Loans

If the career you have in mind requires a college degree, you shouldn’t be afraid to take out student loans to pay for it. Of course, getting free money in the form of scholarships and grants is even better, but it’s not realistic for everyone to pay their entire college tuition this way. This is why student loans don’t tend to have a negative effect on your credit score, as long as you pay them back according to your payment plan once you graduate.

Business Loans

If you have a solid plan for a business, you shouldn’t be afraid to apply for a business loan to cover your startup expenses, including equipment and advertising. After all, you stand to make it all back and also support yourself if you have a stable business. This is why business loans are considered good debt when it comes to your credit score.

Expenses That Will Save You Money

Some types of debt are good because they will save you money over time, even though they cost money right now. For example, buying solar panels for your home is often considered good debt, since this addition will save you money on utility bills and improve your home’s value. Another example of taking on good debt is when you refinance via a loan with a low interest rate so you can pay off a loan that has a high interest rate. This move could save you hundreds or even thousands of dollars, so it’s usually worth taking on more debt.

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Types of Bad Debt

Credit Cards

The No. 1 type of bad debt is the credit card. The average U.S. resident who carries a credit card balance has more than $5,000 in credit card debt, so it’s not uncommon to have this type of debt. But it can easily affect your credit score in a negative way, especially since you’re probably using credit cards to buy items that are depreciating rather than increasing in value. If you have credit cards and want to improve your credit score, you should stop using them and start paying more than the minimum, particularly on the card with the highest interest rate.

Payday Loans

If you’re low on money until you get paid, it may be tempting to get cash today by taking out a payday loan. But in the end, you’ll pay much more than you borrow because the fees and interest rate can be very high. In fact, the interest rate is often three times the amount you borrowed, making payday loans bad debt. If you need money fast, your best option is to borrow from a friend or family member who won’t charge much or any interest, and then work on building up your savings account to help you in times like this. That way, your credit score won’t suffer even when you have unexpected expenses.

Overall, if you’re going to have any debt on your credit report, it’s better to have good debt than bad debt. So if you’re trying to improve your credit score, you can start by focusing on paying off credit cards and any other high-interest debt. As long as you stay current on your good debt — such as your mortgage, business loans and student loans — your credit score should start improving.






Avoid the Student Loan Abyss

By | Debt, Personal Finance

Learn How to Manage Your Loans Now

Perhaps the best piece of advice anyone could give to their former-self is to manage student debt better from the start. Student loans are hard to avoid all together, but there are plenty of ways to reduce the amount of debt you’ll eventually owe.

Whether you’re planning for yourself or your child, here are just a few ways to manage student debt better:

Before Debt

Before taking out a student loan try applying for any (and all) scholarships you qualify for. The application process isn’t easy, and often requires writing on your part, but they can help save you thousands in debt.

Get Organized

Multiple loans are often required to cover the cost of a four year university. It helps to get organized. To help reduce the time paying loans, create a “favorites” folder in your browser. By bookmarking your loan payment pages you can access them quickly and easily. Create an excel sheet to help keep track of usernames, login IDs, passwords and more. By keeping track of account numbers, logins and passwords you’ll never have to worry about forgetting your account details. Just make sure to password protect the excel sheet in case your device should end up in the hands of someone other than yourself.

Create a Budget

As a new member of the workforce you may not have the funds to pay your student loans. There are plenty of options for new graduates including forbearance and deferment of payments. The issue becomes mounting interest. It’s okay if you can’t make payments right away, but it’s important to figure out your finances and begin making payments as quickly as possible to reduce the amount you’ll pay overall. By creating a budget for yourself you can make timely payments, and reduce the amount you’ll owe and even rid yourself of debt sooner than the term of your loan.


Refinancing during the recession was near impossible, but start-up companies like SoFi now make it possible to refinance your student debt. By bundling multiple loans together you can reduce the amount you pay in interest, and even reduce what you owe each month. If you built up good credit in the years since graduating, refinancing could be a way to save on student debt.

Avoid Schemes

Don’t be swindled by would-be scammers. There are a number of fake websites dedicated to student loan “forgiveness” and student debt “settlement” that charge an upfront fee and monthly payments to help you rid yourself of student debt. Don’t fall for these scams. Do your research before taking any action against your student debt.

Automatic Payments

Many student loan lenders provide discounts to customers who set up auto-payments. You can decrease your interest rates by .25% by allowing the lender to remove funds on your due date automatically. It’s also an easy way to make sure your payments go out on time and you don’t acquire late fees. Just make sure you always have funds in your account so that you don’t overdraft.

Student debt isn’t abnormal, and it doesn’t mean the end of the world. If you manage your finances responsibly, and create a repayment plan for yourself you’ll be out of debt without financial burden.

Was this article helpful? How do you manage your student debt? Let us know in the comment section below.

How Student Loans Affect Your Credit Score

By | Credit Scores

student-loan-credit-scoreWe are all familiar with the massive amount of student loan debt that has become the norm nowadays for people seeking a college education. In fact, the average American student now graduates with an average of $33,000 in student loan debt. However, this does not have to be a negative thing. If handled correctly and responsibly, it can actually help students build their credit history so that they can qualify for their first car loan, unsecured credit card, or apartment. In addition, paying off student loans is a great way for young people to boost their credit scores.

Improving Your Credit with Student Loans

If you’re a student or recent graduate, you can improve your credit score with student loans by making your payments on time each month. Your timely payments are reported to the three main credit-reporting bureaus every 30 days and demonstrate to future lenders that you can handle money responsibly.

To find out more about credit scores, read further down this article.

Default vs. Deferment

If you are unable to make your monthly payments, you should only consider loan default as your last resort. Defaulting on your loans can make it extremely difficult to get started as a working adult. It could also affect your eligibility for future financial aid, which could hurt your plans to attend graduate or professional school. Instead of defaulting, consider contacting your lenders and requesting to defer your payments.

Deferment will not affect your credit score. While it’s certainly not ideal, it is an option if you are in a tight financial situation. In summary, on-time payments each month are what will most positively impact your credit score. As a rule of thumb, remember that it’s okay to defer, but not to default.

Your Credit Score Defined

Your credit score is used by lenders to determine your ability to obtain a new line of credit. This number is between 300 and 800 and can influence the interest rate you receive. The higher your credit score, the more likely you are to qualify for loans with a lower interest rate.

A number of factors determine your credit score, including how much money you owe and whether you pay your bills on time. Many financial institutions will deny your application for new credit if your score is not above a certain threshold; maintaining a high credit score is crucial for your financial future.

Credit scores can fluctuate on a monthly basis. Therefore, it’s possible to improve your score month-to-month. For students, it’s important to understand that paying back your student loans on time can help strengthen your credit score and get you a better interest rate for other types of loans. This, in turn, can save you thousands of dollars in the future through the lower interest rates you are charged.

If your credit score is currently suffering, you might be a good candidate for credit repair. Let us at Ovation help you. We offer a wide range of credit repair solutions to help meet the financial needs of a variety of clients, from recent college graduates to those ready for retirement.

Contact us today to see how we can help.

Ways to Get through College without Going into Debt

By | Credit Reports, Credit Scores

“Pomp and Circumstance” has played, your high school diploma is in hand, and the world is at your fingertips. But as you prepare to cross the threshold of higher learning, don’t assume that the price tag automatically comes with a student loan attached — there are ways to matriculate without debt. If, however, that isn’t an option, here are a few tips for getting smart without getting taken.

  1. Don’t think you have to have a student loan to afford school. The truth is, 40 percent of students choose to pay for school by other means. Here are a few options for avoiding student loans:- Go to a community college for the first two years while you save
    – Attend school part time while working
    – Look for scholarship opportunities or attend schools that offer you the best scholarships
    – Go to a work-based school
    – Consider a less expensive school
  1. Employ every financial opportunity first. The possibilities for students to find grants and scholarships are practically infinite. The Internet has endless resources, as do local libraries. Librarians typically have access to scholarship databases as well.Visit the financial aid office of the college or university where you intend to enroll. The staff there can provide information about grants for which you may qualify. Also, speak with the specific school for your line of study about available scholarship opportunities.Understand education-related tax credits as well. And make sure to reinvest the tax refund into future school costs.
  1. You don’t have to take it all. After submitting your Free Application for Federal Student Aid, you will be notified regarding how much the government is willing to lend for your education. The amount given is only to be used for educational purposes and you generally will not need the entire amount. This is most often the case for students attending state schools.Remember: You will be saddled with the amount of debt plus interest. Carefully calculate tuition and other costs of education for the year and only take what you require.
  1. Calculate your monthly payments. To help prevent yourself from taking more than you need, calculate how much you are going to have to pay back post-graduation. You don’t want to be living on ramen noodles for the next decade because you took on student loans you didn’t need.
  2. This is not the time to recycle — your paperwork, that is. Save all of your student loan paperwork. When it comes time to begin repaying your debt, you will want to know how much you owe and to whom. You will also need to know where to send your payments.If you happen to lose your paperwork, you can find your loan servicer through the National Student Loan Data System.
  1. Don’t have a co-signer unless you must. Having your parents co-sign makes them summarily responsible for your debt if you fail to repay the loan. It can effectively make their credit suffer unnecessarily. It also makes them ultimately responsible for your debt if something unfortunate should happen to you.
  2. Let what’s private stay private. Federal student loans generally have a significantly lower interest rate and more flexible payment plans for students than private loans. While some private lenders may offer a convenient student lending product, they’re generally not the place to begin shopping for student loans.
  3. Don’t defer the interest. Most federal student loans begin accruing interest from day one. While you don’t have to pay back the loan until after graduation, the smart student makes interest payments throughout college.Each year you defer the interest, it capitalizes, meaning it is added to the principal loan balance. The principal grows so the interest grows, and so will your payments. Making small interest payments from the beginning means smaller post-graduation payments.
  1. Keep your contact information up to date. You can’t skip out on a student loan servicer by moving without sending a forwarding address. Keep them up to date. Avoid having your credit report hit by reminders of missing payments from your servicer.
  2. Choose your payment plan wisely. Upon graduation, you will have a variety of repayment options.The standard plan is aimed at assisting you with repaying the debt in a decade; it may be difficult at times, but it can be done, and you will be free in 10 years.Some options are based upon income and have lower monthly payments. Be careful with these, however, because they take longer to pay off and the interest continues to grow.Sometimes, even when we’re being careful and have the best intentions, debt can still get out of hand. If you find that you have mismanaged your student loan or simply need help making choices that will benefit your credit score, it might be time to reach out to a credit restoration specialist such as Ovation. We have all made youthful financial mistakes, but those can almost always be resolved given proper planning and a little time.

Student Loan Refinancing and Credit Repair: Facts You Should Know

By | Credit Repair

student-loan-refinancingThey don’t really tuck a student loan payment book into the folder with the diploma you receive at college graduation—it only seems that way. That loan is often the first major financial obligation a graduate faces, and it can last for many, many years. Like all other borrowing, it affects your credit score, so be smart about how you pay it back. And when (or if) a good option for refinancing becomes available, be sure to grab it and save yourself some money.

When Is Refinancing Student Loans Right for You?

If you have a good credit score and you’re financially better off than you were when you took out your student loan, refinancing may be right for you. It’s also right when the interest rate you will get from a refinance is lower than the rate you’re paying now.

The goal is to pay less in the long run, not just to lower the monthly payment. So a lower rate is great, but if the term stretches too many months into the future, you may end up paying more when it’s all added up. Do the math to figure the total amount you will pay over the life of the loan, or ask your lender to do it for you, so you can see the numbers for yourself.

Before you refinance, take note of whether your loans are public or private. Student loans that come from federal programs can sometimes be partially forgiven if you go into some kind of public service work, and they sometimes have income-based repayment options, which can be helpful if you run into financial trouble. If you don’t need either of these provisions, consider refinancing. But if they are attractive or necessary to you, be careful about giving them up.

Refinance or Consolidate?

Refinancing means getting a new interest rate on a loan. Consolidation means lumping together several different student loans (which many people have) into a single loan. This can be convenient—better to write one check than several—but it may not save you money. Pay attention to the interest rates on each loan you already have. It may be better to keep the ones with the lower rates, refinance only the higher-interest loans, and not consolidate at all. But if consolidation will save you money in the long run, go for it.

A Refinance Can Help Your Credit Score

Every financial obligation you have contributes to your credit score, so keeping your student loan payments affordable enough to pay regularly is important to the health of that score. If your credit score isn’t quite as healthy as you’d like it to be, consider a credit-repair service such as Ovation. We can give you advice for managing your financial obligations, so you can control your credit rather than have it control you.

5 Tips to Help Millennials Manage Their Debt

By | Personal Finance

It’s no secret that millennials, or those aged 25-34 years old, are struggling to manage their finances. According to a recent study by Wells Fargo, the average millennial carries a crushing $45,000 in debt. That number is mostly attributed to student loans, but also to credit cards, auto loans, and mortgages.

However, armed with the right information and discipline, millennials can easily start to build a path towards financial freedom and mange their debt. We recommend starting with these five tips.

Set a budget and know your limits

Sounds simple, right? Although it might be a no-brainer, creating and sticking to a budget is the most important thing you can do to start managing and eliminating your debt. As the most tech savvy generation yet, use your smart phone to help you keep track of your spending. Creating a budget helps you assess your spending habits; and by knowing exactly where your money is going, you can develop a plan to help you cut expenses and save more.

Set goals and write them down

It’s important to set both long-term and short-term goals. Write them down and check in with yourself monthly to ensure you are still on track. Short-term goals can include paying off your credit card, while long-term goals could be to pay off your car.

Pay off your smaller debts first

When establishing your monthly budget and goals, focus on paying off your smaller debts first. By eliminating these payments quickly, it will give you more money to put towards your larger debts in the future. It may take you several years, but it’s important to make a plan and stick to it. Moreover, to make your debt more manageable, consider debt consolidation. However, if you’re considering debt consolidation for your student loans, make sure it’s right for you.

Avoid more “bad debt”

Unfortunately, the majority of debt millenials carry is considered “bad debt”, such as credit card debt. This type of debt does not contribute to your net worth and does not improve your earning or buying power. To avoid accruing more credit card debt, don’t charge something unless you are able to pay it off in full every month.

Save, save, save

It’s what your parents have been telling you for years, but it’s true, continuous saving is truly the key to financial success. Your eventual goal should be to have three to six months of monthly income in savings. By continuously saving and sticking to your monthly budget, you will be well on your way to eliminating your debt quicker.

Managing a truckload of debt is no easy task for anyone. Despite these tips, you may still find yourself in a situation beyond what you can manage. If that’s the case, you may be a good candidate for our many credit repair solutions, which are customized to meet your unique needs. Your credit is truly your most valuable asset, and at a young age it’s important to ensure your credit remains in good shape to carry you through your adult life.

To learn more, check out our frequently asked questions and contact us today to see how we can help.


Giving Your Child a Credit Education – Before College, Part 3

By | Credit Reports

In the previous installment of this series (Giving Your Child a Credit Education – Before College, Part 2) we discussed the possibility of co-signing a private student loan. There are many risks associated with this course of action, so we’d like to dedicate an entire article to the topic.


When Financial Aid and Federal Loans aren’t Enough

A student may require a private bank loan to supplement their other financing options for school. Bank loans usually require a co-signor because the student doesn’t have an established credit history and/or a lower interest rate is only possible with the security of a co-signor.


All Risk No Reward

If you choose to co-sign for your son or daughter, you become entirely responsible for the debt. It’s as if the loan was yours alone. If you expect your son or daughter to maintain the loan and make on-time payments, this expectation must be clearly communicated. Missed and late payments on the loan will reflect negatively on you and your credit score.

Be aware that the student loan will be used against your debt-to-income ratio. If you have any plans for future borrowing or financing, co-signing a student loan may limit your personal borrowing possibilities. A new car or home renovation loan may have to be put on hold until the student loan is paid-off.



Unlike federal loans that offer deferments and income-based relief for graduates who are unemployed or under-employed, private loans must be paid on time – like any other private financial product. If your student graduates without sufficient income to make payments on the loan, you need to be prepared to take over payments or suffer the negative history on your credit report.

While interest rates on student loans are currently quite low, this may not always be the case. Interest rates are usually variable for student loans and are therefore subject to rise in the future.

Consider the timing of the repayment plans for this loan. Where will you be in life?  Will you be ready to retire or semi-retire? Remember that this loan is your responsibility as a co-signor and unlike other borrowing; these loans cannot be discharged in bankruptcy. Prepare for the worst – meaning, prepare to pay the loan yourself.


Willing and Able?

If the reward of higher education for your child is worth the risk of re-paying the loan yourself, you may be willing to co-sign – but, are you able to co-sign? Consider contacting Ovation to get your credit report in the best possible shape – allowing you to secure the loan by co-signing and ensuring that you (and your child) have the lowest possible interest rates.

First Comes Debt, then Comes Marriage

By | Credit Scores, Debt

Young couples are delaying marriage and their plans for a family, longer than ever before. The reason, according to a recent report from HIS Global Insight, may be record-breaking student loan debt. Substantial debt repayment plans may leave young couples with less money to pay for a wedding or less savings for a down-payment on a new home. But, the effect of marriage on your finances doesn’t end with your disposable income.

Together, But Separate

Even though you and your partner are uniting your lives, your individual credit reports will remain separate and unaffected by your legal union. Marrying someone with a better or worse credit score will not increase or decrease your personal credit score. Also, any debts that are in your name alone will continue to be your sole financial responsibility – even after you are married. Marriage does not automatically merge all your individually incurred debts into a joint responsibility. Unless…

Exception – Student Loans

Depending on where you live, student loans – even those that were taken-out before marriage – can become a joint liability. If you live in a “common property” state, individual student loans become the responsibility of the couple. If your spouse has outstanding student loans (before marriage) they will become your responsibility after marriage. This allows creditors to come after your assets to pay back your spouse’s student loan. “Common property” states include: Arizona, California, Louisiana, Idaho, New Mexico, Texas, Wisconsin, and Washington.

Marriage may also affect the re-payment terms of your federal student loan. If your federal loan payments are based on a percentage of your income, getting married could mean you will have to pay more. Filing your taxes together as a married couple or simply living in a “community property” state will likely increase your household income and therefore increase your monthly payment.

Joint Accounts

If there is a significant difference in the amount of debt you and your future spouse carry and/or your individual credit scores, you may want to delay creating a joint account. Paying student loans from a joint checking account may inadvertently make that loan a joint responsibility (in non-“community property” states) and give creditors the ability to cease assets from the joint account to pay the loan.

Joint credit card accounts have the ability to either help or hurt you as a couple. If your spouse has a poor credit rating and you add him or her to your account, that account will now appear on both of your credit reports. If the bill is consistently paid on time, this could help your spouse’s credit rating. If your spouse is irresponsible with the card and your bills are not paid on time, both of your credit scores will be negatively impacted.

New Debt

If you are applying for credit together, after you are married, both of your credit scores will be taken into consideration. This makes it very important to know your individual credit scores before making an application for new credit. If one of you has great credit and one of you has poor credit, your new borrowing may be declined or your terms and interest rates may be less ideal.

In “community property” states, any debt incurred by either partner, during a marriage, are considered a liability for both partners. This includes credit cards or loans that are in the name of only one spouse. However, in other states that follow “common law” property rules debts in the name of one spouse remain the sole liability of that one spouse – except when the debt is incurred for the benefit of the family, such as a loan for home repairs.

While pre-nuptial agreements are less than romantic, they may be something you will want to consider to protect yourself from being responsible for your spouse’s individual debts.

Just because someone has debt or poor credit doesn’t necessarily mean that they are financially irresponsible or that you shouldn’t marry them. But it is important to discuss your individual financial standing before you decide to walk down the aisle. Having a financial plan or strategy in place before you are married will mean fewer surprises and greater financial security for both of you.

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