Emergency Fund – Protect Your Credit

Emergency Fund For Rainy Day

When you have gone through all of the trouble of credit repair, you want to ensure that you do not wind up with bad credit again. But, in many cases, people do not wind up with bad credit because they are irresponsible. It is because they were unprepared to deal with surprise medical bills, expensive home repairs, last-minute vehicle replacements or other calamities. This is where a healthy emergency fund comes in.

How Much Should Be In Your Emergency Fund?

Add up all of your fixed expenses for a month, then multiply that number by three. That is how much you will need to have on-hand to keep yourself relatively stable should something interrupt your earnings for a three month period. Three months expenses is the most common recommendation for emergency funds; some experts recommend keeping six months expenses on-hand.

This fund isn’t just for loss of income. It is also for handling unexpected bills. For instance, after your home purchase, you will want to have extra cash available to deal with the inevitable emergency repairs every homeowner eventually faces.

But I Can’t Save That Much!

If you are not in the habit of saving, or if you are living close to the edge of your means, putting aside thousands of dollars can seem like an impossible feat. It can be a lot easier if you break the task down into smaller parts. Start by putting away just $10 a week until you have enough that you could pay your electric bill out of savings. Then, aim for two bills worth. It’s easier if you set up an automatic withdrawal so that you never see the money in your account.

You may be able to free up more money by going over your bills and seeing if there is anyplace you can cut back. Look at monthly membership fees like your gym or Netflix account and decide whether you can go with a cheaper plan. Or, eliminate one restaurant dinner a month and sock the money into savings instead.

When Can I Touch My Emergency Fund?

Set up firm criteria in advance so that you aren’t tempted to dip into your fund prematurely. The emergency fund is not for vacations, splurges, or even great deals that you would otherwise have to pass by. Set up a separate account for impulses so that you can keep your emergency fund secure.

The only times you should dip into your emergency fund is when you have little other choice. For instance, if your car needs expensive repairs, it is okay to use the fund for that. It is also okay to dip into the emergency fund to cover basic bills if you have been laid off from your job or have been out for an extended illness.

An emergency fund is a great tool for keeping your credit score high and your family secure. By keeping these funds on-hand and available, you can help ensure your family’s future stability.

For more information on how you should budget for a rainy day and how to protect your credit score click here to request a free consultation.

Controversies Regarding Credit Scores and Credit Reports

Credit scores are a quick and handy shorthand that banks and other potential creditors use to assess their risk before loaning money. But, as is common with shorthand systems, they are also prone to a number of flaws that can negatively affect you, the consumer.

There are actually a number of controversies surrounding the use of credit scores and credit reports. Some states have proposed legislation to give consumers more protection. Some of the issues with credit scores that can hurt consumers:

Possible Errors in Credit Reports

Experts estimate that 79% of all credit reports contain errors. While most of these are innocuous errors regarding employment or past addresses, others contain negative marks that can lower your credit score. And, when there is an error in your credit report, you are presumed guilty. You, or a credit repair specialist working on your behalf, must initialize investigations into erroneous reportings. In some cases, inaccurate data has stayed on credit reports long enough to begin legal action.

Non-Credit Uses of Credit Scores

Credit scores are not just used for assessing credit. They are also more and more commonly used when you are seeking employment. This has become even more common, and more damaging during the economic downturn. Many worthy applicants are turned away because economic hardships have left them with less than perfect credit histories. At least seven states have put laws into place banning employers from pulling applicants credit reports or limiting what information employers can see.

Further, there is little evidence that credit scores and credit reports are a good indicator of employment performance. Representatives from TransUnion admitted that they had no figures correlating credit score and worth as an employee. A study done by the New York Times failed to find any relation between the two.

Complexity of Credit Scoring Process

The truth is, no one knows exactly how the credit scoring agencies arrive at your credit score. The work involves complex computations that are largely kept secret to avoid gaming the system. Credit reporting agencies have shared the how each section is weighted; however, the exact figures are kept secret. This has led many consumer advocates to criticize credit reporting agencies for a lack of transparency.

Variations Between Different Agency’s Scores

The version of your credit score that you can access is not the same one seen by potential creditors. And, your score can vary depending on which credit scoring agency is used. According to a report from the Consumer Financial Protection Bureau, one in five people are getting credit score reports that are significantly different from what retailers see. This can cause many consumers to pay a higher interest rate than they should because they fail to shop for a better deal on credit card interest rates. In other cases, consumers inadvertently lower their own scores by applying for loans that are beyond what they can qualify for.

In the end, the best thing you can do is arm yourself with knowledge. As you work toward home purchase plans, stick with accepted best practices for credit health. By keeping your eye on your financial health, you can find your way through this complex and sometimes unfair system.

Click here to request a free consultation from one of our certified credit experts.

History of the Big Three Credit Agencies – Education

As you embark on the credit repair process, you find that almost every decision made about your credit-worthiness leads back to one of three big credit reporting agencies. Ever wanted to learn more about these three companies that know so much about you? Meet the big three below:

Equifax

Equifax is the oldest of the three big credit reporting agencies. The company was founded in 1899 as the Retail Credit Company in Atlanta, Georgia. By the 1960s, the Retail Credit Company had files on millions of Americans and Canadians and was one of the largest credit reporting agencies. Although their business has always included credit reporting, their largest business through the 1970s was accumulating data for insurance companies to assess risk. Their sweeping records of individuals’ financial and personal lives was the catalyst for the Fair Credit Reporting Act of 1970. In 1975, RCC changed its name to Equifax. The company has 7,000 employees in 14 countries and maintains files on over 400 million people worldwide.

TransUnion

TransUnion began its life as part of the railcar leasing company Union Tank Car Company. They began offering credit reporting services after acquiring Credit Bureau of Cook County in 1969. CBCC, at the time, maintained 3.6 million card files which were stored in 400 seven-drawer file cabinets. They became the first company to automate and computerize their data, leading to quicker access to consumers’ credit information.

Over the last decade, the company has found itself the focus of controversy for failing to remove erroneous data from their credit files. In two separate cases, plaintiffs were awarded significant settlements. The company has been owned by Advent International and Goldman Sachs Capital Partners since February of 2013.

Experian

Experian was formed when British retail company GUS plc bought credit reporting agency TRW Information Services from Bain Capitol in 1996. Over the next decade, they expanded into countries in Eastern Europe, Asia and Latin America.

While that era involved mostly business to business, they started offering credit monitoring to individual consumers in 2002 via their newly acquired ConsumerInfo.com site. They have since expanded to offer marketing, data gathering and consumer services throughout the world. They have been criticized for charging for credit reports on their site FreeCreditReport.com, as consumers are guaranteed free credit reports at the government mandated AnnualCreditReport.com. They also paid a large settlement to the FTC in 2010 for failing to adequately disclose the $79 fee associated with the credit monitoring services offered on ConsumerInfo.com.

While there are other credit reporting bureaus, these three are the ones that will have the greatest impact on your home purchase goals. What’s most notable is the controversies that each has faced at some point in each of their histories. By knowing the past of each bureau and educating yourself about your rights as a consumer, you can gain confidence in your abilities to strengthen your financial health. Arm yourself with information to empower yourself as you repair your credit and work toward your life and financial goals.

For more credit education and to request a free consultation click here.

Automate Your Finances – Never Miss a Bill Again

When you have done all of work necessary for credit repair, it just makes sense to keep your record clean and your score high. This is especially important if you are working toward a home purchase. But, if you have problems remembering to pay bills, this can undo all your effort. Luckily, a few minutes spent automating your finances can help ensure that you never miss a bill and painlessly build your nest egg at the same time.

Start with Direct Deposit

If you still receive a paper check from your job, see if they will switch you to direct deposit. Having your paychecks deposited directly into your account means that you spend less time at the bank, have your money sooner, and even have a wider choice of banks.

Set Up Automatic Bill Pay for All Regular Bills

Many checking accounts will allow you to set you automatic monthly payments using bill pay features in your account. If you do not have this option, you can also check whether the companies you pay each month have automatic deduction features on their web sites.

For credit cards, set up an automatic payment that will cover at least the minimum on your card. You will usually have the option to choose the day of the month that payments go through. This way, you can pick a day that comes after your payday. For instance, if you get paid on the 15th of the month, schedule your car insurance payment to hit a day or so after that each month.

Get Automatic Savings, Too

Many savings accounts and retirement accounts allow automatic contributions. These are taken directly out of your checking account, so, you never miss the cash. A regular automatic contribution to a savings account is a painless way to accrue funds for a down payment on a house. By automatically contributing to retirement accounts like IRAs, you establish future security. Plus, many discount brokerages will reduce or even eliminate fees if you sign up for automatic contributions to the account.

Give Your Finances Periodic Check-Ups

Once all of the money that goes into and comes out of your accounts has been automated, you will need to check balances far less often. However, it is still worth it to look at accounts periodically to see if adjustments need to be made. For instance, once your savings account balance reaches a certain level, you can transfer money to higher yield investments. As a rule of thumb, look at your checking account a few times a month and investment accounts a few times a year.

Do Not Automate If…

There are some situations where automating bill payments and contributions to savings can be counterproductive. Automatic investments may not work for people who have unpredictable income, since billing dates may not work with the days you get paid. You should also avoid automation if your checking account balance tends to be dangerously low.

Each person should evaluate their finances individually. For most people, in the end, worrying about one less aspect of your finances can reduce your stress levels and increase your financial well-being.

For more information on our credit repair program please click here to request a free consultation.

Online Banking – Should I switch?

As bank fees climb ever higher, many people are looking for ways to spend a little less. One option to explore is switching over to an online-only bank. These are banks that save money by having few or no local branches. Instead, customers do all of their banking via a secure website.

These sorts of accounts can have a lot of advantages, including:

Lower fees. Most online accounts offer no-fee checking, so, you keep more of your money in your pocket. If you are in the middle of credit repair, this is money that can be applied toward settling unpaid debts.
Higher interest rates. Very few brick and mortar banks offer interest on checking accounts, while most online banks do. Online banks also typically have higher interest rates on other products like savings accounts and CDs.
Easy-to-open accounts. At most online banks, you can open new CDs or savings accounts with a few clicks of the mouse. This can be a simple way to put aside money if you are saving for a big expense like a home purchase.
Twenty-four hour a day banking. Instead of being limited to your local branch’s banking hours, you can sign on at any time day or night to do anything from opening an account to paying your bills.

A few of the possible drawbacks to consider:

Are you a tipped worker? Servers, delivery drivers, and others who are primarily paid in cash might find online banks inconvenient. Few allow cash deposits at ATMs or through the mail, so, you can get stuck mailing a money order.
It can be slow to deposit a paper check. While more and more online banks are allowing check deposits via mobile phone or home computer, this is not yet universal. If you have a poor credit rating or if the service is not available from your online bank of choice, you may have no choice but to mail checks to make a deposit.
No in-person contact. Sometimes, bank customers feel more comfortable talking in person with a branch manager, such as when working to resolve insufficient fund fees or other issues. If you have an online-only account, all communication will necessarily be via phone or email.

How to find the best online bank for you:

Check out banking review sites like Bankrate.com and MyBankTracker. These sites keep track of factors like interest rates and fees and also post user reviews.
Ask friends about their experiences. They will be able to share stories about their experiences with customer service, ease of setting up accounts and other details.
Check financial companies you already do business with. Discover, for instance, has banking products such as a cash-back checking account in addition to their credit card services.

As with any other banking decision, make a list of your requirements and find the bank that satisfies those needs best. If your lifestyle is compatible with the offerings of an online bank, you just might keep more money in your pocket by making the switch.

For more questions about how Key Credit Repair can help you improve your credit scores feel free to contact us by dialing 877.842.5215 or clicking here to request a free consultation.

Why Your Credit Score Matters – Tips

Prior credit mishaps make many people gun shy; it’s understandable to want to live plastic-free if you have had trouble managing credit in the past. There are those who espouse the merits of a cash-only existence, and they have a lot of arguments that are sound. But, there are also many things that they miss. You may be surprised to learn that, even though you may never need or want a credit card, your credit score still has a huge impact on your life. A few ways a bad credit score can hurt you:

Why Your Credit Score Matters

While you definitely can get insurance with bad credit, it will cost you more. According to Insure.com, bad credit can cost you up to 10% extra in car insurance premiums. Over a period of years, this can add up to thousands of dollars. When you raise your credit score, this frees up cash every month while providing you with the same level of coverage you had before.

Higher Deposits

Having bad or no credit means having a lot more of your cash tied up in deposits for services. Without good credit and a history of paying utility bills on time, getting electricity or water turned on at your place can cost you the equivalent of two months worth of bills. When you rent a car with a debit card instead of a credit card, you could be required to tie up hundreds of dollars of your own money during your trip. You may even be required to put down a deposit for a cell phone with some providers.

Losing Out on Job Opportunities

In these unstable financial times, more and more employers are checking applicants credit scores when making hiring decisions. Many believe that a good credit score is a sign of a more stable and conscientious worker. Whether that holds true or not, the belief itself can keep you from getting the job you want.

Escaping from Renting

A home purchase is generally seen as one of the best ways to build stability. When you rent, your cash disappears down a hole every month; when you own your own home, part of what you spend each month goes back in your own pocket in the form of home equity. And, owning a home can make retirement much easier since you’ll either have a paid-off place or saved up cash to build your lifestyle.

But, buying a home is almost impossible without a good credit score. Those with poor credit usually have to come up with much larger down payments if they are approved for a loan at all. And, the interest rates that are available to someone with less than sterling credit are higher, meaning tens of thousands of dollars down the drain over the years.

Having a good credit score is about much more than access to credit cards. It can affect your opportunities and your quality of life in dozens of different ways. If your score has taken a hit because of mistakes in the past, credit repair can help you fix it and improve your chances in life.

For more information on our company and services feel free to contact our office by dialing 617.265.7900 or requesting a free consultation.

31% of consumers now below 650 – Credit News

Here is an interesting chart that you can share with your clients if they are curious how their scores compare with the rest of the the consumers in US. Interestingly enough 40% of consumers in the US have above a 740 fico score (A+ credit). The figure that should scare us is that 31% (slightly below a third) of consumers are below 650? If you back out the unemployment rate from that figure (8% or so….) you will find that 22% of full time employees in this country are still not able to finance a home. Some would consider this a shame. Here at Key Credit we consider this an opportunity. Please do not hesitate to contact myself or any of my team members with a scenario or a request for a FREE consultation. Also feel free to request to be set up as a referring broker if you haven’t already.

Interesting stats to go along with this chart.

*40% of consumers are above 750 FICO (A+ credit)

*69% of consumers are above 650 FICO (bankable)

*31% of consumers are below 650 FICO (sub-prime)

*21% of consumers are below 600 FICO (non bankable)

31% of consumers now below 650

Tag: Median Score in US