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10 Ways to Screw up Your Retirement

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Are you screwing up your retirement? You may not even be aware that you are, but here are a few approaches to doing so.

Keeping the Nest Full

Traditionally, the societal custom is that parents raise and provide for your children, and when they become adults, they move out and learn to take care of themselves. In time, the parents retire, progressively age, and eventually need help taking care of themselves. At this point, the children, who are now independent, responsible, working adults, step in and take care of their parents. Lately, it seems like many adult children are skipping the whole living independently part. They may have children too, so now their parents are housing and paying for three generations of the family. Doing so can shave a lot off of one’s income and leave little extra for savings. The way in which not “emptying the nest” increases expenses can really screw up your retirement.

Screw up Your Retirement

Being Unhealthy

Not making wise health choices and seeking preventative care can really hurt you. Medical problems may not only cause financial burden but can also impact longevity and quality of life. Things such as smoking, obesity, drinking too much, and not getting routine checkups and screenings can lead to many chronic conditions, such as heart disease, stroke, diabetes, hypertension, cancer, kidney, and liver disease. Even if the medical bills don’t scrape away your finances, things like chemotherapy, pacemakers, kidney dialysis, daily insulin injections, and frequent, long hospital stay will drag down your quality of life and inevitably screw up your retirement.

Out of Date Plan

Make sure to keep an eye on your retirement plan so that it stays current. It would really be a shame to think you are in shape to retire comfortably and then be blind sighted after it is too late.

Working for Too Long

A lot of people think if they have worked somewhere for a long time, their job is secure, but this is not the case. In fact, age can cause some to lose their jobs because they are more costly to employers than younger people. Some employers will even offer financial incentives for older employees to leave, make an effort to make the work environment negative for them, or pay lawyers to help them find a way to dispose of the employee that will not put them at risk for a lawsuit.

Drawbacks of Older Employees

  • More susceptible to illness or injury
  • High Healthcare Costs
  • Senior employees are paid more
  • Not savvy to new technologies

 

Not Saving Enough

There is no such thing as saving too much, and you can never start too early. Every extra dollar you spend adds up over the years and can make a big impact on your future. Prioritize saving and don’t screw up your retirement by wasting money on things you don’t need.

Equity

The faster you can pay off your home, the better. It is unwise to keep taking out equity to refinance your home. It takes time to really reap the benefits of compounded interest, and you should not rob yourself of this potential source of funding and add to the risk of screwing up your retirement.

Mortgage

Having too large of a mortgage payment is another thing that can screw up your retirement. Try to keep this payment between 1/4th and 1/5th of your earnings.

Mortgage in Reverse

Taking out a reverse mortgage at an early phase and life may seem like a good quick fix for debt, but it can really hurt in the long run. Restricting yourself to preset financial earnings when you are young and have very little equity can eventually screw up your retirement.

My Employer’s got my Back

In the good old days, the employer retirement plan was often enough to get by after your career came to an end. A pension seemed like the ultimate security blanket. Now, pensions are progressively becoming a rarity. If you are lucky enough to get a pension, you can kiss it goodbye if the company goes under.

Even state service employees, like police officers and firefighters are taking a hit. Many of their pension funds do not lack enough money to sufficiently cover everyone. Cities are unions are constantly at war.

Federal government employees were always thought to have held the golden ticket in terms of lucrative pensions, but even these funds are in trillions of dollars’ worth of  do not contain enough to sufficiently cover everyone anymore.

No matter who you are employed by, embrace the account that funds your retirement. Save every dollar you can and contribute to it. Once you screw up your retirement the damage is done. You cannot travel back and time and undo your spending or redo your saving. Seek financial advising and develop a budget early in life so that you will be prepared for a comfortable future.

How the Money Skills You Should Have Can be Learned from Children

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There’s a common misconception that kids don’t know how to handle their money. Adults believe they don’t understand the value of a dollar or the cost of living in the real world. They don’t have to deal with mortgages, bills, groceries and other common expenses. While this may be true, there are several areas where adults could take a lesson from children. If you want to know what money skills you should have, observe the behaviors of children and apply them on a larger scale to your own situation.

Money Skills You Should Have

Understand Single Mindedness

Most financial advisors will tell you that one of the money skills you should have is to focus on what you want. This is a skill that every child knows. As soon as they see the commercial, they zero in on that toy, dress, or video game with laser precision. Knowing what they want, children will often neglect making smaller, more insignificant purchases because they understand it distracts from their ultimate goal. And the word “goal” is the key. When considering the money skills you should have, take the child’s example and make it your own. Some examples of goal oriented focuses might be:

 

  • Vacations.
  • Larger purchases.
  • Retirement.

 

Even if your bills don’t allow you much wiggle room, just a few dollars a month toward an established goal can make you feel like you’re working for more than just the money.

Write it down

Another of the money skills you should have is the determination to put your goal to paper (even if just a word processing document). Think about the lists children make, not only for Christmas, but often year-round. Items are continually added or dropped, the latter occurring either because the child was able to buy one of the items or it was knocked off the list in favor of something more important. This type of visual prioritizing works well for adults, but don’t just stop at the list. Make a plan for getting there. Here are a few things for consideration when forming your plan:

 

  • How much will it cost?
  • What resources do you have at your disposal?
  • How long will it take to get there?
  • Are there certain expenses you are willing to decrease or cut entirely to reach this goal sooner?

 

Be realistic as opposed to optimistic. It’s better to estimate on the higher end of “costs versus resources” and possibly get there sooner rather than facing the frustration of changing your plan if you’re unable to accomplish it in the original time frame.

Place Appropriate Value on “Small Amounts”

How many times have you walked past a penny on a street? Compare this to how often children pass up that penny. This demonstrates another of the money skills you should have. Children still recognize small amounts as part of the bigger picture, something adults forget in the chaos of credits and debits.

For an adult, picking up pennies may not get them to that new car, but on a comparable scale, the extra dollars saved by coupons or selecting sale items starts to add up. Also, several credit cards offer cash back rewards with no annual fee just for using their card. If treated like a bank debit card and paid off every month, the consumer only wins in a situation like this, earning free money (yes, it’s really free) which can serve as small increases to the scheduled monthly investment toward the financial goals.

Know How Much You Really Have

Even if children are still using a piggy bank, most of them could probably tell you how much was in it at any given moment. While adults may let such spare change just accumulate, a child keeps close track of their money, monitoring and recounting with each new addition. In these times of automatic deposits and withdrawals, it’s far too easy to miss (or misappropriate) expenditures. Next thing you know, the piggy bank is empty. And on the hottest day of the year when you just wanted a glass of lemonade. Lucky for kids, the piggy bank doesn’t charge overdraft fees.

Along the lines of that lemonade, depending on the parenting style, many children recognize they won’t get that next glass until they work to make the money for it. Loans and credit are inaccessible. While surviving strictly on a cash-only basis isn’t possible for some, strive to be as close as possible.

Be Happy with How Much You Really Have

Of all these suggestions for money skills you should have, this last one is the most intangible but perhaps most important. While it’s good to work toward goals, it’s also important to be proud of what you have accomplished so far. The closest that a child comes to a negative emotion in regards to money is perhaps jealousy that he/she doesn’t have as much as someone else.

Adults are capable of much worse, drawing lines between social classes as obvious as chalk on the sidewalk. Children don’t believe money defines them or separates them from each other beyond a rudimentary sense of one having “more” or “less” than another. Instead they define themselves by what they enjoy in life. Part of this may involve their possessions, but is the happiness that is the end goal for most children.

So the last of the money skills you should have is to simply respect and value the money you have. It can be used as a springboard to further heights. Just don’t let it weigh you down. It’s just money, after all. And probably not many of you pretended you were bankers when you were kids. Define yourself by who you are, and let the money help you along the way.

Overdraft Fees: Less Common Maybe, But Getting Way More Expensive

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Tales from an Ex-Banker

Time for A Confession: I was once a personal banker, but before I was allowed to assist people in regards to their finances and be of service to them in a head to head situation, I was forced to act as a bank teller. For the most part, this was a  pleasant enough situation, except for one key aspect of it; calling to tell people that their bank accounts had gone into the negative.

Imagine the act of having to call someone and tell them that not only are they out of money, but that they also have to pay for not having any money once their transactions are finished clearing.

Keep in mind that these are people who knew me, some even who have known me my entire life. They are people who trusted me to look out for their best interests and yet, I was completely and utterly powerless. Sure I could put in for a fee reversal, but even that was only good for first incidents and for nothing after that first time.

It goes without saying that this issue has been an easy button to press of mine ever since then. Even before the Great Recession had it, I had long since left banking, but I was still so very relieved when I read about the regulations that were being instated that would help end this horrible and painful madness. It appears now that the overdraft problem is back and only worsening from before. As such, I would like to take this opportunity to teach you how to avoid the seemingly never-ending spiral.

Overdraft Fees

Overdraft Fees and Why They Are Rising

Fees from overdrafts are extremely vital when it comes to banks and how they make money and profit. In fact, they are the bulk of revenue made from checking accounts. Almost thirty-two billion dollars in revenue was generated from overdraft fees alone in 2013. Fees run up to fifty dollars for each and every transaction according to some surveys.  These are used to make up the money that banks are losing due to the decline of rates of interest.

Because of this, banks increase the amount of fee per individual occurrence and seek new customers that would be most likely to overdraft.

Questionable Business Practices?

Banks are considered businesses just like anything else and so you simply cannot blame them for working on ways to earn money while trying sustain themselves. After all, they do have deep costs to provide for even their services that they do not charge the consumer for, but the act of actively seeking out people who are more probable to incur overdraft fees is a questionable business tactic at best.

How to Avoid These Nasty Overdraft Fees

-You might be best off opting out of overdraft protection-Really

The best way to keep away from having to pay overdraft fees is simply to opt out of the protection. In this way, your bank simply declines transactions that would otherwise take your account into the negative. This is up to the individual though as sometimes it might be more beneficial to make sure an important bill is paid on time even at the risk of incurring an overdraft fee. Even so, some bills from online and those associated with checks can still usually come out even without having the individual’s approval.

-How to Best Buffer Your Account without the Need for Overdraft Protection

The best option for most people is usually to link your account from savings to your checking account. Then the money can simply come from savings instead of coming from the regular account and causing an overdraft fee. This same thing can also be accomplished with a credit card or some other personal credit line. This will just require a carefulness on your part to keep you from going into debt.

-Understand the differences-Know Your Money

Becoming reliant on online balancing as opposed to keeping a checkbook registry could come with the very real possibility of putting you at higher risks in regards to over-drafting fees. This is because most people do not understand the difference between their account and available balances.

-Account Balance

The balance of your account refers to how much money you actually have in the account. This does not take into account and debits or credits that are still pending.

-Available Balance

The available balance of your account, however; does take these debits and credits into consideration and so it is actually the money you possess currently. Some of us like to try to beat the charges that are pending, with the knowledge that everything might not come out the same day, but this is extremely dangerous and should be avoided at all costs as you are almost certain to end up in the negative and get stuck with extra charges and overdraft fees.

How to Avoid Scams (Phone, Email, and Mail)

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When it comes to the protection of identity, it is important you do all you can to guard it from scammers. There are many how to avoid scams articles out there that let you in on some of the things that you, yourself can do in order to minimize the risk of your personal information getting to scammers. A recent scam has hit two million taxpayers worldwide, which has raised awareness on protection. Scammers know their goal and tend to be getting savvier as I speak, which is why it is vital to always stay one step ahead. When it comes to how to avoid scams, then it is important you are familiar with the many ways you can get scammed.

How to Avoid Scams

Once you know how to spot a scam and how it came to you, it will certainly let you in on the secret on how to avoid scams.

Most Recent IRS Scam

This is one of the latest scams and begins with a phone call. You get a call from the IRS. Their name and number does show up on your caller ID and they will also attempt to prove they are legit. They tell you that you owe taxes, which need to be paid immediately via wire transfer or prepaid debit card. On the sign of arguing or resisting anything, the speaker will begin threats by saying you may get arrested, deported, or will have your driver’s license taken from you. If you hang up now, a couple of minutes or even seconds later you will get a call back from a person who says they are the police or they are calling from the Department of Motor Vehicles. As a final step to have you fully convinced, you may even receive an email that looks authorized and claims to be from the IRS.

These strategies must not be believed and once you understand this, in future it will always be easier for you on how to avoid scams.

The real IRS will never ask for payment via phone.

How to Avoid Scams over the Phone

The phone scam has happened to maybe everyone and the scary thing about it is a legit-looking number always shows on the screen. However, no matter how real the number looks what your main concern is how to avoid scams.

Get one step closer on becoming a pro on how to avoid scams!

  • Intimidating Language – if a company is legit, they will never threaten you over the phone. If you are called and threatened with serious language and consequences, then it’s pretty likely there’s a scammer on the other side.
  • Force Or Urgency – one thing all scammers know is that they only have limited time to convince you. This means they will suddenly put pressure on you and say that you have to act quickly.
  • Stubbornness – no matter how many times you ask for a call back number or more information, a scammer won’t give you either.

Phone scams are pretty difficult to spot as scammers are getting clever day-by-day. However, here’s how to avoid scams that you come into contact with in the future.

  • Always ask for a number you can call back on and see what reaction you get from the caller.
  • Never give out your personal detail over the phone.
  • Using a phone book or website call the number listed there and you will find out from an employee if you were being scammed or whether the call was legit.

How to Avoid Scams in Your Email

An email scam is pretty much like a phone scam. The common factor in the two is validity. However, there are several ways you can find out whether the email is real or not:

  • Links in the Email –avoid is clicking on them, as they could be a virus. However, using your mouse to hover over them will show you exactly what the link is made of; giving you a better idea whether it’s real or not.
  • The Sender – the question is, does the email look legit? The address and url should both be checked.
  • The Urgency and /or Demand for Personal Details – if a company is legit, it will never ask for your personal details over email. No matter how real the links and information look, never give personal information over email.

How to Avoid Scams in the Mail

An old scam known as snail mail is another ways scammers can reach you. Fake offers, money order scams, lottery scams and much more are included. This is how to avoid scams via mail:

  • If you are being offered something free in the mail, it is always a good idea to do your own research.
  • If something sounds too good to be true, then it is most likely a scam.
  • Scams can also be created at the name of asking for help – so don’t trust those emails.

Explaining the Uses of a Multi-Employer 401k Plan

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401k plans are crucial to any employee who wishes to comfortably retire with a decent amount of money. Currently, however, many small businesses are not able provide their employees with these plans, as they are too expensive. Small businesses are currently unable to pool their purchasing power together with other small businesses in order to provide a 401k plan, however, there is legislation in the 113th congress that is considering to allow the businesses to do so. If they pass this law, small businesses will be able to transfer their fiduciary responsibility to an independent fiduciary. This will allow small business owners to offer the same benefits that medium and large companies which contain over 100 employees has to offer.

Multi-Employer 401k Plan

Why are Multi-Employer 401k Plans Necessary?

If an employee is wishing to save up for a retirement plan, multi-employer 401ks are probably the most efficient way in doing so. There are two main advantages that comes with these types of plans. The first being that all earnings and contributions to the 401k plan are deferred from all taxes until the employee makes a withdrawal at retirement age, which is generally around 60 years old. The second advantage is that many employers provide contributions that match the amount of money deposited in the multi-employer 401k. This is sort of like the added bonus of working for a reputable company. However, it is important to keep in mind that this is not always provided in the 401k plan and is simply an added benefit that some employers might wish to offer.

Can a Multi-Employer 401k Change One’s Retirement Landscape?

Many people wish to retire by the age of 65, but a common reality for most employees is that they may not necessarily be able to afford to retire. However, the retirement of many individuals could be impacted greatly by offering multi-employer 401k plans. For example, an employee that is in their 20’s who invests in a 401k from the moment he/she starts working with the benefits of the contributions on a pre-tax basis, such as elective deferrals, will notice a large amount of returns over the course of his or her employment history. This is very important while planning for one’s retirement, as it will give a certain amount of cushion for their life as a retiree.

Is the Fact that Small Businesses Cannot Offer 401k Plans a Problem?

This could be more of a problem for the employers rather than their employees. This is due to the fact that the thought of a multi-employer 401k plan will usually tend to attract many talented and hardworking employees, rather than those who simply try to work to get by. Additionally, multi-employer 401k plans will often keep these valuable employees interested in working for the company, is it offers a viable means of preparing for their retirement with the least amount of taxes possible. Finally, business owners who offer 401k plans will be able to use it as a tax write off at the end of every tax term. So it is not necessarily a problem, however, there are several benefits that will come along with this form of retirement plan.

Will this Plan for Small Businesses actually be Passed, and if so, When?

You have to take it into consideration that this mandate is left up to the United States Congress, so it is very difficult to say if it will actually be passed and when. Although it is in legislation, there is the possibility that it will be overlooked and will not pass legislation, or, it could take many months to even years for them to do so.

Independent Fiduciary for these Multi-Employer 401k Plans…

The majority of large banks and investment financing firms will be more than happy to help out with the responsibilities that come with being a fiduciary for these multi-employer 401k holders and small business owners. A vital part in their participation will be to offer cost effective services to small businesses in hopes to gain trust. They will have to effectively handle the money within the plans and responsibly invest it back into their savings in order to produce the most effective 401k plan as possible.

Challenges Faced by Independent Fiduciaries.

There are many challenges that will be faced by these “independent fiduciaries” while dealing with a multi-employer 401k plan. They will need to educate the employers, as well as, the employees on the advantages and even the risks that will be faced while entering the market. In 2008, there was a financial meltdown in the market. This left many potential investors nervous to enter to market which is understandable. There are, however, many advantages in preparing and contributing to a multi-employer 401k plans that should not go overlooked. This is only one of the challenges that will be faced by an independent fiduciary.
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Is a 401(k) Or A Roth IRA a Better Investment?

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Many young people do not consider retirement but they should when they consider a job or employment. Businesses, corporations and companies offer away to invest through 401(k) Or A Roth IRA as way for employees to save for retirement. An emergency fund or savings is necessary later in life simply because as we age we have many medical issues that may be addressed. Medical bills can accumulate and no way to pay them. You might need to dip into your retirement fund or use credit to pay it off which realistically is not a good alternative because in the future the money saved in retirement is what you will need to live on comfortably. So you may want to check on information about the company you work for to see what is offered.

401(k) Or Roth IRA

Does the company offer a 401(k) Or a Roth IRA?

When a company offers a 401(k) plan they will match a percentage equal to that of an employee. This provides you; the employee’s contribution is done through a salary reduction in many cases on a pre-tax base however some do a post-tax contribution. There are few major 500 companies that still offer their employees a profit sharing option especially if the company has improved their quarterly production within a given year. The plan may also offer the employee away to invest their monetary funds by using selective investment products or allow them to by secured stocks in the company.

  • Employee contribution of a 401(k) plan is based on a rate of fifty cents for every dollar contributed or equal to a guaranteed portion of your salary.
  • If you have the choice where you are employed it is best to choose a 401(k) when it is available. Of course it also depends on personal tax situation and the goal you want to achieve for your retirement.

Having a 401(k) Or A Roth IRA can benefit a person’s retirement but when a company does not offer a 401 (k) a Roth IRA is beneficial for a way to plan for retirement. Since the law has changed the age of retirement and the end of the “Baby Boomers” are beginning the age of 50 it makes sense to invest money into a Roth IRA. However a Roth IRA, Traditional IRA or both to have the contribution for the year which cannot exceed the lesser of $5,500 or 100% of earned income cumulative of both types of IRA’s. In 2014 if you are 50 years old or older the amount has to be $6,500.00. The government has placed laws to stipulate and the interest that IRA’s can accumulate over a period of time.

  • The benefits of having the Roth IRA compared to the Traditional IRA are that the Roth IRA contribution may be withdrawn at anytime without an income tax or a penalty tax of 10 %.
  • Another benefit with having a Roth IRA is that the conversion amounts may be taken out without having an income tax or after five years a 10% penalty tax to pay.
  • Meeting the eligibility requirements of having a Roth IRA and being able to deduct contributions from the federal taxable income and can reduce the taxes you may owe.

Of course with a Traditional IRA the money accumulates is tax deferred but eventually you will pay taxes on it but only when you withdrawal the money before you reach the age of 70. You can also start by taking minimum distributions each year after your 70th birthday.

It is important that many of us have invested through contributions to 401(k) or Roth IRAs each year. The idea of saving money for the future is up to what fits our financial needs but at any giving time can change. When we decide to save for our retirement the IRA belongs to us and we have the flexibility to use it with discretion. Whether it is for a serious illness that has acquired large medical bills, having children in college or having you return to college for a Master Degree.

Companies that do not offer 401(k) plans give employees the only option of having Traditional IRA, Roth IRA’s, certificates, mutual funds, bonds and company stock. If you have to make a choice do some research on your own at a number of stock websites to see what the current interest rate is at and the projection. Remember you are trying to invest your hard working money you earned into something that will give you growth as you get toward the retirement age. Since, we would all like to enjoy a comfortable retirement in the future finding the best way to save is always in a person’s best interest.  Especially if you think that income tax rate is going to be considerably lower at retirement it makes sense to defer paying taxes now when you can. So investing in a Roth IRA for the future is an alternative with so many companies getting rid of the 401(K) offers.

Why Interest Rates in 2014 May Go Up – And What It Means for You

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Some people believe that interest rates are a minor issue that can be ignored, after all just a small couple of numbers cannot do much right? Well, this is certainly not true, after all these small numbers help banks and companies all over the world get millions and millions of dollars every single year and therefore get richer while you get poorer. These numbers mean a lot and every single year they become slightly bigger. Although the difference does not seem so bad it is also another way for these companies to become even richer while you have to work more and spend more trying to pay the interest rates. Specialists analyze the chances that each country and its economy has to have the interest rates rise and in fact it seems that the interest rates in 2014 will indeed rise. You should always keep your eyes open, after all the more interest they charge the more you pay. Keep an eye out and always try to negotiate!

interest rates in 2014

Yes, you can get rid of debt much faster than what you imagine!

Every single year the rates change, which means your debts will cost you more and more money. If you pay off your debts as soon as possible it will mean that you no longer will have to worry about how the interest rates change every single year. This might sound hard and sometimes impossible to do, however nothing will prevent you from budgeting and finding a nice way to get rid of the debts. You will be able to lead a much happier and wealthier life if you get rid of everything you owe before the interest rates rise once again, after all they will every passing year.

Make sure you always find different ways to stay away from paying extra interest

Every single year the amount of interest changes national wide. It is always important to check the rates and see when they will truly have to change. The sooner you are ready to face such raises the better. There are some cases that you will not have to worry about the interest changes (such as in student loans), however in most cases you will need to worry 9such as if you have certain kinds of mortgages). Either way make sure you read more about the subject and understand what you can do in order to get rid of the extra interest rates and its extra values.

Credit cards are always an issue when it comes to dealing with interest rates:

It is important to keep in mind that credit card rates change every now and then, and interest rates in 2014 will change how much you pay for interest once again. It is important that you get rid of debt as soon as possible after all the sooner you get rid of it the less money you will have to spend in the whole process.

Mortgages might suffer with the new interest rates in 2014:

The adjustable rates mortgage will certainly suffer with the new interest rates in 2014. It is important to keep in mind that this kind of mortgage is prone to having raises each passing year so if you have this kind of mortgage in hands get ready to pay more. Of course you can always negotiate (and you should always try to negotiate when these raises come), however if you still do not have any kind of mortgage under your responsibility look for other options that will not have you facing such issues every year. You can also talk to professionals of the field that will help you understand what the best options are, especially when it comes to paying extra interest rates.

Student loans will not be affected by the new raise:

Thankfully students will not have to have an extra something to worry about this year. The interest rates for student loans will not raise for them, even if the interest rates in 2014 raise nationwide. This is good because people will have incentives to continue going to university and getting their degrees. Make sure you continue to study and regardless of the interest rates charged pay your debts as soon as you possibly can once you are done with university and its classes.

Always keep an eye open for the future changes you might have to deal with

It is certainly impossible to predict what is going to happen with the interest rates in 2014, however it is always good to be prepared and to try and understand that you will have to deal with them regardless of what you would like to do. Make sure you have extra money saved so you will always have a comfortable way to get rid of interest as soon as you possibly could.

How to Fix Credit Report Errors

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Paying close attention to your credit report is very important. Mistakes happen and sometimes they even happen on your credit report. Paying close attention to your credit report means that you can find these mistakes rather quickly and fix credit report errors. If these errors happen they can affect your credit. Also when these errors occur, under the regulations of the FCRA, you have the right to fix them and it is the CRA’s responsibility to make sure that they are fixed properly.

In order to ensure you’re prepared if an error pops up, you must keep your payments and accounts well documented. Once they are spotted you need to work hard to fix credit report errors. Keep records of everything. This should not only be done on computer files, as many people have experienced the unexpected loss of important information that has been kept on computers. These important documents should also be kept organized in storage on paper.

When an error occurs on your report it can be from multiple different possibilities. There are an estimated 7.2 trillion people in the world today. Odds are high that you share the same name as someone else. This is one way that an error can occur on your credit report. If your name is Jacob Adams, both of these names are fairly common. It would not be unlikely for there to be another Jacob Adams. There could be a mix up where information from the persons’ matching name is placed on your credit report.

Another mistake that could occur involves social security numbers. At times another SSN could be included in your credit report. More often than not, the difference between the two SSNs is only by one number.

A Dispute:

Since there are many different types of problems that can occur, the process and information needed to fix the problem is sometimes different. However, the way that you begin to fix credit report errors is usually the same. Most national credit bureaus have a place to begin a dispute online. This can be a good place to begin. Once you have completed the process of filing an online dispute it is also good to send a detailed letter in the mail. This way you can tell your story clearly and accurately. Here are a few things that your letter should include:

  • Accurate, currant contact information such as telephone numbers and your address
  • A detailed explanation of the issues at hand
  • A copy of your report with the problem areas highlighted or circled
  • Clear proof that the information on the report is wrong and include the correct information

This letter should also be sent by certified mail so that you know exactly when the bureau receives it. You also need to keep a record of everything that you have sent to the bureau.

For example if there is information on your credit report stating that you lived at an address where you never lived you would want to provide evidence proving that you lived at a different address in the given time period.  If there is an incorrect social security number on your report you will need to send a copy of your social security card. You will need accurate proof for each dispute and it is likely that you will need to provide around 50 pages of in-depth information.

As soon as you have sent all of your information to the credit bureau, you should also send a letter to creditors who gave the credit bureau the wrong information. This letter is in order to notify them that you are filing a dispute. You should also include the same proof that was sent to the credit bureau proving that the information is incorrect.

When trying to fix credit report errors that are more serious such as incorrect bankruptcies it is extremely important to be very persistent and provide all of the necessary information. Bob Sullivan outlines great guidelines to use in such cases in “Bob Sullivan on The Red Tape Chronicles”.

Review Your Report:

The CRA has 30 days to respond to your dispute. After this mark, if you have not heard anything you need to call for assistance and should keep notes on each conversation. After you have received a response from the credit agency they will send you a new copy of your report if it has been changed. You should also be given the information of the creditors or merchants that ar being disputed against. It the problem has not been fixed and you know that it is wrong then you can continue to pursue a solution. Also if you are being ignored or not being treated fairly you can report this to the agency that the creditors report to. It is a trying process but it is very important that you and the others involved work to fix credit report errors.

Things to Know about Credit

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Four things you have to do if you’re just starting out with credit

Being new when it comes to credit isn’t anything to feel ashamed about. Graduating from college or thinking of buying a new home? It’s vital to get on track with a good credit score. Knowing the basics will get you started; For example, not having enough data available about you to produce a credit score will leave you with a ‘thin file.’ Ultimately meaning you don’t have a credit score.

Things to Know about Credit

Nevertheless, when you have enough information to create a credit score – as small as it may be – your primary score will be around about the middle. Here four tips to aid you in taking advantage of this benefit.

1.      Have a look at your report

Just because you haven’t done a lot to gain you credit, does not mean your credit file is bare. Credit reports are often lengthy and tend to include personal information such as your current employer. Making sure you credit report includes correct data is the first step in working towards a great credit score. Experian, TransUnion and Equifax are the three credit-reporting agencies. Each offer free credit reports, which can be obtained directly through them or by visiting www.annualcreditreport.com. Lenders are not obligated to provide credit information to one of these credit agencies let alone all three. Therefore attaining all three of your reports is essential as the credit agencies do make the odd mistake meaning data on your reports may vary from one to the other.

2.      Building bridges

Using credit cards sensibly and starting with a card that suits you personally can be a simple way to build credit. Capital One’s Journey Student Rewards credit card and the Discover it for Students card are specifically intended for young people who can’t get a higher rate rewards card. You won’t miss out either if you have a poor credit score or thin credit file because secured credit cards are there just for you. All you have to do is place a cash deposit – usually between $300 and $500 – and this serves as your credit limit. They are good if you’re just beginning building credit as they are low risk.

3.      Be smart with your new card and then upgrade

Another thing you have to know about credit is paying your debts on time steadily is a great way to establish a good credit score. With your first card make a minor number of purchases each month but be sure to pay off the balance in full before or on your due date. After six months you may be eligible to apply for a second credit card.

If you started out with a secured credit card, you generally have to wait 6-12 months before asking the credit card company if they would allow you to change over to a regular credit card. Don’t forget to use the second card as responsibly as you previously have.

4.      Keep an eye on your credit score

Defining how credit worthy you are starts by using credit wisely. Lenders only use three-digits on your credit report to decide if they are going to prolong you credit. FICO is the only company that knows who your score is made up, however it is known to be centred on five mechanisms.

  • Credit utilization – 30%
  • Payment history – 35% – if you have paid well in the past
  • Types of credit used – 10% – what you have credit for
  • Length of credit history – 15% – how long you have had the credit for
  • Recent searches for credit – 10% – if you have recently applied for more credit

Credit utilization is harder to explain. It all relates to your debt-to-credit ratio; or how much you’ve used compared to how much you have left. So if you have $6000 of obtainable credit and have used $3000 of it, your debt-to-credit ration would be 50%. Credit experts say the ration should be 30% or less.

Credit utilization and payment history are the two most prominent factors here. In order for you to achieve a good credit score you must have used credit wisely and utilized the smallest amount of credit possible.

How lenders see you

 Credit scores generally fall in to different groups. This is how a lender sees and checks your credit score.

  • 700-850 – Excellent credit score
  • 680-699 – Good credit score
  • 620-679 – Average credit score
  • 580-619 – Low credit score
  • 500-579 – Poor credit score
  • 300-499 – Bad Credit score

Obtaining you credit score

There are numerous ways to obtain your credit score. Try visiting www.myfico.com or try one of the three credit-reporting agencies.  However, make sure the agencies don’t make you sign up for a trial subscription, where you would be charged later for the service if you forget to cancel it. CreditKarma.com and CreditSesame.com have a vast amount of other information about your credit other than just your score. This could be as simple as how much your mortgage is. They also offer your credit score for free from one of the three agencies, without being obliged to the trial periods.

Vital things to remember

Remember starting out with good credit is easier than try to fix bad credit. Try to avoid late payments and defaults; they could seriously damage your credit score! Good practises now mean a better financial future.

The Pros and Cons of Bankruptcy

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Many people have found themselves in financial situations that can sometimes seem hopeless. There are many different options to those people that a want to remove their debt. However, sometimes the only option is filing for bankruptcy.There are so many pros and cons to bankruptcy that one can look at before making a final decision.

Pros and Cons of Bankruptcy

Bankruptcy can change your life forever, it cannot only harm your credit, but it could be the short solution to improving an individual’s life. Bankruptcy might be the solution to help you not lose your larger assets, like you car or home. Since filing for bankruptcy is such a long-lasting and permanent decision it is important to examine all the pros and cons of bankruptcy. After knowing the facts then you will be able to decide it, bankruptcy is the best option for your situation.

Credit Cards and Creditors

One thing that most everyone knows is that you will no longer have all your credit cards, unless you have already paid them off prior to filing for bankruptcy. This can be a big con to many people, as well as the waiting process that you have to go through before you can get any credit in the future.

For many people it is a pro that during the process all of your accounts in collections will be frozen. No further action will be taken on you from your creditors. This is beneficial to those going through foreclosures, repossessions, negative phone calls, as well as any garnishments that you maybe going through. In addition, using a lawyer can help shelter you have dealing with many of the questions that creditors will have.

Future Outlook

Some of the reasons that one should really look at all the pros and cons of bankruptcy is because many of the consequences will happen in the future.

For example, it will be nearly impossible for an individual to receive a mortgage until you are at least five years out from judgment. It is also important to note that the bankruptcy will remain on your credit report for at least 10 years. Just as getting a mortgage is difficult, it can make it hard for you to gain credit, life insurance, or get a job.

However, for both these options there is a positive. Each type of bankruptcy that you file has exemptions that can allow you to keep some of your major assets like a home or car. This can stop you from having to worry about getting another loan or wind up without a home.

Which Debts

There are both pros and cons with bankruptcy and the debts that you have. However, there are only certain debts that can be erased by filing bankruptcy.

Not all debts can be removed during the bankruptcy process. Two of the major debts that an individual cannot be release are student loans and back taxes due.

Even though you cannot have your student loans discharged, all the lenders will no longer be able to call with harassing messages. You will be able to begin rebuilding your credit score as soon as your bankruptcy has been completed.

Personal Benefits

Bankruptcy can be looked as a sign of admission, defeat, or embarrassment. Your name will be in court records as well as it can appear in newspapers, this can be considered embarrassing to many people. You will have to tell your story to a judge regarding your entire financial situation. It is important however, to remember that most judges have heard stories that are worst than your personal situations.

It can be complicated if you are sued rather than filing for bankruptcy. If you are sued by your lenders then your car can be repossessed or your home can be foreclosed on.

Tips

There are several things you might want to remember before making a decision.

  • Filing for bankruptcy can release you from the need to handle your creditors and their phone calls.
  • You will be able to avoid any lawsuits by filing for bankruptcy. You will also have your foreclosures paused, you can no longer be sued after you file your bankruptcy position.
  • Bankruptcy can harm you are the ability gain no credit, insurance, as well as a jobs. You will also have trouble getting any mortgage for between 7 and 10 years after your bankruptcy is complete.

There are so many reasons that a person can find themselves in financial troubles. It is true that the cost of living is rising, the unemployment is rising, and poverty is rising. If you are facing insurmountable debt troubles then filing for bankruptcy may be your only way option. It can be very stressful for anyone involved in the negative financial situation. Knowing the pros and cons of bankruptcy can help a person decide if it is the best option for you.