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Tips for Families Going From Two Household Incomes to One

The decision to move from two household incomes to one can be a challenging one. Many people face it when they’re having their first child, or when they’re contemplating a career change that will require going back to school.

Sometimes, it’s not a decision at all, as a life change can force you into this type of situation. Perhaps one partner becomes disabled, or they face job loss in the coronavirus economy. (Sometimes, this can happen abruptly, with the unexpected passing of your partner.)

For Sarah and I, the moment that triggered our choice to move to a single income household was the moment we discovered that our third child was on the way. With two other preschool-aged children at home already, child care was becoming so financially demanding that we were questioning whether it was worth it anyway, and the desire to simply have a tighter knit family for a time while the kids were so young cinched our decision.

Here are seven strategies that worked very well for us in planning for a transition from two incomes to one.

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How to transition from two household incomes to one income

1. Create a budget for life after the change

If you’re considering the possibility of moving to a single income household, your first step is to figure out the financial feasibility of it. Is it even possible to pull this off?

The easiest way to do that is to assemble a budget that incorporates both your reduced income level after the shift as well as the changes in your expenses. You’ll have to make some estimates as to how many of your expenses will change. For example, you’ll likely see a drop in commuting costs, professional clothing, and meals eaten outside the home, and you’ll probably see a natural drop in overall food costs. However, you’ll likely have to supplement that with additional belt-tightening.

How does one even start assembling a budget?  Begin by figuring out where all of your money is actually going, tracking it down with bank and credit card statements.  Organize all of those expenses into categories that make sense for you, and total up how much you spent in those categories.  Then, figure out sensible cuts within each of those categories.

When Sarah and I assembled our one-income budget we realized we would have to drastically cut our entertainment and food expenses to make things work. We decided that strictly adhering to eating at home and cutting back heavily on spending for entertainment and travel would have to happen, but it was still possible and realistic to make it work.

2. Consider your health insurance options

In an ideal situation, the person who is remaining in the workforce already has the best health insurance package, which the whole household is already using. However, sometimes you may find that the person leaving the workforce is the one with the better option, meaning that you either need to switch to the other health care plan or, if one isn’t available, shop for one on the open market.

3. Consider long-term FMLA leave or a sabbatical

Some workplaces offer unpaid leave through Family Medical Leave Act (FMLA) that can last for up to a year in some situations, and other workplaces offer sabbaticals in the form of periods of unpaid leave. These options can help you retain access to some workplace benefits while you are away from the workplace.

4. Do a trial run on one income first

Now that you have a clear picture of the expenses that you’ll face after moving to one income, do a “trial run” on that income. Commit to living as though you had just one income as closely as possible, sticking to your reduced expenses in areas like food, entertainment and hobbies to see what problems expose themselves.

If you find that you cannot sustain your household on one income, try revisiting your budget to find other areas where you can cut back on expenses. In the case that you find you can’t cut back any more expenses, consider some work-from-home jobs to pick up a side gig or increase your income while staying home.

5. Build a healthy emergency fund

An emergency fund is a pool of cash that is set aside for unexpected events, typically in a savings account. One of your major goals during the time leading up to transition to a one-income household should be to build up that emergency fund, so that you’re able to handle unexpected events easily once you go from two incomes to one. If you’re executing the trial run strategy, then the extra income from the second income earner during that trial run period provides the funds you need to build that emergency fund.

Ideally, all families should have a healthy emergency fund, but it’s even more important when you’re transitioning to a single income, as there’s more financial risk involved. The truth is that life contains a lot of risk and emergencies will happen, and while there are many things you can do to avoid debt in an emergency, the best one is to simply be prepared for it. Aim to have at least a couple of months of living expenses set aside, so that things don’t fall apart if the single income earner loses their job as well.

6. Pay off high-interest debts

If you have a healthy emergency fund in place, the next step is to get rid of as much of your high-interest debt as possible. As with the emergency fund, this is much easier to do if you’re doing a trial run of transitioning from two incomes to one income.

Start by assembling your own debt repayment plan, which will help you organize your debts in a sensible way and will naturally prioritize high-interest ones.

The advantage of paying off debts during your trial run period is that it reduces your expenses when you’re living with a single income. That’s one fewer bill that you have to deal with, meaning it’s easier to make ends meet.

7. Develop home economics skills

As you’re preparing to switch to a single income household, one very useful tool to have in your repertoire is basic frugal household skills, like food preparation, household management and basic repair skills. Use this trial run as an opportunity to really hone your skills in those areas when you have a financial safety net of a second income to help clean up any mistakes along the way.

For example, you might completely burn dinner as you’re learning to cook at home, but this is much less of a crisis if you can afford to order pizza, an option that might not work as well later when you’re on a much tighter budget.

We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

Source: thesimpledollar.com

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How to Build Credit with Fingerhut

  • Raise Credit Score

If you’ve been wanting to make a big purchase, but your credit is less than spectacular, you might have looked into Fingerhut as an option. 

Fingerhut is an online catalog and retailer that showcases a multitude of products. On this website, customers can shop for anything from electronics to home décor to auto parts. Fingerhut offers financing through their own line of credit, making it appealing to shoppers with poor credit or a nonexistent credit history. Many consumers have a better chance of getting approved by Fingerhut, than they might have of getting approved through most other credit card companies. It’s an option worth looking into if you want to improve your credit score through credit utilization.  

The major difference between Fingerhut and credit cards that cater to low credit scores is that Fingerhut credit is exclusively available for use with its own company’s products and authorized partners. You’ll also find that the company’s products are pricier than they would be through most other retailers, while also bearing the weight of higher interest rates. While it might seem like a good idea if you don’t have good credit, it’s best to familiarize yourself with the ins and outs of the company beforehand so that you know what you’re signing up for. 

How Fingerhut credit works

When you apply for a Fingerhut credit account, you can get approved by one of two accounts:

  • WebBank/Fingerhut Advantage Credit Account.
  • Fingerhut FreshStart Installment Loan issued by WebBank.

As it happens, by submitting your application, you are applying for both credit accounts. Applicants will be considered for the Fingerhut FreshStart Installment Loan issued by WebBank as a direct result of being denied for the WebBank/Fingerhut Advantage Credit Account. In other words, you won’t have a way of knowing which one you will be approved for prior to applying. Both credit accounts are issued by WebBank and are set up so that customers can purchase merchandise by paying for them on an installment plan with a 29.99% Annual Percentage Rate (APR). These are the only things that the different Fingerhut credit accounts have in common.

The WebBank/Fingerhut Advantage Credit Account

The WebBank/Fingerhut Advantage Credit Account works very much like an unsecured credit card, except that it’s an account that you can only use it to shop on Fingerhut or through its authorized partners. 

This credit account features:

  •  No annual fee.
  • A 29.99% interest rate.
  • A $38 fee on late or returned payments.
  • A possible down payment; it may or may not be required. You won’t know prior to applying. 

If you get denied for this line of credit, your application will automatically be reviewed for the Fingerhut FreshStart Credit Account issued by WebBank, which is both structured and conditioned differently.

Fingerhut FreshStart Installment Loan issued by WebBank

If you get approved for the Fingerhut FreshStart Installment Loan, you must follow these three steps to activate it:

  • Make a one-time purchase of no less than $50.
  • Put a minimum payment of $30 down on your purchase, and your order will be shipped to you upon receipt of your payment. You may not use a credit card to make down payments, but you can use a debit card, check, or a money order. 
  • Make monthly payments on your balance within a span of six to eight months.

You can become eligible to upgrade to the Fingerhut Advantage Credit Account so long as you are able to pay off your balance during that time frame or sooner without having made any late payments. Keep in mind that paying for the entire balance in full at the time you make your down payment will result in you not qualifying for the loan as well as being ineligible for upgrade. 

How a Fingerhut credit account helps raise your credit score

The fact that it can help you improve your credit is one of the biggest advantages of using a Fingerhut credit account. 

When you make your payments to Fingerhut in full and on-time, the company will report that activity to the three major credit bureaus. This means that your good credit utilization won’t go unnoticed nor unrewarded. If you use Fingerhut to improve your credit score, you will eventually be able to apply for a credit card through a traditional credit card company—one where you can make purchases anywhere, not just at Fingerhut. 

Additional benefits of a Fingerhut credit account

Besides using it as a tool to repair your bad credit, there are a few other benefits to using a WebBank Fingerhut Advantage Credit Account such as:

  • No annual fee.
  • Fingerhut has partnerships with a handful of other retailers, which means you can use your Fingerhut credit line to make purchases through a variety of companies. Fingerhut is partnered with companies that specialize in everything from floral arrangements to insurance plans.
  • There are no penalties on the WebBank Fingerhut Advantage Credit Account when you pay off your balance early.

How to build credit with Fingerhut

Fingerhut credit works the same way as the loans from credit card companies work: in the form of a revolving loan. 

A revolving loan is when you are designated a maximum credit limit by your lender, in which you are allowed to spend. Whatever you spend, you are expected to pay back in full and on-time through a series of monthly payments. This act of borrowing money and paying off bills using your Fingerhut account causes your balances to revolve and fluctuate, hence, its name. 

Your credit activity, good or bad, gets reported to the three major credit bureaus and in turn, will have an effect on your credit report. Revolving loans play a large role in your credit score, affecting approximately 30% of your score through your credit utilization ratio. If your credit utilization ratio, the amount of available revolving credit divided by your amount owed, is too high then your credit score will plummet. 

When using a Fingerhut account, the goal is to try to keep your amounts owed as low as you possibly can so that you can maintain a low utilization ratio, and as a result, have a higher credit score.

Alternatives to Fingerhut

If you’ve done all your research and decided that Fingerhut isn’t the right choice for you, there are other options that might serve you better, even if you have bad credit. There are a variety of secured credit cards that you can apply for such as:

  • The OpenSky Secured Visa Credit Card: You will need a $200 security deposit to qualify for this secured credit card, but you can most likely get approved without a credit check or even a bank account. It can also be used to improve your credit, as this card does report to the three major credit bureaus. While this card does come with an annual $35 fee, you can use it to shop anywhere that will accept a Visa. 
  • Discover it Secured:  For all those opposed to paying an annual fee of any sort, this card might just be the one for you. With a $0 annual fee and the ability to earn rewards through purchases, there’s not much to frown about with this secured credit card. One of the best perks, is that it allows you the chance to upgrade to an unsecured card after only eight months. 
  • Deserve Pro Mastercard: This card is a desirable option for those with a short credit history. There is no annual fee and no security deposit required and, if your credit history isn’t very long-winded, that’s okay. The issuers for this card may use their own process to decide whether or not you qualify for credit, by evaluating other factors such as income and employment. This card is especially nifty because you can get cash-back rewards such as 3% back on every dollar that you spend on travel and entertainment, 2% back on every dollar spent at restaurants, and 1% cash back on every dollar spent on anything else. 

Final Thoughts 

Fingerhut is an option worth looking into for those with bad credit or a short credit history. If you want to use a Fingerhunt credit account to improve your credit score, be sure to use it wisely and make all of your payments on time, just as you would with any other credit card.

Even though it might be easy to get approved, the prices and interest rates on items sold through Fingerhut are set higher than they would be at most other retailers, so it’s important to consider this before applying. 

There are a ton of options available, regardless of what your credit report looks like, if you are trying to improve your credit. If the prices of Fingerhut’s merchandise are enough to scare you away, you might want to consider applying for a secured credit card. 

Source: pocketyourdollars.com

Prepare for Holiday Shopping with These Timely Credit Tips

October 29, 2020 &• 5 min read by Constance Brinkley-Badgett Comments 0 Comments

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According to a YouGov Parent Survey in 2019, a quarter of parents entered the 2019 holiday shopping seasonstill paying down debt related to 2018 holiday spending. Deloitte numbers put holidayretail salesgrowth in 2019 at 4.1% year-over-year. In 2020, Deloitte predicts growth of between 1% and 1.5% year-over-year for the holiday season.

It might be that some people no longer want to pay for holiday gifts, decorations and food a year down the road. But it’s also true that the COVID-19 pandemic has hit consumerwallets and some people might be cutting back this year.

That doesn’t mean that people aren’t shopping. Google and other thought leaders note that changes to shopping habits and the need for social distancing and other measures will likely spread the holiday shopping season out longer. Shoppers are also likely to turn to online shopping.

With a ton of shopping opportunities, a longer holiday shopping season and pent-up pandemic energy, it might be easy to overspend and create debt you’ll deal with into the future. Follow these tips to prepare for holiday shopping so you can protect your financial standing, save money and make the most of the resources you have this season.

1. Check your credit scores

Begin by checking your credit scores and reports. They tell you where you stand if you want to apply for credit. They also give you a baseline of where you are so you know if your score goes up or down later with no explanation.

An unexplained drop in your credit score can be a sign your financial information is compromised. Unfortunately, the holidays are prime time for many scammers. Using a service, such as ExtraCredit’s Track It feature to keep tabs on 28 of your FICO scores, helps you know when you need to act to protect your credit.

2. Ask for a credit limit increase

If you have existing credit cards and you’re a cardholder in good standing, the months prior to the holidays can be a good time to ask for a credit limit increase. You’re not asking so you can spend more-it’s typically advisable to keep spending in line with your budget no matter how much credit you have.

You’re asking for a higher limit so you can spend what you already planned to without hurting your credit utilization. Credit utilization is the second-most important factor in determining your credit score-second only to payment history. It’s the ratio between your credit limit and how much of that credit you have used.

If you have a card with a limit of $1,000 and you spend $300, that’s a utilization rate of 30%. But if you get approved for a credit limit of $2,000 and you spend $300, that’s a utilization rate of only 15%, which is better for your score.

3. Apply for a credit cardwith a 0% APR introductory offer

Those with good or excellent credit might want to consider applying for a card with a 0% APR introductory offer. If you qualify for such a card, you typically have one or two years to pay off purchases made during the introductory period without accruing any interest.

This can be a way to finance your entire holiday without paying anything more for the privilege of doing so. However, it’s still important to maintain your budget and not overspend just because you won’t be paying the balance off until later. Otherwise, you make this season’s holiday festivities next season’s problem.

4. Pay down debt before-and after-the holidays

Speaking of last season’s debt: If you can pay it down before you start spending this season, that’s a great accomplishment. It also frees up your credit and your budget so you can better enjoy the current holiday season. If you’re paying $100 a month on your debt, that’s $100 a month that might go toward gifts or celebrations that you don’t have to put on a card this year.

If you do use credit to pay for the 2020 holidays, have a plan for paying it down as soon as possible. That’s especially true with 0% interest cards. The longer you wait, the greater the chance you’ll miss the introductory period and potentially be on the hook for a lot of interest expense.

5. Create a holiday spending budget

Whether you’re using cash or credit-or a mix of both-enter the 2020 holiday shopping season with a plan. Take an honest look at your personal budget. If you don’t have a budget, create one before you move forward. Then decide how much you can realistically spend during the holidays.

Consider which gifts you want to buy and which events you want to host or attend. You might not be able to do everything, and that’s OK. Be honest with yourself, your family and your friends about what you can afford to do with your time and money this year.

Then make a list and assign each item a monetary budget. That can include:

  • Gifts as a total
  • Gift extras, such as wrapping and tags
  • Shipping, both for receiving items you buy and for shipping gifts to others
  • Food and drinks
  • Travel
  • Decor
  • General festivities, such as tickets to holiday events

Once you assign a dollar amount to a category, stick to it. That’s a good idea even if you’re spending with credit.

6. Align budgeted spendingwith credit cardrewards

Once you know how much you want to spend, decide how best to spend it. If you’re using credit cards for the holidays, check your accounts to see if any offer cash back or rewards points. If they do, double-check which categories or stores you can shop in to earn the most points with each card.

For example, some travel rewards cards offer 6x points when you shop at supermarkets. You could use such a card to cover the food-and-drink portion of your holiday budget and reap the biggest rewards possible from that spending. You might also be able to maximize rewards when purchasing gift cards.

7. Guard your financial information and identity

As you enjoy holiday shopping, be on guard. Don’t use debit card PIN numbers unless you have to, and shield the keypad when you enter your information. Keep a close eye on your wallet or purse, and check your credit card statements regularly to ensure all charges are yours. You can also use ExtraCredit’s Guard It feature to help keep your identity and account information safe during and beyond the season.

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How to Build Credit Without Student Loans

June 6, 2016 &• min read by Jeanine Skowronski Comments 0 Comments

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College graduates saddled with student loans may find this hard to believe, but there is one upside to having to pay back all that debt: It helps you build credit.

That may seem like a small consolation — particularly if the balances you owe are even average — but credit can be hard to come by. Of course, all hope isn’t lost for those who don’t have student loans.

Here are some ways to build credit without that kind of debt.

1. Get a Secured Credit Card

The Credit Card Accountability Responsibility and Disclosure (CARD) Act prohibits lenders from giving credit cards to anyone under 21 who doesn’t have a willing co-signer or a demonstrated ability to repay, but if you’re over that age or you have a source of income, you can apply for some entry-level plastic.

Secured credit cards — which require you to put down a deposit that serves as your credit line — are specifically designed to help people repair or build credit. These cards generally require a deposit to “secure” the limit of the credit card. (You can go here to learn more about the best secured credit cards in America.)

There are also student credit cards geared to young borrowers that could be worth considering. The better ones have low credit limits that can keep new borrowers out of trouble and tout rewards or alerts designed to build smart-spending habits.

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2. Become an Authorized User

If you can’t qualify for a credit card, you may want to see if a parent, guardian or family friend is willing to add you as an authorized user to one of their credit cards. Authorized users aren’t responsible for paying off an account, but will get credit (pun intended) for any good activity associated with it. Just be sure to have the primary cardholder check if the issuer reports authorized users to the major credit bureaus, since not all of them do so.

3. Take Out a Credit-Builder Loan

An alternative to starter credit cards, credit-builder loans, offered by some credit unions and banks to help people improve their credit, allow you to borrow a nominal amount (often $1,000 or less) and make payments for 12 to 24 months. The payments are deposited in an interest-bearing CD or savings account. These loans typically have relatively low interest rates and can help people with a thin credit history develop a more solid credit profile as long as on-time payments are reported to the three major credit reporting agencies. (Again, you may want to check this ahead of time.)

4. Apply for a Personal Loan

You may be able to qualify for a personal loan. These installment loans do not require collateral and typically have slightly higher interest rates than secured loans. A bank or credit union that you have a relationship with may be willing to extend financing, though you may be asked to get a co-signer.

5. Establish Good Habits

Of course, you’ll only build good credit if you use any financing you are able to obtain wisely. You can establish a good credit score over the long term by making all your payments on time, keeping debt levels lower than 30% (ideally 10%) of your total available credit limit(s), and adding a mix of credit accounts (revolving lines, like credit cards, and installment loans, like an auto loan) as your score and wallet can handle them.

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You can track your progress by viewing your two free credit scores each month on Credit.com. If you make a misstep, you may be able to fix your credit by disputing errors on your credit report, identifying your particular credit score killers and coming up with a game plan to address them.

More on Credit Reports & Credit Scores:

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Why Does My Mortgage Keep Getting Sold?

A letter arrives in the mail and tells you your mortgage has been sold. It also informs you to send your monthly payments to a new address. Don’t panic! This happens all the time, and you shouldn’t see many (if any) changes.

“I would say probably 30% to 50% of the time [borrowers are] going to eventually end up mailing their payments somewhere else different from when they first originated it,” says Rocke Andrews, president of the National Association of Mortgage Brokers.

So why does your mortgage get sold—and why can it happen multiple times? Banks and mortgage servicers constantly check the numbers to find a way to make a buck on your big loan. It all takes place behind the scenes, and you find out the result only when you get that aforementioned letter in the mail.

What does a mortgage being sold mean for homeowners?

The short version: When a loan is sold, the terms of that loan don’t change. But where a mortgage-holder submits payment and receives customer service may change as the loan gets sold. And that could affect a few things.

“The level of service that you receive may vary depending upon who the servicer is,” Andrews says. “Certain servicers might offshore a lot of that [work]. So when you would call into servicing you could get a call center in India or over in Asia somewhere and people were less than knowledgeable about the product.”

But service issues that lead to frustration are the exception, not the rule, says Andrews. “Most [consumers] don’t deal with the servicers that much, they just send in a payment and things are happy.”

The new servicer might offer different payment options and may have different fees associated with payment types, so be sure to check any auto payment or bill pay functions you’ve set up.

The basics of mortgage servicing

To understand why mortgages are sold, it’s important to understand some basics.

First, when you take out a mortgage to buy a home, a lender approves your loan and you make payments to a loan servicer. Sometimes, the servicer and the lender are one and the same. More often, they’re not.

The servicer “collects the payment and disburses it out,” Andrews says. “They distribute the payment to the investors, [send] property taxes to the local taxing entity, and [pay] homeowners insurance. They are taking care of all the payments coming in and getting them distributed to the people they belong to.”

Andrews says a small portion of the interest you pay on a loan—often a quarter of a percent—goes to the servicer.

“Typically servicing is a labor-intensive business—there are only five or six servicers [nationwide] that probably handle 75% to 80% of all the mortgages in the United States,” Andrews explains. Major players include Chase, Wells Fargo, Citibank, Freedom, and Mr. Cooper. Some of these companies service the loans they originate.

Servicers can sell your mortgage

Lenders can enter agreements with servicers to purchase batches of loan servicing. Or lenders may shop around for a servicer if they’re carrying too many loans on their books.

Servicers are interested in buying loans in order to sell other products to their new-found customers. Andrews uses an example of a big bank that can then attempt to sell retirement funds, credit cards, or other profitable financial product to customers they had no prior relationship with.

Many lenders originate loans, and then proceed to sell off the servicing or the loan itself. If the servicer changes, the customer must receive a notification. There will be a grace period in case a borrower accidentally sends payment to the wrong place.

Lenders often sell the loans to financiers as a mortgage-backed security for investors or to government-sponsored entities like Fannie Mae, Freddie Mac, and Ginnie Mae.

So why does my mortgage get sold?

Loan servicers are businesses in search of a profit. Andrews says the value of the servicing depends on two main factors:

  • Whether a borrower pays on time or not
  • How long the borrower will be paying

If a servicer receives a quarter percent for servicing a 30-year mortgage, a consumer who pays steadily for the life of the loan is more valuable  than a borrower who opts for a refinance within a few years.

Keep in mind: During a refinance, the new loan pays off the old loan, and new terms are set. So if a servicer was expecting to earn a quarter of a percent over 30 years and the borrower refinances after only five years, the servicer gets the share for five years as opposed to 30.

For example, if you have a $100,000 loan at 4% for 30 years, you’d pay about $70,000 in interest over the life of the loan. However, the lender would need to wait a full 30 years to make that full $70,000. In hopes of a quicker profit, lenders will often sell the loan.

If servicing a loan costs more than the money it brings in, lenders may attempt to sell the servicing of it to lower their costs. The lender may also sell the loan itself to free up money in order to make more loans.

Loan servicers have another consideration in play. They need to pay investors who buy mortgage-backed securities—even if a consumer with a mortgage can’t make payments or is in forbearance.

“The downside to forbearance is the servicing company has to make your payment for you,” Andrews says. “That’s why we’re running into problems.”

With millions of homeowners asking for forbearance, Andrews predicts more mortgages will be sold.

Can I state that I don’t want my mortgage sold?

Somewhere in the terms and conditions of your mortgage paperwork, it likely says your mortgage can be sold. Andrews says there is really no way to keep it from happening.

The trade-off for the odd behind-the-scenes shuffling of your mortgage is a lower interest rate for you—the all-important borrower.

“It’s just part of making the entire mortgage industry safer, more liquid,” Andrews says. “Back in the old days you would go to the bank and make your payment at the bank.” The rates depended on how much money the bank had and the area economy.

But instead of the bygone days of interacting with the local banker, nationwide competition for your borrowing needs has been unlocked.

“By nationalizing the mortgage market, you provide lower rates and better options to the consumer,” says Andrews.

For more smart financial news and advice, head over to MarketWatch.

Source: realtor.com

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I Don’t Need a Credit Card But Want to Build Credit. What Can I Do?

July 22, 2016 &• min read by Constance Brinkley-Badgett Comments 0 Comments

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Good credit is essential if you hope to borrow money one day for things like a new car or home. But good credit can also be important for smaller things like renting an apartment or even landing a new job. And one of the easiest ways to build the credit necessary for these things is by getting a credit card.

If you have no credit, or even bad credit, and you’re averse to getting a secured credit card to help improve your credit, there are other ways to go about establishing and building good credit.

Here are three other options for building credit and improving your credit scores.

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1. Get a Credit-Builder Loan

A credit builder loan is a loan with a set amount you pay back over a set period of time (referred to as an installment loan). Most have repayment terms ranging from six months to 18 months, and because these loans are reported to one or more of the three national credit reporting agencies, on-time payments will help build up your credit.

Here’s how it works: A lender places your loan into a savings account, which you can’t touch until you’ve paid it off in full, allowing you to build credit and savings at the same time. And because loan amounts for credit builder loans can be quite small (just $500) it can be much easier to make monthly loan payments.

Credit-builder loans are best for people with no credit or bad credit. But, if you have good credit but don’t have any installment accounts on your credit report, a credit-builder loan could potentially raise your score since account mix is another major credit-scoring factor.

2. Pay Your Rent 

If you’re in the process of moving or need to do so in the near future, it’s a good idea to find a landlord who reports your rent payments to the major credit bureaus. Depending on what credit report or credit score is being used, these on-time monthly rent payments can give you a quick and easy credit reference and help you qualify for a loan (or at least another apartment down the road).

3. Become an Authorized User

Asking your spouse, partner or even your parent to add you onto one of their accounts as an authorized user could give your credit a boost. If the account they put you on has a perfect payment history and low balances, you’ll likely get “credit” when that account starts appearing on your credit reports. You won’t necessarily need to use the card to benefit from this strategy. It is a good idea to have your friend or family member check with their issuer to be sure that it reports authorized users to the three major credit reporting agencies (not all do).

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Remember, one of the most important things in building good credit is making timely loan and bill payments. Bills like rent or utilities may not be universally reported to the credit bureaus, but if they go unpaid long enough, they can hurt your credit, especially if they go into collection. (You can see how any collections accounts may be affecting your credit by viewing your two free credit scores, updated every 14 days, on Credit.com.)

If your credit is in rough shape, due to a collection account or other payment history troubles, you may be able to improve your scores by paying delinquent accounts, addressing high credit card balances and disputing any errors that may be weighing them down. And remember, you can build good credit in the long term by keeping debt levels low, making timely payments and adding to the mix of accounts you have as your score and wallet can handle it.

[Offer: If you need help fixing your credit, Lexington Law can help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]

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