Filing Your NJ 2019 Taxes: Go it Alone or Use a CPA?

Everyone knows April 15^th is tax day. For months you’ll see the ads everywhere for tax filing services. If you’re reasonably good with numbers you may be wondering if you can handle filing your taxes yourself or if you should use an accountant. There are a lot of factors to consider so it’s best to know all of the options before you file.

 

When should you go it alone?

Filing taxes yourself is best when you’re taxes are fairly simple. If you are filing singly and taking the standard deduction your tax preparation will be fairly straightforward. However if you have dependents, student loan interest, a mortgage, or own a business you will want to itemize in order to get the maximum benefit. That can get complicated quickly. Certain itemizations can raise red flags for an IRS audit. In that case you will have been penny wise and pound foolish. You’ll have to hire a CPA to represent you in an audit in addition to back taxes and fees you’ll have to pay.

 

Not all accountants are created equal.

Anyone who studied accounting can call themselves an accountant. Your college roommate who took a few accounting courses is an accountant. Your cousin’s wife who read Accounting for Dummies is an accountant. Does that mean you should put your tax preparation in their hands?

 

You may think that going to an office like Jackson Hewitt or H&R Block means that you’re putting your taxes in the hands of professionals. The term ‘professionals’ is misleading. Their websites don’t even call their employees accountants or professionals, they call them ‘tax pros.’ Workers filing your taxes are trained on how to use accounting software, that’s it. Hiring one of these companies is hardly a step up from filing yourself using TurboTax.

 

An Enrolled Agent, or EA, is an accountant who has been certified by the IRS. To become an EA, several requirements must be met:

• Must have a Preparer Tax Identification Number (PTIN), which must be renewed annually
• Must achieve passing scores on all three parts of the Special Enrollment Examination (SEE) within two years
• Apply for enrollment
• Payment of enrollment fee
• Pass a background check
• Pass a suitability check of past tax filings
• Renew EA certification every three years
• Obtain continuing education after certification

An EA does not have to have a college education. When choosing an accountant to file your taxes, an EA will probably be more affordable than a CPA. An EA is also capable of legally representing you in the event of an audit.

 

A Certified Public Accountant, or CPA, must have a bachelor’s degree from an accredited college or university with 150 total semester hours. Of these, 24 must be in accounting and 24 in business. In order to be licensed in New Jersey, a candidate must pass the CPA exam and provide evidence of at least one year of experience working for a CPA. During that term, 25% of your time must be spent auditing and accounting and the remaining 75% on tax services. Maintaining a CPA license requires 120 hours of continuing professional education to be completed every three years including a New Jersey Law and Ethics course.

 

A CPA is the most well-educated and experienced person you can have handling your taxes. If you need help finding an NJCPA, Veitengruber Law has close relationships with CPAs with impeccable reputations. George can recommend a CPA that will handle your taxes with accuracy and honesty beyond reproach.

 

Who should use a CPA?

Anyone not taking the standard deduction should have their taxes prepared by a professional. When itemizing your taxes, a CPA can help you find deductions you might have missed, express concerns about possible red flags, and let you know about upcoming tax law changes for the new year that you can prepare for.

 

In the event of an audit, you’ll want a CPA on your side. They will have experience navigating an audit and won’t be intimidated by the IRS officials. They may even have worked with the IRS agent before on other cases and know what to expect.

 

While most tax returns could benefit from the eye of a CPA, these are some categories of filings that definitely should be itemized:

• Buying or owning a home
• Owning a rental property
• Moving and moving expenses
• Moving to a new state and filing 2 sets of taxes
• Medical expenses and medically related travel
• Owning a business
• Working from home in a home office
• Paying student loan interest

 

It’s best not to leave your tax returns to chance. Hiring a CPA for your filing is the best way to ensure you get the maximum benefit on your return.

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Can a NJ Seller be Sued for Undisclosed Defects in the Home?

When selling your home in New Jersey, “Caveat Emptor” (Buyer Beware) is the main tenet applied. The seller also has an obligation under common law to properly represent the property. If the seller fails to honestly represent the home for sale, they open themselves up to the probability of legal actions. Because we know this is an area of NJ real estate law that can easily be misinterpreted, Veitengruber Law always works hard to ensure that our clients understand their responsibility as a New Jersey real estate buyer or seller.

New Jersey courts have ruled in favor of misled buyers.

While the law is not specific, the courts have heard numerous lawsuits and ruled in favor of buyers when they have been blatantly misled by the seller. In New Jersey there is an “implied warranty of habitability.” This means that the seller is expected to disclose anything that can affect habitability of the home, and includes things like: drainage problems, hidden mold, roof leaks, poorly insulated walls and windows. Was the house ever tested for Radon? Hiding these types of things from potential buyers could bring about a lawsuit after the sale.

NJ real estate contract review is crucial!

There are good reasons to use both a real estate agent and a NJ real estate law firm like us when buying a house. Even the most basic real estate contract includes a laundry list of items that any buyer would expect to be included or corrected before they agree to purchase a property. All improvements and construction should be valid and up to code. This will ensure a Certificate of Occupancy (CO) can be obtained from the local municipality. You cannot move into a house without a Certificate of Occupancy.

KEY TAKEAWAY: Buyers should be sure that qualifying for a CO is written into their real estate contract, and every contract should be thoroughly reviewed by a real estate attorney. At Veitengruber Law, we work closely with many home inspectors to ensure that a full property inspection is completed before our clients sign any paperwork.

Undocumented improvements can lead to problems

Sometimes homeowners make improvements without securing the proper permits and inspections. This potentially means that if the situation comes to light before, during, or after the sale of the home, the municipality can levy fines and charge back taxes. Who is financially responsible for these fees depends  upon when the situation is discovered.

A house with a bad reputation?

There is no official requirement to disclose things such as a tragic event that occurred in the home, like a crime, murder, or death of natural causes. While sellers don’t have to offer up this information, they do have to respond truthfully if asked if an event of this nature has occurred in the home or on the property. If a seller blatantly misrepresents what has taken place in the home, the buyer can sue for relief.

As the buyer, you are spending a great deal of your money for the house of your dreams. You will likely spend many years living in the home, and you may even raise a family there. BECAUSE there are no solid laws requiring the seller to disclose the home’s “past,” it’s important that you do your due diligence. Research all available information and secure your situation with the expert representation of Veitengruber Law.

How Bankruptcy Impacts Your Inheritance

Making the decision to file for bankruptcy can be difficult, but sometimes bankruptcy is the best answer to your financial difficulties. Filing for Chapter 7 or Chapter 13 bankruptcy can be the tool that helps you get out from under massive debt. But the process of bankruptcy isn’t easy and it comes with some hard to swallow consequences. If you are expecting to receive an inheritance soon or if you have recently been the recipient of money or property from a loved one who has passed, you need to think about what bankruptcy can do to your inheritance.

In bankruptcy, there is a 180-day rule. Once you file, the first 180 days immediately after are critical to your bankruptcy case. In this time period, whatever income you receive becomes part of the bankruptcy estate. Any inheritance you receive during this time will also become part of the bankruptcy estate and what happens to that inheritance will depend on your specific bankruptcy case. It is important to note that you do not have to actually have possession of the money or property you are entitled to in your inheritance for it to be included in the bankruptcy. As long as you become entitled to the inheritance within the 180-day time frame, it will be included in your bankruptcy.

If your spouse receives an inheritance, it is not necessarily part of the bankruptcy estate. Your spouse’s inheritance will only be included in the bankruptcy estate if you are filing for bankruptcy together. If your spouse is not included in the bankruptcy case, then the inheritance should not be included. The only way the inheritance could become part of the bankruptcy estate is if it is used in conjunction with marital assets. The best way to avoid this issue is to keep your spouse’s inheritance totally separate from any shared assets.

You are responsible for notifying the bankruptcy trustee of the money or property you are entitled to under your inheritance. Even if you fear the inheritance may be taken during the bankruptcy to pay off creditors, you cannot withhold this information. Talk to a bankruptcy attorney about when and how to notify the bankruptcy trustee. There may be specific forms you need to amend for your case depending on whether the inheritance was money, personal property, land, or a structure.

Whether or not you will be able to keep this inheritance depends on if it falls under an existing exemption. In New Jersey, you can keep up to $1,000 of personal property and up to $1,000 of furniture and household goods. You are also entitled to keep your clothing and your burial plot. If married and filing jointly, you and your spouse can double the personal property exemption to $2,000. Your bankruptcy attorney will be able to help you understand what part of your inheritance, if any, is exempt. If your inheritance is not exempt, the court will liquefy the asset to go towards paying off creditors under Chapter 7 or it will be included in the calculation for your payment plan under Chapter 13.

If your loved one passes or you become entitled to the inheritance 181 days or more after you filed for bankruptcy, it is not part of the bankruptcy estate. Under Chapter 7 bankruptcy, your inheritance is yours to keep and it will not be used to pay off creditors. Under Chapter 13 bankruptcy, however, your inheritance could be calculated into your monthly payment plan. Unless it is exempt, your bankruptcy trustee can count it as income and determine how much of it should go towards your outstanding debts.

Bankruptcy can be a confusing and difficult process. Don’t become overburdened with stress over all the little details. At Veitengruber Law, we’re experienced in handling the intricacies of New Jersey bankruptcy law. If you are concerned about how bankruptcy can impact your inheritance, we can help.

What is a Holographic Will?

A holographic will is a personal handwritten will that has been signed by the testator (the person writing the will). While a formal will requires the addition of witness signatures, a holographic will does not. In some cases, if proven to be legitimate, the holographic will is treated the same as formal wills executed by your lawyer.

How do I ensure that a handwritten will is honored after my death?

There are several requirements that ensure that a will is honored:

1. You must be able to prove you actually wrote and signed the will. This can be done by hand-writing experts. You can also provide and name witnesses to the writing.
2. You must be mentally capable to make the decisions involved in the writing of a will and the disposition of your property.
3. You must be expressing a wish to distribute your property to beneficiaries.

 What are the pitfalls involved?

Not all jurisdictions will recognize a holographic will. A will of this type can be more easily challenged by virtually anyone. If you have an existing will that was written by an attorney, a judge could be persuaded to honor the more legal document. A holographic will is generally written during times of great distress or danger.

An example of creating a holographic will under duress would be in the few minutes when you know that your plane is about to crash. You may write a note stating that your immediate family is to inherit all of your earthly possessions. A business partner, for example, would be prone to contest this, especially if you have contracts in place for how your business is to be split after a partner’s death.

Another example of a holographic will comes in the form of a video will. Generally this happens when there is no paper available. People in the armed services are usually granted the largest berth when it comes to creating video wills. People that are trapped, lost, kidnapped or imprisoned also fall into this category. There are time limits set by some jurisdictions for these types of holographic wills.

 Who should I notify of the will’s existence?

The hard truth of the matter is that you may not be able to notify anyone, especially if you’re in a life or death situation and come to the realization that you’ve never drafted a will! If that’s the case, you’ll have to hope that your handwritten or typed last wishes will somehow make it into the right hands and will also stand up in court. This is all assuming that your holographic will survives the tragic event(s) that caused you to lose your life.

The best way to go?

 We all live busy lives, filled with activities and work. Once you reach a point where you own assets to dispose of, it falls on you to make it easier for your loved ones when you do depart this earth. Therefore, there is no better alternative than to make time to sit down with your lawyer and write a formal will.

Yes, there are online wills that can be downloaded and filled out. There are packages that can be purchased from your local bookstores that will direct you how to fill out a will that should stand up to probate. Our recommendation? Don’t wait until you’re looking death in the eye to scribble out a few lines saying everything goes to my wife. Don’t take chances with your Estate; you deserve the peace of mind that comes with having your will professionally written and witnessed.

 

How to Start Saving for the Holidays in September

The holiday season is all about family, festivities, and decorations—but it is also an expensive time of the year. Between gifts, décor, travel, and party supplies, the average American spends upwards of $1,000.00 every year for the holiday season. If you don’t plan for this expense, you could end up charging all your holiday purchases and wind up in a post-holiday financial slump. It is no wonder so many New Year’s resolutions revolve around money management. The best way to avoid going into debt this holiday season is to start saving now. Here are some tips to get through December without debt or overspending.

 

Create a comprehensive list of who you are shopping for and how much you plan to spend on each person. If you already have ideas for gifts you will be purchasing, check the pricing and include that in your budget for each person. If you are hosting a holiday party, include estimations for how much you will be spending on decorations, food, drinks, and entertainment. You can refer to bank or credit card statements from last year to get a good idea of your average holiday spending. Small extras, like food for your kids’ holiday party or a bottle of wine for your neighbor, also add up so be sure to include some cushion into your estimated budget.

 

Once you have your total holiday budget number, divide it by the number of weeks between now and when you plan on starting your holiday shopping. This is the amount you will need to save each week to stay on budget. An alternative savings plan is to figure out how much you can afford to save each week and base your holiday budget on this number. If you determine you can save $50 a week for 8 weeks before you must start shopping, your holiday budget would be $400. If this isn’t enough to get you through the holidays, there isn’t much you can do about it this year. You can, however, start saving earlier next year to give yourself a more realistic budget.

 

It is a good idea to keep your holiday savings separate from the rest of your money. It can be difficult to differentiate your savings for holiday expenses from the money you use for bills and everyday expenses if they are all in the same pot. You could even go so far as to set up automatic savings transfers each week to make sure you remain true to your savings plan. If this is not an option or you are saving cash in an envelop, set up weekly calendar reminders to assist you in staying on track.

 

If you find your financial resources running thin to compensate for holiday expenses, look at your regular spending before whipping out the credit card. Examine your budget and try to find any nonessential expenses that you could cut, at least temporarily while you get through the holidays. Bulking up your holiday budget doesn’t always have to mean making cuts, though. You could increase your savings by getting a part-time holiday job. Many stores hire seasonal help during this time of the year. Or, make room for new holiday gifts by clearing out and selling some of your old things.

 

Just because the average consumer spends around $1,000.00 on holiday expenses doesn’t mean you have to. Everyone’s budget is different and you need to find a savings plan that works for your specific financial needs. There are plenty of ways to get through the holidays on a smaller budget. Take advantage of sales or create DIY gifts for loved ones. The important thing to keep in mind is that this season is about creating memories with family and friends—not getting buried under a pile of debt. People might not remember what you gift you got them from year to year, but they will certainly cherish the memories you create together.

Budgeting Tips When You Live Paycheck to Paycheck

It’s a reality that life’s expenses simply cannot be ignored or avoided regardless of our circumstances. Most people work hard every day to earn the money they need in order to meet those expenses. Some people literally live from “paycheck to paycheck”, scrimping by on mere dollars by the time they get paid again – only to have their entire paycheck GONE nearly as soon as it hits their bank account. Believe it or not, there is also a group of people who don’t even have bank accounts!

If your income is just enough to allow you to squeak by each month but you aren’t able to put any money into savings, your financial future looks bleak. You need to be able to put some money aside for retirement as well as emergencies that arise along the way. If you have children, you’ll also most likely want to be starting a college fund for them.

Don’t think you can do it? Try out some of the following tips to see if you can make your money stretch just a little bit further each time you get paid.

First, you need to know your total monthly costs 

When you have some free quiet time, sit down (with your significant other, if applicable) and set out to determine exactly what your total necessary monthly expenditures are. Be sure to include:

• Living expenses (rent or mortgage) plus any HOA fees
• Utilities (gas, electric, phone, internet, water & sewer, trash removal, recycling)
• Cell phone bill(s)
• Car payment(s)
• Gas (for vehicle) OR
• Public transportation fees (train, subway, bus)
• Food (include groceries as well as any restaurant bills)
• Prescription and OTC medications
• Other

Once you are sure you haven’t forgotten any necessities that you pay for regularly, the total amount is how much you’ll need every single month. If you have money left over, you’re doing great! Stop spending it and start putting a bit of the surplus into a savings account every month. Look for savings accounts that offer the most rewards. You may also choose to start investing some money if you have a monthly surplus, even if it’s a small surplus. Make your money work for you.

Why is living “paycheck to paycheck” so risky?

Chances are good that if you’re reading this blog post, you’re not left with much (if any) surplus after paying all of your necessary monthly bills. The very definition of living “paycheck to paycheck” involves regularly running out of money before your next pay day rolls around. If you’re finding that you need to borrow money from a friend or utilize your credit card for daily living expenses when your paychecks fall short, you’re not alone. Over 60% of Americans report having lived “paycheck to paycheck” at some point in their lives.

This is a very dangerous way to live because you make yourself susceptible to significant financial damage, like skyrocketing credit card debt, foreclosure, payday loan debt (DO NOT TAKE OUT A PAYDAY LOAN), bankruptcy and worst of all: a rapidly plummeting credit score.

Tricks to make ends meet

Consider downsizing – Whether just temporarily or for the long haul, think about relocating to a living situation that is more affordable. If you own a home, consider selling and renting a small apartment while you build up a savings account. Alternatively, buy a smaller home, move to a less expensive area, shack up with family, or take in a roommate (or several). Use the extra money to pad your savings account and bulk up your retirement plan.

Shop around – Look for better deals on all of your utilities. You can shop around for the best energy prices, and regarding other utility companies – it never hurts to ask. Negotiating a lower monthly payment is very possible because most companies don’t want to lose a valuable customer.

Stop using Check Cashing services – If you’ve avoided opening a bank account because of the required minimums, take a look at your local Credit Union. They tend to have more reasonable rates and minimums. You simply must have a bank account in order to make sure that your bills are paid on time, AND if you’re cashing your checks through a Check Cashing service, you’re losing a huge portion of your money due to their exorbitant fees.

Make a budget and stick to it – It is imperative to establish the basic costs of your day to day living and to stick to that number. You may find that making your coffee at home saves you a lot more than you’d realized, and that switching to store brand toiletries results in pretty substantial savings! Clip coupons and read grocery store flyers every week. Only buy what you absolutely need if it’s not on sale or you don’t have a coupon for it.

Pay down your debt – We realize this one is potentially the most challenging to do when you’re just getting by. We’re here to tell you that it is possible to wipe out your debt. That’s right – if you’ve been paying a large chunk of money just to manage your credit card’s minimum payments – we can help you eliminate those payments altogether, giving you a much more solid financial footing to stand on.

 

How to Choose Between an IRA and a 401(k)

No matter where you are in your career, it is never too early to plan for retirement. If you’ve been avoiding setting up a retirement savings plan because you don’t know where to start, you’re not alone. The two main types of retirement savings plans are a 401(k) and an IRA—but how do you know which one is best for you? Determining which kind of retirement savings plan is right for you will depend on which option fits your specific lifestyle. Here, we will look at a few of the key differences between the two and when it’s advisable to invest in an IRA or a 401(k).

What is a 401(k)?

A 401(k) is a retirement savings plan through your employer. Contributions are normally deducted straight from your paycheck into your 401(k). The money put into your 401(k) will grow over time as it is invested on your behalf into mutual funds, stocks, and bonds. You can contribute up to $19,000 a year to a 401(k) and there are no income restrictions. Money in your 401(k) cannot be taken out until you reach age 59 ½ without a 10% penalty, but after you are 70 ½ you must take minimum distributions. Your contributions are tax-deductible, but you will pay income taxes on money you withdraw from your 401(k).

There are a few ways to tell if a 401(k) is a good retirement investment for you:

– Your employer offers a 401(k) and will match your contributions, essentially giving you free money.

– Automatic paycheck deductions will make you less tempted to spend the money. It is gone before you ever have it in your hands.

– You have reached your IRA’s maximum annual contribution. You could use a 401(k) to maximize your savings.

– You want to take advantage of the tax benefits of a 401(k). Because the contributions to your 401(k) are taken out of your paycheck before taxes, you could reduce your taxable income and therefore fall into a lower tax bracket. This could allow you to receive higher income tax returns.

What is an IRA?

An IRA, or individual retirement account, is the other most popular retirement savings plan. An IRA is not through your employer and will therefore stay with you no matter how much your lifestyle changes. You can invest up to $6,000 per year until you are 50, at which point you can invest $7,000 per year. Like a 401(k), you cannot withdraw money before age 59 ½ without paying a 10% penalty and you must make minimum withdrawals after you are 70 ½.

Your IRA contributions may be tax deductible depending on your financial situation, but any withdrawals will be taxed as income. However, this is different if you have a Roth IRA. With a Roth IRA, you pay taxes up front on your contributions, but you do not have to pay taxes when you withdraw later. There are no income limits with a Roth IRA and because you pay taxes up front, you can withdraw your funds at any time without paying a penalty. There is also no mandatory minimum distribution requirement at a certain age, so you do not have to touch your contributions until you are ready.

A traditional IRA or Roth IRA may be right for you if:

– Your employer doesn’t offer a 401(k) match or any other retirement plans. IRAs allow you to save and invest on your own terms, even if you don’t have access to a retirement savings plan through your employer.

-You change jobs a lot or don’t plan to stay with your current employer. An IRA stays with you no matter where you go or who you work for.

-You are in a lower tax bracket. Especially if you are young, you can invest what you can in a Roth IRA now while paying the lowest possible taxes.

-You want to control how your money is invested. Whereas with a 401(k) you are paying someone to make investments for you, IRAs give you control over what kind of investments your money goes to.

The Takeaway

At the end of the day, the most important thing is that you pick a plan and start saving consistently. When you are looking at your options, don’t be afraid to compare different plans and services provided. There are so many variables that go into saving for retirement and it can be hard not to become stagnant with worry about the what-ifs. Focus on what you can control: making steady contributions to a retirement savings account that fits your lifestyle.

How a Credit Freeze Can Prevent Identity Theft

It seems like every time you turn on the news or log on to your Facebook account these days, there is chatter about yet another massive data breach. In today’s increasingly digitized world, our personal information has never been more at risk of becoming compromised. Identity theft is a very real threat to your valuable identifiable data, your credit score and your overall financial security. While it can seem like identity theft is out of your control, you actually do have the power to defend yourself. One of the best ways to do this is with a credit freeze.

What Is a Credit Freeze?

A credit freeze puts an immediate lock down on your credit information and prevents potential cyber thieves from stealing any of your identifying information in order to open an account (anywhere) and start racking up debt in your name. A freeze will disallow anyone who is not actually you from gaining access to your credit file. Since creditors like banks and credit card companies need to see your credit report before they will open a new line of credit for you, they will be unable to do so unless you specifically lift the credit freeze.

When you initiate a credit freeze, the only people who will have unlimited access to your credit report are you and any current creditors and debt collectors you may have. Employers and some government agencies will have limited access to your credit report.

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IMPORTANT NOTE: A credit freeze does not impact your credit score and is totally free.

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When Is a Credit Freeze Called For?

A lot of people freeze their credit after they have experienced an information breach or have otherwise had all or part of their personal data stolen. The challenge most commonly encountered when freezing your credit report after an incident is the race against time. Who will “get to” your credit report (and all of the personal information contained therein) first – you, or the criminal?

Because of the aforementioned “race against time,” preventative measures, like freezing your credit before an incident occurs, are much more likely to be effective. With a credit freeze, even if your Social Security number somehow becomes compromised, the rest of your data and accounts will be protected. It is also a great idea to freeze your child’s credit report now in order to protect their future.

How Do I Freeze My Credit?

While freezing your credit is free, it does require you to jump through a few hoops. You will need to contact all three major credit bureaus and freeze your account individually. While this is time consuming, it will be worth it when your credit report and score remain safe if (when) another cyber attack materializes.

Each credit bureau will present a slightly different process to freeze your credit, but you will definitely need to provide them with: your Social Security number, birth date, last two addresses, a clear copy of a government-issued ID card, and a copy of a bill or bank statement with proof of your current address. You can request a freeze via phone, e-mail, or through the good old-fashioned Postal Service.

Once you apply for a credit freeze, the credit bureaus will give you a PIN with which to manage your credit freeze. You will need to keep this number in a safe place because you will also need it in order to unfreeze your information when the time comes to open a new line of credit. Your credit freeze will be activated one business day after you make the request via phone or online, with mail requests taking three business days.

What Happens When I Need to “Unfreeze” My Credit?

To unfreeze your credit, you will need to provide the same credentials with which you initiated the freeze, to the credit bureaus. Per federal law, the freeze should be lifted within an hour if you make the request via phone or email. Mail requests to unfreeze your credit will take three business days.

You can also request to have the freeze lifted temporarily, so a potential employer or landlord can do a quick check before your credit goes back into freeze mode.

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PRO TIP: Ask which credit bureau they will be contacting and only unfreeze your data at that bureau.

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Is There a Down Side to Freezing My Credit?

There are some cons to credit freezes. The process of requesting and managing a credit freeze with three different credit bureaus can be a lot to juggle. You will also have to go through the extra step of unfreezing your information anytime you apply for a new line of credit. Additionally, putting a credit freeze into effect now won’t protect any of your existing accounts from fraudulent activity.

Regardless of any negatives, in today’s increasingly digital world, protecting yourself from a cyber attack with a frozen credit report is a fantastic—and free—way to keep your personal information private.

Why You Shouldn’t Panic Every Time Your Credit Score Changes

With the internet almost constantly at the tip of your fingers, keeping tracking of your credit score has never been easier. Banks, credit card issuers, and free online credit monitoring companies all offer their services to help you stay virtually right on top of your credit score. But if you find yourself panicking every time you get an email from Credit Karma, it might be time to reevaluate your relationship to credit monitoring. Small month-to-month changes in your credit score don’t really matter*, and here’s why.

The most important thing to understand is that you don’t have just one credit score—you actually have many, and they are all calculated using different formulas. The most well-known credit score is your FICO score, which is calculated and monitored by three different bureaus: Equifax, Experian, and TransUnion. All three institutions have different levels of access to your information at different times and are constantly updating your files with every piece of information they receive.

What’s more, each credit rating category covers a wide range of scores. “Good” credit falls in the 670 to 739 range. Unless you are teetering on the edge between categories, a couple of points difference isn’t going to impact your credit worthiness too greatly. There are a myriad of reasons why your score will go up or down in any given month, and none of them truly reflect your overall credit health. Delayed credit bureau reporting, hard inquiries, balance increases, or opening a new account can all cause temporary, insignificant shifts in your credit score.

Fixating on small credit fluctuations is stressful and unnecessary. As long as you are not currently in the process of applying for a new loan or a new line of credit, a less than stellar score will have little impact on your every day life. The good news is that even if your credit score has recently taken a small dip, most lenders will look at the big picture, taking your credit history into consideration, not just your current three-digit score. It’s the big swings that you need to watch out for.

A major change in your credit score can alert you to unauthorized activity on your accounts or tip you off to the long-term impact of carrying high balances and paying your bills late. It is important to pay attention to these changes to make sure they reflect your financial activity. If your monitoring service reports a change you don’t recognize or understand, look into it. Whether it is the result of fraudulent activity or just poor financial habits, it is important to investigate why your credit score is changing so dramatically.

If you are concerned about your credit score and it isn’t exactly where you want it to be, don’t panic. At Veitengruber Law, we can give you real facts about credit and debt. Our legal team can provide real life solutions to improving your credit and your overall financial health. With patience, time, and dedication, it is possible to repair your credit. Using credit monitoring services is a great first step in the right direction. Just remember not to take every small monthly fluctuation to heart and stay focused on your overall credit goals.

*If your score takes a significant plunge, drops into a lower category, or is on a consistently downward trend, reach out to us. If something is amiss, it IS better to address it sooner rather than later.

How to Manage Credit Card Debt During a Divorce

Divorce is complicated. When it comes to divvying out debt, even the most amicably separated couple can find themselves at odds. In New Jersey, you are responsible for any debt in your name—even if your spouse is the one who racked up the bill. It’s easy to become overwhelmed and end up spending buckets of money either paying off your ex’s debts or facing a pile of legal fees. To avoid making a complex situation any more confusing, here are some great money-saving tips for dealing with credit card debt during a divorce.

Deal With Debt Before Divorce

If you’re already facing credit card debt, it could be financially disastrous to add the high cost of divorce to your financial woes. While it may be difficult, your best option is to deal with the debt before you file for divorce. As tempting as it may be to wait for a court to figure out how to divide the debt evenly, you and your spouse will save a lot of money coming to an agreement on your own.

Meet up and discuss exactly what the two of you owe. If you both have your own credit cards, remove the other person as an authorized user from those accounts. Even if you are just an authorized user on an account, your credit can be impacted if your former spouse does not make on-time payments. If you have joint accounts, consider transferring the balance to new cards that you each take out separately. Look for balance transfer credit cards with low interest rates. If you can compromise with your spouse in how to divide the debt evenly, you could save hundreds or thousands of dollars in legal fees.

If You End Up Paying Your Ex’s Debt

Unfortunately, some people don’t have the chance to be proactive about marital debt before a divorce because they only find out about the debt after the fact. If your name is attached to the account the debt is under, you may have no choice but to take responsibility for the debt. You can take steps to getting your name removed from the account, but in the mean time, you will need to make sure the account is getting paid.

In order to protect your credit, you may be stuck paying off debt accrued by your ex. It is important to note that while you can petition the court to have your spouse repay you for these debts, this path is expensive and you may never get the money back—even if you have a court order. This is why it is very important to make sure you and your ex do not share any accounts at the time you file for divorce.

If your ex does not remove your name from an account willingly, you will need to get a lawyer to prove you did not know about the account and did not benefit from the loan. If you do end up being responsible for paying off a portion of this debt, kept diligent records of your payments. If your ex decides not to pay their part, you will be able to prove that you have a history of making good on your payments.

Work on Creating Good Credit Post-Divorce

Whether you are facing the arduous task of building your credit from scratch or working on paying off debts accumulated in your marriage and subsequent divorce, you will need to generate a solid plan to rebuild your finances. Create a list of your debts to determine how much money you can afford to put towards each debt every month. Your new budget will need to absorb living expenses as well as any debt you are responsible for after the divorce.

It can be difficult to adjust to life under one income instead of two—especially if you are struggling under the weight of credit card debt. Veitengruber Law’s experienced financial legal team can help you come up with comprehensive debt-relief solutions catered to your specific needs. Managing debt during and after a divorce can be complicated and stressful, but you don’t have to do it alone. We can help you make a plan to eliminate burdensome debt so that you can start to move toward financial health.