Understanding Your Credit Report

Photo courtesy of Tax Credits

Your credit report is essentially your entire financial history all tied up neatly (ideally) into one document. The general purpose of a credit report is so that potential lenders and other institutions whom you may enter into a financial contract with, can have a relatively simple way to assess your ability to remain financially solvent and responsible. This helps lenders decide whether you are someone they’d trust to pay them back.

Due to The Fair Credit Reporting Act, you have the right to receive a free yearly copy of your credit report from all three of the major credit reporting bureaus: Equifax, Trans Union, and Experian. Getting a hold of your credit report is actually the easy part. Reading them with a decent level of comprehension may be a different story, especially if your credit information is lengthy or contains multiple adverse or potentially negative items. Regardless, it is important that you understand what you’ll be presented with when your credit report arrives in the mail. Taking a moment to learn about the parts of your credit report means that you’ll be better able to make improvements where possible and pick up on any reporting errors.

The information used to create your credit report and your overall credit score (different from your report, but very closely related), comes from any companies with whom you have done or are currently doing business, and from information in public records. The general information gathered includes your given name, any aliases, your current place of residence (plus all past addresses), birth date, and your Social Security number. Once your identity has been authenticated, the following information will be gathered: your bank/credit accounts, loans, mortgages, payments, delinquencies, bankruptcies, short sales, foreclosures, court cases, and any wage garnishments.

All of this information will be listed on your report, and each item’s importance differs. Your financial details are divided into the following five variably weighted categories to calculate your overall credit score:

  1. All accounts in use (10%): Included in this category are all of your credit cards, loans, mortgages, garnishments, etc.
  2. Recently acquired accounts and inquiries from creditors (10%): Accounts and loans that you have very recently opened or applied for fall into their own section because it tells creditors that you may be taking on debt that they don’t know about. When you apply for a credit card or another type of loan/financing, each potential lender will want to know your credit history, and their inquiries into your credit history will be noted on your report. For these reasons, applying for too many loans or credit cards sends up a red flag on your credit report.
  3. Your credit history length: (15%): How long have you been using credit cards and/or loans?
  4. Debt to credit ratio: (30%): This is the amount of money you owe as compared to your overall credit limit. High credit card balances on which you make minimum payments will lower your credit score. On the flip side, a high credit limit while maintaining relatively low balances means your debt to credit ratio will raise your credit score number.
  5. Your ability to make payments! (35%): Your success or failure at keeping all of your accounts current and making timely payments is obviously a crucial component when it comes to having a good credit report and; therefore, a high credit score number.

If you need further assistance interpreting all of parts of your credit report, or are interested in taking steps to improve your credit rating, drop us a line in the comment box. Visit our Facebook page and get a free consultation just for “liking” our firm!

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How to Keep Your Holiday Spending in Check

Every November in recent history, consumers have been sounding off, becoming increasingly agitated about the fact that retailers seem to want us to forget Thanksgiving altogether.

In the past, Black Friday has traditionally started off the yearly holiday shopping season. It’s called Black Friday because in years past, it could often give retailers the push needed to tip them over into profitability (being in the black), instead of ending the year unprofitable (in the red).

In order to encourage shoppers to spend money on more than just one day, many big box stores have been shifting the beginning of their holiday sales further and further back on the calendar. This year, many of these stores are seemingly ignoring Thanksgiving altogether, keeping their stores open for all or part of the holiday.

If watching the holiday shopping season slide earlier and earlier leave you scratching your head, well, there’s a reason why retailers want to blur the lines between Thanksgiving and Christmas.

The National Retail Foundation forecasts that holiday shoppers plan to spend less money this year, which has been a trend since 2008. Every year since then, consumers have been spending approximately 2 to 4% less on their holiday shopping, pushing stores toward more drastic action. Although complaints about blending the two holidays together have been ricocheting around the Internet, (and even employees who will be working on Thanksgiving have expressed their unhappiness), more and more consumers have reported that they plan to participate in early holiday shopping events.

Why would consumers participate in something that they’re ultimately against? It boils down to what “makes the world go-round”: money. If you’re one of those consumers weighing the pros and cons of saving a few dollars versus not wanting to encourage retailers in their efforts to create a holiday mash-up, take a minute to come up with an alternative that works for you.

When we really stop and think about it, doesn’t everyone we know already have everything they need? Aside from a million dollars and a yacht, I mean. With some exceptions, most of us give gifts just to give them, which means they often end up being meaningless, useless and in the end, a pointless reason to spend money that we don’t have lying around.

3576571288_8f088880c1Photo courtesy of Isaac Wedin

Every day, we make it our mission to help our clients get their finances in order. One piece of advice we give is to avoid spending money that you don’t have. Especially this year, if you’re upset and/or angry about stores opening up for the holiday season on Thanksgiving, make a statement by doing something a little different.

  • Make your own photo cards. Instead of shelling out tons of money to have a photo company make them for you, set up a backdrop in your own home using a sheet or solid curtains. Take a family photo with a tripod, then import the photo to Powerpoint to add text and designs. Print them on photo paper at home if you can, or simply send them to your local printer to be printed as regular photos instead of cards. Even cheaper: send an e-card!
  • Give the gift of experience. Instead of following through with your “obligation” to buy gifts that may ultimately end up on the recipient’s yard sale table next year, give someone the gift of time with you. Plan a day of fun adventures for young children who are close to you (zoo, aquarium, movies with popcorn, visit family out of state). Adults could pool their money and take a vacation somewhere warm with the entire family!
  • Give the gift of food. Especially if you love cooking or baking (and have a knack for it), sharing the wealth of delicious food or baked goods is a wonderful way to stay in the tradition of gift giving without the risk of your gift being unwanted or unneeded.  Everyone loves food!
  • Offer up your services. If you’re not the chef in the family but have another admirable talent, give the gift of your services FREE of charge. Give out homemade coupons offering to babysit so friends can spend a night out alone, for example.
  • Shower them with flowers. For those who live in warmer climates (or those who keep a greenhouse going year-round), consider creating a luscious arrangement of your home grown blossoms. Giving arrangements that can thrive indoors is the best idea, so your gift recipient can brighten up their home’s interior through the cold winter months.
  • Use your words to create a gift. Have a talent for writing? Write a short book about a child near to your heart, or perhaps some framed poetry for your adult friends.
  • Make a Craft-in-a-Bag. Hit up a few craft stores and peruse their clearance sections. Some thrift stores often have bags of miscellaneous craft items for extremely affordable prices, too. You can give a child hours of fun for a mere few dollars.

If you’ve got children who also want to get into the holiday spirit, help them come up with gift ideas that won’t take a huge bite out of their allowance, or, in many cases, your own wallet once again.

  • Frame it. Help your child create a meaningful picture collage to put in a pretty frame as a gift for grandparents, their other parent, or aunts and uncles.
  • Play it up. What kid doesn’t like hamming it up for the camera? With your help, they can act out a fun play while you man the camera. Their first dramatic debut will be a unique gift that close relatives won’t soon forget.
  • Go extreme. Couponing isn’t only good for groceries! Children and teens who are on a spending budget can make coupons offering their services for almost anyone. Things like car washing, raking leaves, making dinner, one free night of babysitting, snow removal and cleaning are all things that many people would be quite happy to receive.

Most importantly, plan ahead so that you can execute some or all of these money saving suggestions. While these ideas may require more time, if you plan well enough in advance, you’ll never have to charge another thoughtless gift to your credit card again. As a result, after the holidays are over, you’ll be left in good spirits about the great gifts you gave, and your credit score will be in good standing, too.

Maybe you can have your turkey and eat it, too!

What Happens to Joint or Co-Signed Debt in a Bankruptcy?

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Many Americans today are dealing with some form of joint debt, whether it be through marriage, or through helping a family member or close friend in a financial bind. While it’s wonderful to be able to help out a loved one, too many people are more than willing to sign on the dotted line without a complete understanding of what exactly it means to be a co-signer or guarantor. Oftentimes, these are the people who end up completely blindsided if and when one of their co-debtors files for bankruptcy.

Luckily, there are things that can be done to protect those people who are so willing to open their hearts (and apparently, their wallets, too) and put their name onto someone else’s debt simply to make things easier for a person they care about.

If the main debtor is the person to file bankruptcy, do lenders have the right to go after the co-debtor in order to collect the debt? Actually, they do.

Filing for bankruptcy can only ever discharge one person’s debt at a time, leaving any co-debtors 100% liable for mutually owed monies.  However, anyone with half a heart and conscience would naturally want to protect the person who was so willing to step forward when he or she needed assistance borrowing money or making a significant purchase.

One thing that a debtor can do is reaffirm the debt himself. By doing so, he is stating full intention to continue to repay the debt, even after the bankruptcy case is finalized. This ensures that any co-debtors won’t have to deal with collections agencies knocking at their doors. The downside to this solution is that reaffirming a debt means that the debtor must repay the debt in full, even if the item in question becomes damaged or destroyed at some future time.

Perhaps a slightly safer alternative would be to include the co-signed debt into the bankruptcy petition in order to have it discharged with the rest of the money that is owed to various lenders. By collaborating with any co-debtors throughout the entire process, his or her worries can be put to rest by the reassurance that the main debtor will continue to pay off the debt even after the bankruptcy. Any debtor has the choice to continue to pay on debts after a bankruptcy. Most people don’t make a habit of this, being that the goal of filing for bankruptcy is to rid oneself of any responsibility to all monies owed. However, since a majority of his debts will be erased, it may then become possible for the debtor to continue making payments on the co-signed debt so that his co-debtor doesn’t have to get involved.

If your relationship with the co-debtor is complex and volatile, such as with an ex-spouse, we may advise you to file for Chapter 13 Bankruptcy. If you would like to share the specific details of your situation with us, we can easily advise you of the best way to handle joint and/or co-signed debt during a Chapter 7 or Chapter 13 Bankruptcy matter. Simply contact us today at Veitengruber Law to learn how we can help.

Image credit: Mark Morgan

The New Retirement: Small Changes, Big Savings

7770054244_1994acfe15Photo courtesy of Jenn Durfey

Retirees in the new millennium are finding that their golden years are not exactly how they dreamed they would be. The combination of longer lifespans, higher expenses, smaller nest eggs and low returns on investments mean that the multi-decade retirees of this generation will be forced to make some difficult decisions.

That being said, retirement in the present year or upcoming few doesn’t have to mean certain poverty. Seniors who are finding that their retirement savings are coming up short can make some small changes that will add up to big savings and a more stress-free third act.

A multitude of studies regarding finances during retirement predict that the average US employee will end up facing a significant money shortfall each month if they fail to take action to remedy their budget problems.

Because the game of retirement has changed so significantly, current retirees can’t really look back and learn from past generations, and that leaves many people feeling alone and floundering without direction. The result is severely lacking retirement account balances that will simply not cover all of life’s expenses. So what is today’s retiree to do?

Working later in life is one way to boost your Social Security payments when you do officially retire. By delaying collecting on your Social Security for several years, you can significantly increase the amount of benefits you will receive. Although you will have to work longer, it may be worth it in the long run.

Realistically though, many people are forced to leave the workforce earlier than they’d like due to complications of their physical or mental health, or late in life job loss, so it’s important to start looking and thinking beyond the money as soon as possible.

If you’re still at least a few years away from retiring, indulge your inner entrepreneurial spirit and start a business alongside your regular job. Put your passion to work for you and by the time you retire, you will either have a significant savings or be ready to launch a business.

For those of you who’ve already made the leap, either partially or totally into retirement mode, don’t panic. There are some things you can do to salvage your lifestyle, saving yourself from poverty at an older age.

The biggest decision you can make that may bring in a significant amount of money is whether or not to move. Especially if you own your own home and had a (large) family that has now left the nest, downsizing can bring in a lot of money. If you’re living in a home that has rooms that you don’t even go into or use on a daily basis, your home is probably too large, and you could do just fine with a smaller dwelling. Additionally, moving to a smaller home or apartment means lower monthly utility bills and less time and resources spent on upkeep, not to mention lower property taxes. If possible, moving to a less expensive area is also a great way to stretch your dollar during retirement, when you need them to stretch further than ever before.

Other things to analyze include your mode of transportation, especially if you’re paying a hefty car payment each month. It’s possible that you don’t really need two cars past the retirement age, especially if your spouse is also retired. Also, comb through all of your utility bills and determine where some excess spending could be cut. I personally know a woman who, after her husband’s death, changed a few of her bills around from budget plans to getting charged for her actual usage. By foregoing excessive air conditioning and keeping power sucking appliances unplugged, she got her electric bill down by approximately $250.00 per month. That’s just one utility!

As you look forward into your retirement, whether it be far into the future or just around the next bend, remember that small changes really can equal big savings, and you’re definitely going to need it.