Can You Settle Retail Credit Card Debt?

Retail credit cards can create some of the hardest debt to manage. Retail credit cards are often easy to acquire but in many cases come with astronomical interest rates. Because of this, getting behind on retail card payments can quickly lead to a deep hole of unmanageable debt. When your retail debt gets out of control, it can seem like your options are limited. Fortunately, it is possible to settle retail credit card debt.

Debt settlement is when a debtor negotiates an agreement with their creditor to pay off a smaller portion of their total debt. Normally, this only happens when the borrower has defaulted on the account. The creditor may be more likely to agree to a settlement if they feel they would not receive payment for any of the debt owed. However, if you know you are at risk of defaulting, you may be able to discuss settlement options with your creditor. A creditor knows that recouping some of the debt is better than none of the debt. Settlement can be resolved with a lump-sum payment or with a fixed number of payments.

Settling your retail credit card debt may be the right choice for you, but it is important to know the potential consequences of debt settlement. Your credit score will likely be significantly impacted by a settlement. While you are repaying the settled amount, the settlement itself will be seen as a negative mark on your credit report. Even if you close your credit card account, the settlement will impact your credit score for up to seven years. Because of this, it is important to consider all of your options before you opt for debt settlement.

You may also be hit with surprise taxes if the IRS gets involved with your settlement. If the settlement allows more than $600 to be forgiven, you will likely have to pay taxes on the amount forgiven. If this happens, it is possible for you to reduce your tax liability. If your liabilities exceed your assets, you could qualify as insolvent and therefore wouldn’t have to pay as much in taxes. Before you settle, you need to make sure you can afford the potential taxes of settling.

Of course, no one has the right to debt settlement. You have to be able to provide evidence to your creditors that you have a specific hardship or that your debt is unmanageable. Even if you do compile enough evidence to prove you are facing significant financial difficulty, your creditors still may not be willing to negotiate. If your creditors are demanding payment in full, you may be forced to look into other debt management solutions.

While you can certainly attempt to settle retail card debt on your own, it might be in your best interest to work with a reputable debt settlement firm like Veitengruber Law. As a respected New Jersey debt settlement law firm, we have relationships with creditors and know how to negotiate with them. Because retail credit cards are often facilitated by larger credit card or finance companies, an attorney will typically have better luck negotiating than you would on your own. A debt negotiation attorney knows all the ins and outs of the laws surrounding debt and how this will impact your specific situation. This is especially important if you have had legal action taken against you. Even if you’re facing a lawsuit over your retail debt, the right attorney can demystify the settlement process and help you get back on your feet financially.

Veitengruber Law is a full service debt negotiation legal team. We know how overwhelming credit card debt can be, but you don’t have to struggle alone. Our proven debt negotiation solutions can help you work towards eliminating your debts. We can help you decide if debt settlement is the right choice for you and help you explore all of your debt management options.

How a Credit Freeze Can Prevent Identity Theft

credit freeze

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.


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


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.


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


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.

FICO Score vs. VantageScore: What’s the Difference?

fico score

Your credit score is one of the most important aspects of your overall financial profile. Potential lenders and creditors will use your credit score to determine what kind of risk they are taking by giving you a loan or a line of credit. Essentially, your credit score is your entire credit and financial history all boiled down to one number. Consequently, you may be surprised to know that there are actually many different ways to calculate a credit score. The two most popular ways to estimate your credit score are using the FICO scale and the VantageScore scale. Below, we will discuss the differences between them and how they can impact your credit score.

Details of your debt and financial history are reported to three major credit bureaus: TransUnion, Experian, and Equifax. These institutions will compile your payment history, total debt, amount of unused credit, the diversity of your credit lines, and other financial data to create your credit report. That data is then run through an algorithm which will provide the three-digit number that is your credit score. These three bureaus compile data and store your information differently, which can mean your credit report—and therefore your credit score—will look different depending on the scoring system used.

The FICO Score credit scoring model ranges from 300 (very poor credit) to 850 (EXCELLENT credit). This is the most well-known scoring method, and over 90% of big lenders in the country use the FICO credit scoring method. While there are many different versions of the FICO method, FICO8 is used most often by lenders today. While FICO doesn’t like to give out a lot of information on how they compile data, the rough breakdown of your FICO8 credit score is: 35% payment history, 30% amounts owed, 15% length of credit history, 10% new credit, and 10% credit diversity.

In 2006, the credit bureaus created the VantageScore as an alternative to the FICO Score. Vantage is similar to FICO. It still ranges from 300 (poor credit) to 850 (incredible credit) and there are multiple versions of the VantageScore method. The current industry standard is VantageScore 3.0. The biggest difference between VantageScore and FICO is that VantageScore doesn’t value the length of your credit history. While FICO requires you to have 6 months of data, VantageScore has zero time requirements. The components of the VantageScore system are also different: 40% payment history, 21% depth of credit, 20% credit utilization, 11% balances, 5% recent credit, and 3% available credit.

There are several ways to access your FICO Score and your VantageScore. Some big banks and issuers will offer their customers their credit scores on their monthly statements. Chase Bank, Capital One, and OneMain Financial use VantageScore while Bank of America, Discover, and Citibank prefer FICO. Experian also offers free access to your FICO Score and VantageScore. Keep in mind, though, that your FICO Score and VantageScore can vary from credit bureau to credit bureau, so Experian may provide a different score than TransUnion or Equifax even if they are using the same scoring method.

If there is one big takeaway from comparing these two credit scoring models, it’s that payment history is the most important factor that goes into determining your credit score, regardless of the model used for calculation. Despite their similarities, however, the differences in methods can result in some deviations where your credit score is concerned. This is why it doesn’t hurt to know what your credit score is under both scoring methods. Regardless of differences, as long as you keep up with at least one model, you should have a good idea of your financial standing in the eyes of creditors.

5 Credit Repair Hacks that Actually Work!

credit repair

People often don’t realize the value of good credit until they really need it. Typically, it’s when they attempt to buy a house or open a new line of credit that people realize their credit score isn’t quite up to par. When that happens, the gut reaction is to race to fix their credit quickly. The good news is that raising your credit score is possible, regardless of your financial situation. However, this is a process that often takes time. Rebuilding a poor credit score can take months or even years.

Use these hacks to repair your credit score:

1. Pay Down Your Balance(s)

One of the best ways to raise your credit score quickly is to pay off a significant amount of your debts. Don’t just throw money at credit cards blindly, but be strategic about how you pay off your debts. A good way to do this is to look at your credit utilization ratio. This is the amount of credit you have used against the amount of credit you have available.

Example: if you have a $2,000.00 balance on a card with a limit of $5,000.00, your utilization ratio is 40%. Most experts suggest keeping your credit utilization ratio under 30%. If you are trying to increase your credit score quickly, you will want to pay off the cards where your credit utilization ratio is above 30% first. One of the best ways to do this is to make two payments a month. If you can swing it financially, making one extra payment a month can quickly reduce your overall debt and your credit utilization ratio.

2. Raise Your Credit Limit

Since we know your credit score is partly based on your overall credit utilization ratio, a quick way to lower that ratio without reducing debt is to see if you can increase your credit limit. In using the example above, if you have a $2,000.00 balance on a card with a limit of $5,000.00 (40% utilization ratio) and your creditor increases that limit to $6,500.00, your new utilization ratio will be at a more desirable 30%.

There are some important caveats when using method. You know yourself best: if you have trouble with overspending, this might not be the best choice for you. Also, if you have missed payments or have seen a steady decrease in your credit score lately, this will likely not work for you. In these instances, your credit card issuer may see the request for more credit as a sign that you are having a financial crisis. If you are a good customer with on time payments and your score is steady, this could be a good strategy to instantly boost your credit score.

3. Become an Authorized User

When rebuilding your credit, it is difficult if not impossible to get approved for a new line of credit. One way to get around this issue is to enlist the help of a trusted friend or loved one. If this person has good credit, they can add you as an authorized user on their current credit card account. This authorized status will show up on your credit report and boost your score.

IMPORTANT: When tying your credit to another person, you MUST make sure they are responsible first. The ideal candidate is someone who makes timely payments and keeps their balance low. If you tie your credit to someone who makes late payments and carries a high balance, you could end up lowering your credit score.

4. Consolidate Your Debt

There are two different kinds of debt: revolving debt and installment debt. Credit card debt is revolving debt, where the balance changes with each new purchase and payment. The FICO formula that determines your credit score favors installment debt, like loans, because this kind of debt tends to be more stable. Thus, consolidating your credit card debt into a personal loan can really give your score a boost. Personal loans also tend to have a much lower interest rate than credit cards, so you will end up paying less money in the long run.

5. Mix Up Your Credit Portfolio

Having a wide array of different kinds of credit is a good way to boost your score.  If you find you only have credit card debt, taking out a personal loan or a car loan isn’t a bad idea. While your credit mix is only 10% of your total score, diversifying your credit can give your score that extra boost it needs to go from “fair” to GOOD. It should be noted that this is a long term approach to better credit and should not be used by those who need an instant boost for an impending big purchase or financial change.

These tips and tricks can give you the boost you need to finally achieve excellent credit. If you are struggling to manage your debts or get your credit score where it needs to be, the team at Veitengruber Law can help. We offer personalized credit repair options to fit your financial needs.

 

How will my Spouse’s Debt Affect me?

When you meet someone new, finding out their credit score is typically not your go-to first date conversation starter. In the whirlwind of new romance, money matters tend to remain ignored. It is often much later in the relationship—after a couple has already become financially entwined through marriage or the sharing household bills—that financial issues come to the surface. You may be surprised to find out your spouse has accrued a substantial debt that you had no idea about. When facing this startling new information, it may be difficult to know how to move forward with your partner. Here are some tips to dealing with a spouse who has debt.

1. Hold Off On Making Judgements

In situations like this, emotions can run high. You may feel lied to or betrayed by your partner for concealing their debt. Breathe through your initial reaction. When people feel attacked they tend to shut down or become defensive. Keeping an honest, open space for communication with your spouse will allow you to move forward to fix this problem together. This also goes for making judgements about their current financial choices. If you see your spouse making consistent efforts towards paying off a debt, don’t chide them for their purchase of a new pair of shoes. Paying off debt is a process that you cannot expect your spouse to complete overnight.

Keep in mind that debt accumulates for many reasons and a past debt does not necessarily mean your partner cannot be financially responsible now. Maybe they were overzealous with their first credit card or are struggling with student loan debt. Unemployment, divorce, and medical expenses can also add up quickly. Don’t judge too harshly until you have the full picture of your spouse’s debt.

2. Get the Details

The amount of debt your spouse has makes a difference, so it is important to know the exact number they are currently working to pay off. How your partner is paying off the debt matters, too.  Is the repayment situation short term (over a year or two) or long term (5-20 years)? If it is a long term repayment plan, you can expect this debt to impact your life together for years to come. This is also the time to check your spouse’s credit report with them. This will give you the full picture of any late payments, high balances, legal judgements, or bankruptcy filings they may have.

3. Know When You’re Liable

Many people assume that once you get married, you automatically take on your spouse’s past debt. This is not true. Your credit histories will remain separate for any debts or financial troubles that occurred before your marriage. New Jersey is a common law state, meaning that even after marriage you’re only responsible for debt accrued in your name.

This changes once you open joint accounts, apply for joint credit, cosign on loans, or include your spouse on an account as an authorized user. These actions will show up on your credit report and you will be responsible for the debt. If at any point your spouse cannot make payments, even if it is on debt they personally accrued (after the date of your marriage), you will be responsible for the full payment of the debt.

4. Decide How You’ll Make Purchases Going Forward

Your spouse’s debt, and its impact on their credit score, may make it difficult for you to make big purchases together for the duration of the repayment period. Depending on how much debt they have and how low their credit score is, you may be looking at taking on the full weight of big purchases for awhile. You may be hesitant to apply for joint credit, cosign, or add them as an authorized user on your accounts. Have an honest conversation about how you will make big purchases together going forward.

At Veitengruber Law, we know the stress of large debt can create a lasting impact on marriages and families. Our experienced legal team can help you sort through the debts and create a future path that looks bright. Our comprehensive approach to resolving debt problems can help relieve the stress on you and your spouse.

 

 

Can I be Approved for a NJ Mortgage with a Bad Credit Score?

NJ mortgage

A lot of people with a bad credit score assume it is impossible to become a homeowner. A low credit score can definitely make it harder to get a new credit card or any type of loan, including (and especially) a mortgage loan. If the one thing standing between you and home ownership is your credit score, don’t give up hope. It is possible to get approval for a NJ mortgage with a low credit score.

What is considered a “bad” credit score to mortgage lenders?

Different lenders have different criteria for loan applicants. The lower your score, the more likely it is that potential lenders will see you as a risk. If your score is somewhere in the middle—between 620 and 740 (approximately)—there is a little more wiggle room. While you will likely face higher interest rates and be restricted in how much you can borrow, you should still be able to secure a mortgage loan without much issue. Generally, if your score is under 620, you will not be able to get a loan from a traditional lender. But that doesn’t mean you have no options for getting a loan; it just means you will have to go through less traditional lenders.

Private Lenders

One option for borrowers with low credit scores is to go with a private lender. Mortgages through private lenders often come with higher interest rates and more substantial minimum down payments for borrowers with bad credit. You also may have to do a little more work with a private lender, like providing additional paperwork that is typically not required with a traditional lender. It’s important to do your due diligence when going through a private lender. Shorter payback periods and higher interest rates can make it difficult to make your monthly mortgage payments. Make sure you will be able to make timely payments in full for the duration of the loan.

FHA Loans

Another possibility is a Federal Housing Administration (FHA) loan. If your credit score is at least 580, you can qualify for an FHA mortgage with 3.5% down. With a score between 500 and 580, you will need to put at least 10% down. The cutoff for credit scores with an FHA loan is 500. Downsides to an FHA loan include: high interest rates and a mortgage insurance premium of 1.75% as well as monthly insurance premiums. If you pay less than 10% of the loan for your down payment, you will have to pay these monthly insurance premiums throughout the life of the loan.

Mortgage Tips for Low Credit Score Borrowers

Sometimes it’s possible to make up for a bad credit score in other ways. You can offset the risk of the loan by offering to pay a bigger down payment. While first-time home buyers typically put down 6% or less, making a 20% or more down payment could encourage lenders to approve your application despite a poor credit score. Plus, the more money you put down, the lower your monthly payments will be.

Another option is to enlist the support of a co-signer. If you have a close friend or family member with a great credit score, they could help you secure a mortgage loan. This is not a commitment to take lightly, though. While the mortgage is in your name, the co-signer will be equally responsible for any payments. This means if you miss a payment, their credit will be negatively impacted. Working with a co-signer requires a lot of communication and trust.

#1 Way to Own a Home with Bad Credit

If your goal is to buy a property but your credit score is poor, the best thing you can do is take the time to rehab your credit score. The higher your credit score, the better chance you’ll have of working with a traditional lender. Working with a traditional lender means your down payment, interest rate and monthly payments will be lower. Regardless of your situation, Veitengruber Law can help you determine which path to home ownership is best for you.

9 Smart Money New Year’s Resolutions for 2019

money new year's resolutions

Everyone looks forward to the New Year as a fresh start. This year, use your New Year’s Resolutions to benefit your wallet! From big goals to small changes, these 9 tips can get your finances on track in 2019:

 

  1. Eliminate/Reduce Credit Card Debt

If your credit card debt has gotten out of control in 2018, plan to make paying down your credit card balances a priority in 2019. With the Federal Reserve likely to increase interest rates this year, credit card debt is only going to become more expensive. Set a specific goal for yourself, (for example:  pay down 25% of your current debt). Focus on paying down the debt under the highest interest first to avoid income-draining interest rates. If you are struggling to make credit card payments, do not hesitate to reach out for help from Veitengruber Law.

 

  1. Pay Down Student Loans

For a lot of people, student loan debt is a heavy financial burden. It’s a great idea to take 2019 as an opportunity to make a huge dent in your student loans. Start by reviewing your loans and determining which ones have the highest interest rates. Making extra payments on those loans will save you money on interest in the long run. Paying more than the minimum due each month is also a great way to make sure you are not spending more than you should on interest. If your interest rates are high or you have a lot of different loans, consolidating your loans may allow you to get a lower interest rate and create more manageable monthly payments.

 

  1. Emergency Fund

In 2018, 39% of Americans paid for an unexpected $1,000 expense with their savings.* Many Americans end up in debt trying to cover unexpected costs. Most experts recommend having at least six months’ worth of expenses in savings, but if you are starting an emergency fund from scratch, make your goal something you think is reasonable to achieve. Even having a few hundred dollars in savings is better than nothing. You may want to consider setting up automatic transfers from your paycheck into a savings account so you are not tempted to spend this money.

 

  1. Improve Your Credit Score

The first step to improving your credit score is to know what it is in the first place. Signing up for free and reliable credit score monitoring through services like Experian or Mint will help you see how healthy your credit score is now. Good credit scores range from 700-749 and scores of 750 and higher are considered excellent. If your credit is not where you want it to be, make raising it your priority in 2019. Small things like paying your bills on time, keeping credit card balances low, and setting up automatic payments right after you’ve gotten paid can help reduce your debt and improve your score.

 

  1. Do Taxes Early

Filing for your federal income tax returns as soon as you can is a great way to start the New Year. Not only will you get your refund faster, it can give you extra time to pay taxes you may owe or help you avoid needing a tax extension. If you are expecting a big life change in 2019—like returning to college or buying a home—filing early will help you get a head start on this paperwork. For instance, students can use the information on their 1040 form to apply for financial aid. Plus, the sooner you apply for your refund, the less likely it is that you will be the victim of tax return identity theft.

 

  1. Cook More

Americans spend thousands of dollars a year eating out. A big way to save money in 2019 is to spend less time eating out and more time making your own food. Use 2019 as a chance to get more comfortable in the kitchen. Bring lunch from home, meal prep on the weekends, and spend some time researching quick-to-make meals. The more frequently you eat food bought from the grocery store, the less money you will spend—and the healthier you will be, too!

 

  1. Retirement Savings Plan

It is important to start saving for retirement as soon as possible. There are many options for creating a savings plan for retirement and you can determine which one is best for your specific circumstances. Maybe your employer provides a 401(k) plan, but if not – you can open an IRA or, if you are self-employed, a Simplified Employee Pension IRA. If you already have a retirement plan in action, reassess the plan in 2019. Could you be saving more? Are you on track for retirement?

 

  1. Home Improvements

While some home improvement projects will cost big and add value to your home, sometimes it’s the small projects that can have a big impact on your finances. Investing in energy-saving appliances in 2019 could allow you to save money every month on energy costs.  Energystar.gov has recommendations for energy efficient products and other home improvement ideas to get you thinking about ways you can save money on energy this New Year.

 

  1. Focus on Your Health

The average American spends over $4,000 a year on health care. Make your health a priority in 2019! Join the gym, focus on eating well, and take the time you need to relax. Go to the doctor at the first sign of illness instead of waiting until your health has been severely diminished. Preventative healthcare measures can save you big in the long run.

 

 

 

*From Bankrate

No Debt vs College Degree: Which Wins?

student loans

If you’re strategizing to keep your debt burden low throughout the first phases of your adult life, you’re probably considering whether or not it’s worth it to assume a large amount of student debt. After all, 70% of college graduates leave their alma mater with a burdensome level of student debt. Today, more than 44 million US residents are struggling to repay a collective $1.5 trillion in college loans alone.

For many people, a college degree is a necessary step toward creating the adult life they’ve dreamed of, and assuming some level of student debt is likely unavoidable. However, it’s absolutely imperative that students fully comprehend the long-term impact of the loans they’re agreeing to.

If a college graduate is unable to repay their loans in a timely manner, or doesn’t prioritize repaying them, financial disaster looms ahead. Graduates face severe financial penalties for not repaying their loans, including additional fees, mounting interest fees, potential wage garnishment, and negatively impacted credit ratings. Keep in mind that New Jersey is not an inexpensive place to live, so if you play to return to your home state after school, you’ll need a savvy financial plan to do so.

The following quick guide will help you determine whether the cost of student loans will make sense for you in the long term. The answer to this question varies from individual to individual, so it’s a decision you’ll need to make for yourself. Carefully weigh the pros and cons, advantages and disadvantages, and do your best to make the most beneficial decision for your situation.

Remember, too, that if you do end up (or have already ended up) with a significant amount of college loans, it’s going to be okay. You’re not alone by any means; as we’ve discussed, 1 in 4 adults in our country are still repaying their loans.

The Pros and Cons of Student Loans

Pros:

  1. Student loans can make college possible, or make it possible for you to attend a school that would otherwise be unattainable. If a student loan makes the difference between you attending your dream school or a local state school, it may well be worth it to bridge the gap with a loan.
  2. In certain fields, if pursuing a higher quality (or more widely respected) education positions you to earn significantly more over the life of your career, then your student loans may represent only a small fraction of your potential earnings. In such situations, assuming responsibility for a larger loan is almost certainly worth it. Study hard, network with grace and skill, and set yourself up to bring home the kind of money you’ll need.
  3. Student loans can be spent on more than just tuition. Choosing a student loan may make the difference between you having to work full-time during your education and instead having the luxury of focusing solely on your studies. You can use student loans to pay your rent or car payment, purchase a laptop and textbooks, or even just buy groceries. Postponing your financial troubles until after you graduate can have a positive impact on your mental health and resources during the few years you’ll have to pursue your education goals.

Remember, too, that even though student loans are pretty terrible, they’re still more affordable than credit card debt or other high-interest personal loans!


  1. Paying off student loans on time will help you build credit. You’ll need a positive credit rating to get a good interest rate on significant purchases like a car or home, so having this opportunity to build credit right out of college can be very positive. Please be aware that you will need to make prompt payments every month in order to benefit from an improved credit score.

 

Cons:

  1. Interest is a pain in the neck. When you repay your student loans, you’ll be repaying the amount you initially borrowed plus the interest that’s accrued over the years you’ve been in college. As of 2018, interest rates on student loans range from 4.5% to 7% for federal to 11% – 15% for privately-held loans.

If you choose high-interest student loans, the interest rates can be almost as disastrous as those on credit cards! If you can afford college without assuming any student loans, clearly it is in your best interest to do so.

  1. Choosing student loans will mean that you’ll begin your adult life with debt. Your financial freedom will be significantly impacted by this burden; you’ll probably need to delay other life goals like home ownership or international travel until you’re able to pay off a significant portion of your student debt.

Home prices in New Jersey don’t show any signs of halting their steady climb, so delaying your entry into the housing market could mean paying as much as tens of thousands more for your first home.

  1. It is nearly impossible to discharge student loans without paying them directly. Unlike many other kinds of personal debt, student loans cannot be eliminated by declaring bankruptcy. If you assume responsibility for a student loan, you will have to repay it.
  2. Missing payments on your student loans can destroy your credit score, which will negatively impact your financial opportunities for many, many years to come. You’ll have difficulty renting or purchasing a home on your own, applying for a loan on a car, and could even lose your job along with your financial credibility.

 

The truth is that student loans can be a net positive in your life and can be relied upon to help you create a better future for yourself and others. In real-life application, though, slow job growth, high interest rates combined with punitive laws preventing struggling graduates from discharging their debts through bankruptcy, and skyrocketing tuition prices are factors that work against even the most well-intentioned students.

That’s why if you do decide to assume student loans, it’s important that you try to live frugally and limit the amount of debt you need to take on. If you can work part-time and still maintain your grades, consider doing so. Purchase clothing second-hand when possible, for example, and keep your wardrobe streamlined until you have more financial freedom.

You’ll find that the fiscally wise habits you can cultivate during these lean years will serve you well in the future, even after you’ve paid off your debts. Remember that being conscious and intentional about your spending is always a healthy decision. Frugality is never something you should be ashamed of!

NJ Landlords & Credit Checks: The Facts

credit check

As society shifts from the use of tangible papers to swiping a tiny piece of plastic to make purchases, credit is pushing closer to the forefront of the realm of finances. Despite the satisfaction of handling cash in the checkout line, credit cards, whether we like it or not, are becoming the norm. Along with owning credit cards comes the inevitability of your credit score. Good credit holds more significance today than it ever has before. Many people simply don’t realize how impacting a credit score can be, especially when it comes to real estate decisions – even renting. If you’re considering renting an apartment or house, know that the first thing a landlord will set eyes on is your credit score and report.

When you complete a tenant application form, you provide a variety of information about yourself, but typically it’s not enough for most landlords to make a solid decision. This drives the landlord, property manager, or rental agency to hike one step further into your personal information. The main reason to check an individual’s credit history is to review one’s capability or incapability of paying rent. A landlord doesn’t want a renter who will never pay rent on time.

Every time that a potential lender checks your credit, it will appear on your credit report. Too many checks will damage your credit score, decreasing your chance of acceptance to rent anywhere. Be careful not to apply to too many places at one time. Many inquiries in a short amount of time is looked down upon as it can imply repeated rejections and/or reckless financial behavior. It’s possible that some credit score models will combine multiple inquiries into one, which will prevent you from getting penalized for “shopping around,” but this cannot be guaranteed.

Landlords prefer to have renters who are clean: clean house and clean credit. Obviously, if you have good credit and an adequate history, there shouldn’t be any reason that your application wouldn’t be accepted by the landlord. On the other hand, if your credit score does not meet the landlord’s standards, they could outright reject your application. It’s also possible that they may require you to pay a larger down payment or find a cosigner. Our credit history defines who we are, therefore landlords may be hesitant to offer you residence if your score is less-than-stellar.

In the past, making credit payments on time didn’t boost your credit score (because they weren’t given to credit agencies), but thankfully that has changed. If your landlord reports your on-time payments, credit bureaus will include it in your credit report. Because more and more rental agencies are reporting positive rental history, renting responsibly can now have a positive effect on improving your credit score.

Keep in mind that missed and late payments will also show up on your credit history. A tenant-screening report will show an eviction if you’ve had one. This is different than a credit report, and typically shows up in the rental application process. In the likely chance that your landlord sends missed payment updates to a debt collector, it will show up and remain on your credit report for 7 years in addition to 180 days from when you began missing payments. Don’t put yourself in this position. Make payments on time. Having trouble making payments? Give us a call and let us give you a FREE holistic debt evaluation.

What else can credit score affect?

Cell Phones: The one item that seemingly everyone has today is a cellphone. Believe it or not, your credit score can influence whether or not a phone company offers a service plan to you. It is possible to acquire a plan that doesn’t necessitate a credit check, but be aware than a phone service application may initiate a hard inquiry. Remember, all hard inquiries show up on your credit report and could potentially lower your credit score.

Auto Loans: The majority of people need to take out a loan in order to purchase a car. Obtaining and acquiring a loan is affected by your credit score. Taking it one step further, the amount of the loan and the interest rate are dependent on how well you measure up. In this case, it’s best to shop around for the best auto loan rates. Though it’s true that several inquiries can damage your credit score, a majority of credit scoring models will regard multiple auto loan inquiries in a short period as a single inquiry.

Though this article discusses only three crucial parts of life that are influenced by credit scores, there are a myriad of others. It’s so important that we aim to make payments on time and not take part in other activities that will cause destruction of our credit score. Like anything else in life, your credit score needs consistency and some TLC for it to thrive.