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Building credit and destroying debt
- 1. Building Credit and Destroying Debt Friday January 13, 2017 Sponsored by:
- 2. Are You In Debt? Do you spend more than you earn? Do you have bills? Student loans? Rent? Child support? Have you been late with your payments? Do you have trouble saving your money?
- 3. You can Rebuild! Save money! Take control of your finances! Restore credit history! Provide nice things for family and friends!
- 4. Here’s what you do…
- 5. 1. Secure Card More strict than regular credit/debit cards Regular cards cannot rebuild credit Monitored by three major credit bureaus Limits spending $300 minimum Compare rates and fees With good habits, you can qualify for non-secure cards Temporary; comes with interest!
- 6. (Live) Lean + (Financial) Mean = More Green! New Years’ Resolution? Check payment history Check books for deposits and withdrawls Monthly bank statements Downsize Remove extra things causing debt Needs vs. wants Live by the essentials Make payments on time!
- 7. Be sure to monitor your credit at least once a year. www.annualcreditreport.com FICO (Fair, Isaac, and Company) www.myfico.com Credit Ranges = 300-800 No credit = No record = BAD Banks rely on a record less than 600 = BAD 600 – 700 = AVERAGE more than 700 = GOOD 6-12 months to see score go up 2. Credit Scores
- 8. 3. Build a Relationship with your Bank
- 9. Bad Credit = Burned Bridges These will affect your credit score! Credit Fraud Delinquencies Overdrafts Late Payments Takes long time to rebuild poor credit Up to seven years!
- 10. Good Credit = Strong Bridges Banks favor those with financial value! Build a line of credit How much you deposit Ticket to car/home ownership Don’t be afraid to ask questions Requires Careful management Self-respect Sufficient income
- 11. 4. Debt Snowball vs. Debt Avalanche
- 12. Which works best? Debt Snowball You start by paying your small debts Fewer payments to keep track of Takes longer Compounding interest But you’ll gain confidence to pay larger bills! Debt Avalanche You start by paying your large debts More efficient; can save money in the future! Much quicker Less interest But can you keep up with it like with small bills? Be flexible! Choose whichever works best, whenever it works best.
- 13. 5. Earn Extra Income Another job? Can you put in the extra hours? Live thrifty! Shop at dollar and thrift stores (Family Dollar, Amvets, etc.) Coupons and In-store discounts (Tops, Target, Wegmans) Recycle old products Save all loose change
- 14. Pursue a career! There’s more to this world than your day job. What are you passionate about? How/what can your kids learn from you? Start a business! Straight Talk on January 21 https://buffaloniagara.score.org/content/ straight-talk
- 15. Aim HIGH!
Editor's Notes
- Are you in debt? I’m sure everyone has some kind of debt. You probably spend more than you earn. Between your bills, student loans, rent, or child support, you might have been late with payments. And even afterward, you still can’t save any of the money that you worked for.
- You can save money! If you’re overwhelmed by your financial situation, you can take control of it. If you’ve had a poor credit rating, you can restore it. Once you do, you can get all kinds of nice things for you and your family and friends.
- Listen carefully and take notes, because there are five steps you can take to be financially secure…
- Number One: A Secure Card You cannot rebuild credit with a normal credit/debit card. Secure cards are specifically to help you retain better spending habits. Your account would be monitored by three major credit bureaus, and will most likely notify you if something’s amiss. Your account would need a minimum of $300, and can go up into the thousands. But you would be limited to the number of times you take out money, versus how much you deposit. Which is okay, because the more you deposit, the easier it will be to pay your bills. To find out which secure card works best, be a wise consumer! Compare rates and fees among different cards at your bank. Once you’ve developed good spending habits, you can qualify for regular, non-secure cards. And these secure cards are temporary, as they come with interest over time that you’ll have to repay!
- Living Lean with the Financial Means equals More Green! You probably have a plate of (collared) greens for New Years’ dinner. Traditionally, greens are meant to give you financial wealth for the new year! And it’s probably already your New Years’ resolution to earn more money. While using a secure card, always be sure to check your payment history. Use check books to record each time you use your card, how much you put in, and how much you put out. And get monthly statements mailed to you from your bank. Downsizing: Whatever is causing you unnecessary debt can be boiled down to needs vs. wants. What do you need to spend money on? Make that your priority. What do you like to spend money on? If it’s something like your favorite snack at the store, a night at the movies, or eating out at a good restaurant, those can be reserved as rewards for your improved habits. And it’s always important to make your payments on time. Pay your bills at least a week before the due date, and here’s why…
- 2. Credit Scores When using a secure card, you’re in charge of monitoring your annual credit score. The best resources for that is www.annualcreditreport.com, and the FICO credit ratings. Most Credit Scores range between 300 and 800. If you’re having money problems, you might think that cutting off any financial activity might improve your standing. It’s natural to take pause when you’re scared. However, banks respond to your needs more positively if you have some kind of record. If you have no record, they may not trust you. Even if you’re in trouble, it’s better to start somewhere and work your way upward. Your credit rating varies among sources, but typically, anything lees than 600 is bad. The 600 median is average, and 700 or more is good. It can take 6 months to a full year to see your score rise, which is slow, but the better your score, the better your relationship with your bank, which leads to the next step…
- 3. Building a Relationship with your Bank
- You’ve probably been told at least once to never burn a bridge. Because tt takes a lot of effort to build good relationships, and it can be destroyed very quickly. You never want to destroy it with bad habits. Credit fraud and delinquencies are two things you should keep close track of with your banking account. Be aware of any hacking attempts with your account, and tell your bank right away if your card is damaged or stolen. Overdrafts can come from over-spending. Be wise about what you spend on at what time. Late payments can make you fall behind on your bills. You may lose out on your basic utilities if you can’t pay on time. These can all affect your credit rating. Once it goes down, it can take up to seven years to build it back up. It sounds unfair, but sometimes, the best way to fix a mistake is to not make it at all.
- Good Credit can Build Stronger Bridges Banks like customers with good financial habits. The best deals are made with those demonstrating a sense of value. When you have a handle on your spending, you build a line of credit. It comes from the amount of money you deposit, which can determine whether you can pay for a new car, or buy a new house. If you plan on owning a home versus renting one, banks and realtors will be looking at your line of credit. If you’re unsure about something regarding a major purchase, don’t hesitate to ask questions. You might get pressured into buying something you can’t afford, but you have to go with what works best for you and/or your family. This requires careful management of your bank account, a sense of self-respect, how you’re able to meet those goals, and building a sufficient source of income.
- 4. Snowball versus Avalanche
- When debt is punching you in the face, there are two ways you can punch back: the Debt Snowball and the Debt Avalanche. When your building a snowman, you roll a snowball until it grows bigger. Debt Snowball is when you start small; paying off the small bills first. Paying monthly bills on time can help you give fewer payments down the road. For those dealing with student loans, this method can take longer, and comes with compounding interest over time. But for those patient enough, it’ll give you confidence to pay eventually pay larger bills. Debt Avalanche is when you start paying the larger bills first. You’re paying more money in a shorter amount of time. This method is more efficient, much quicker, and can help avoid interest in the future. This might be more preferable if you want to get things over and done with. But if you get overwhelmed, you might lose confidence and fall behind on payments again. You’ll have to decide which method works best for you. If you need time to work up your discipline, start with the snowball method. If you want to pay less money in the future, use the avalanche method. It all factors into your personal life choices; the kind of jobs you have, how much you’re saving. But be flexible! Don’t punish yourself with only one option.
- 5. Earn Extra Income This is likely the most important step, as the previous four are contingent on how much money you make each year. If you’re working one job, you may consider getting another one. Can you fit two or more jobs into your weekly schedule? Depending on the size of your paycheck, keep track of where you do your weekly shopping. It might be better to go to a dollar store or thrift store. Using coupons and discounts at the local supermarket can help control your spending. Recycling old products; giving old items and shopping at Goodwill. Recycling old bottles and cans for extra change. Saving up extra change and putting it into a savings account. These are small, subtle steps that over time, can pay off in a big way.
- For those who are bored of their current job, you might want to pursue an actual career. And contrary to popular belief, you do not have to go to college to get a great job, especially given loan rates these days. Finding a job was once easier for our parents and grandparents. Today, things are different. This is a question for those working at WalMart or McDonald’s: When you were a kid, what did you want to grow up to be? A doctor? Football player? Novelist? Piano player? What are you most passionate about? How can you turn a hobby into a career choice? If you have a family, what kind of example are you setting for your kids? What kind of future are we providing our kids? Will they wind up working at WalMart? Or will they have a chance at pursuing something they actually enjoy? One way to become a doctor or a piano player is to start a business! There are plenty of local resources on how to get started, and one is an annual business conference held at the Convention Center in January. Straight Talk will allow you to meet local professionals who launched their own businesses, and tell you where to get started. What books to read at the downtown library, what classes to take at local colleges, and places around town where small businesses are set up on their first few years. Again, this all sounds like a lot to digest, but the best way to improve your finances, pay off your bills, buy nice things for your family, live a life you want…
- …is to aim high!