Manage Your Credit & Identity

Different Types of Refinancing

We’ve all heard the word “refinance”, but what typically comes to mind is mortgages. Yes, you are correct. It also can apply to other areas of your finances such as car loans, student loans and credit cards.

As with any borrowing, you want to pay off the debt as quickly as possible. But sometime you cannot afford to purchase a car with cash, so you take a car loan. You may want to look into refinancing your car loan if you can get better terms – lower interest rate.

For student loans lower interest rate is probably not the answer. You may have several loans and several payments. It might be easier for you to keep track of and have only one payment per month, if you consolidate. Check out your options to determine if this is right for you.

Credit cards are a good example. You may be payoff debt and it may seem like it takes forever. It could if you have high interest rates. Refinancing a credit card balance to a lower or zero percent interest rate will help you pay back what you owe quicker and pay less in finance charges.

As with any financial transaction, do your research and compare all terms and conditions to see if this is the right move for you and your finances at this point in your life.

Identity Thieves Don’t Stop with the Living

You know that I go to great lengths to protect myself from identity theft. I do what I can from my end even though I have no control over corporate breaches. Ugh!

But, there are others in my family who may be at risk.

Have you ever had a close family member pass away? You probably said ‘yes’ to that question. If so, you know that the family writes an obituary for the newspaper that includes a number personal details. When I was the Executor for my father’s estate, I did that. I even looked at the newspaper to see what information other families included to make sure I didn’t leave anything of importance out.

Well, that was mistake number #1.

I (like many others) handed a potential identity thief the information on a silver platter. I included his date of birth, where he grew up, the names of my mother and siblings, his past places of employment, and the organizations he was a part of. I included everything everything but his social security number.

According to AARP, 2.5 million deceased people have their identity stolen postmortem each year. This is wide spread and the victims can’t speak up, so it’s a win for the thief.

So what can you do about it?

Send death certificates to the three credit reporting agencies and request that a death alert be posted to the deceased credit report – I did this.

Contact the banks and investment companies with death certificates. See if you can get the accounts out of the deceased’s name. In some states you can do this if the account was joint – I took care of this, too.

Notify the Social Security Administration, the IRS and Motor Vehicles – this is where I could have done more (partial mistake #2 – I did social security and the IRS but not motor vehicle).

Then, preventatively, check the deceased’s credit reports to monitor for any suspicious activity so you can catch it early on. For more options, please go to my previous newsletter on reports available to consumers.

Hopefully, I won’t lose anyone close to me anytime soon, but from now on I will do ALL the steps – not just most. I was somewhat lucky, as my father was collecting social security and had a government pension, so I notified both. It didn’t even occur to me to notify the DMV. Learn from what I have done (and not done) to protect your loved ones.

Stay away from these types of loans

Are you familiar with these types of loans? These are the ones, I would strongly encourage you to stay away from:

1. Payday loans aka payday advances rely on your employment / payroll history. You borrow short term money to be paid back at your next pay date. These are unsecured in the sense that there is no collateral. Depending on how the interest is calculated by individual state regulations (in the states that allow them), your interest rate can be upwards in the hundred percentage range. Not a very cost effective way to borrow money.

2. Balloon loans / mortgages: These types of loans are NOT fully amortized. With most “good” loans you make an agreed upon payment, and at the end of the term the loan is paid in full. But that is not the case with a balloon loan. Your payments are not high enough to pay off the loan at the end of the term. Once you think you are finished, you end up with a very large final payment which may be 50%, 60% or even 100% of your principal (hence the name ‘balloon’).

3. Rent-to-own loans: You make rental / lease payments towards the ownership of an item (furniture, TV, computer, etc.). You can terminate the rental / lease at any point and return the item, though there may be a penalty. Once the agreed upon payments are made, the item is yours. This looks like an affordable way to get what you want right away, but it isn’t. Typically, you pay substantially more for the item than if you just used a credit card.

In each of these cases, borrower beware. Read and understand any legal agreements prior to signing. You need to understand what you are getting into and for how long, so that you can make an informed choice that is right for you and your situation. If you don’t understand the contract or feel pressured, that would be your signal to walk away.

It’s May 2015 – Time to order your 2nd Credit Report

This month use Equifax

Hello, it’s Jill again, reminding you to get your finances in order so you can relax this summer.

How to Order Your Credit Report

The only authorized source for your report is AnnualCreditReport.com. You won’t be charged and they won’t force you to sign up for “credit monitoring”. It’s yours to review by law. Learn more.

Visit www.AnnualCreditReport.com:

Select your state, then click Request Report.
Fill out your information, then click Continue.
When it asks you to select a service, select Equifax.

Not comfortable ordering online? There are other ways to order your report:

Mail your postal order by downloading the form at AnnualCreditReport.com
Call in your order at 1-877-322-8228

What should you do with your report?

Review it for accuracy!
Follow the instructions to correct any errors.
And, always remember to keep copies for your records.

Were you hoping for your credit score instead? Try CreditKarma.com. It doesn’t give you a FICO score, but it comes close by providing scores from TransUnion and VantageScore. And, there’s no charge for you. CreditKarma funds their service through website advertising.

May you have a relaxing and successful summer!

P.S. I’ll send you another reminder in September to help you stay up-to-date on your credit before the holidays.

Read about Jill in the Stamford Advocate

Personal bankruptcies on the rise

With bankruptcies up, Women’s Business Development Council offers help
By Alexander Soule
Published 1:00 am, Sunday, April 19, 2015
StamfordAdvocate.com

Maclyne Josselin might catch the eye of any corporate comptroller looking to build a staff, keeping a ledger within arm’s reach in which she tracks income and expenses to the penny.

Josselin’s business these days is managing her own personal finances — and “profits” have been exceeding “losses,” a welcome change from just a few years ago.

Despite an improving jobs market, and slightly higher wages and savings in Fairfield County in the past year, not to mention low oil prices and a surging stock market in the macroeconomy, personal bankruptcies rose 5.8 percent in the region last year to just over 1,500.

The local increase comes in the context of a 12.2 percent drop nationally in people seeking protection from creditors, and underscores a fragile economic recovery that is still causing pain for many, amid slow wage growth and high costs of living in Fairfield County.

While financial crises can strike from any number of directions beyond one’s control –job loss, health problems and family demands, to name a few — Josselin said she edged toward the financial cliff by living paycheck to paycheck on a nonprofit employee’s salary without eyeballing what she was spending, and was unable to save anything.

Josselin, a Stamford resident, said she was able to make the conscious decision to reverse her course, but it was difficult.

“It’s like breathing,” Josselin said, describing the habit she has honed of tracking her expenses daily. “Just getting started was the hardest part.”

With nothing to lose, Josselin began attending a free clinic on personal finance that the Women’s Business Development Council offers at its headquarters in Stamford, as well as at satellite offices in Danbury, Shelton and Hartford.

Jill Russo Foster runs WBDC’s personal financial education and budget coaching programs, and has written multiple books on personal finance, including “Thrive In Five: Take Charge of Your Finances In Five Minutes A Day.” She became an expert on the topic the hard way, saying she accumulated 27 credit cards while in her 20s before the inevitable financial disaster hit, requiring a couple of years to work to fix her credit problems.

Josselin would eventually hammer out a plan that worked to control her spending by tracking every penny — literally — that she pays out. She keeps it all in a binder she has titled “Young, Fabulous and Saving,” deriving it from the Suze Orman book “The Money Set for the Young, Fabulous & Broke.”

From student to tutor

Today, Josselin is one of WBDC’s volunteer budget coaches, having tutored three people to date in a half-dozen, one-on-one sessions spanning three months. It was intimidating at first, she said, with her first client a woman many years her senior.

Foster said about half of the people who go through the program have income putting them below the official federal poverty. Of the remaining half, she said she has counseled spouses with combined income as high as $190,000, who have fallen on hard times due to health issues, divorce or other calamitous life events.

WBDC’s advanced budget coaching sessions for people in financial crisis entail four major tenets. Perhaps surprisingly, the easiest is reducing debt, while the hardest is improving one’s credit score, mainly due to the fact it is hard to move that needle in the six-week span of the program. The other two legs of the stool are increasing one’s income-to-expenses ratio and boosting savings.

Of those who register for WBDC’s budget coaching programs, 85 percent say they have changed their spending habits. Though Foster would like to close that 15 percent gap to zero, it nevertheless is making a difference. With a staff of 16 people, five part-timers and volunteers, WBDC helps as many people as it can.

Since 2005, when Connecticut experienced a surge of bankruptcy filings before Congress stiffened rules on who could qualify, statewide bankruptcies have stayed in rough lockstep with the economy. From just under 4,000 filings in 2006 –likely an abnormally low number due to people filing in advance of the new rules — personal bankruptcies marched steadily upward to peak at nearly 11,250 cases in 2010, before receding each year to 6,750 cases last year.

Behind most of those cases there is an individual or family who has hit rock bottom, unable to make ends meet whether due to a lost job, medical bills, poor planning or bad luck.

Foster said there are common traps many people fall into, including deciding to postpone payment of a bill coming due in order to be accumulate funds to pay it off in full. Better to pay some of it right away and the rest when one is able, she said.

A utopian world

Hand in hand with bankruptcy is home foreclosure, with Corelogic tracking nearly 5,240 foreclosure proceedings in Connecticut for the 12-month period through February.

Both bankruptcy and foreclosure data can be influenced by external factors, according to Mark Stern, a Fairfield attorney who chairs the Bankruptcy Law Committee of the Fairfield County Bar Association. Those factors can include changes in bank policies regarding foreclosures or judicial retirements resulting in a backlog of cases.

Stamford state Superior Court Judge Douglas Mintz told Connecticut legislators in February that in 2012 and 2013 an increasing number of people participated in a foreclosure mediation program mandated in 2008 by the state. He said the program has helped 15,000 Connecticut families stay in their homes — 69 percent of whom signed up for mediation — and requested that the state make the program permanent.

“It would be a wonderful, utopian world where, you know, I would not have to do a foreclosure docket on a Monday morning,” Mintz said. “Even in the good times, people get sick and lose their job.”

WBDC CEO Fran Pastore said her organization had initially intended to end the budget coaching sessions led by Foster once the economy gained steam again, but now intends to keep it in place.

“We can’t even meet the demand of the number of people who want to get into the program,” Pastore said. “The despair is so real and it is very much alive ” a sense of despondency, despair — nowhere to turn.”

Josselin said she was able to turn it around just by taking the first step, and the next, and the next. She is now sharing her experience with others, and Foster suspects more will make the transition from student to tutor on what can be a long, hard road to financial stability — one people from up and down the various walks of life have traversed.

“What I try to tell people is that there is no shame or guilt about what happened in the past,” Foster said. “Just come in and start addressing it.”

Alex.Soule@scni.com; 203-964-2236; www.twitter.com/casoulman

Financial Spring Cleaning: What do do first?

Welcome to our April Blog Hop!

This month we are so excited to help you reach your business and life goals, featuring articles, how-to’s and resources for you today that have helped each consultant, blogger and business owner on the hop in their own lives and businesses. Get ready to be inspired for a fabulous month ahead of you as you move along through the blog hop.

You may just be starting the blog hop or may have come from 3. Kim McDaniels at iBiz Design Duchess on Natalie Bradley’s Blog Hop. If you get off track at any time, the full lineup below will help you move along from blog to blog so you make sure to see and learn from all of the articles featured here today.

Financial Spring Cleaning: What should you do first?

Have I ever had credit card debt? Yes! There have been times in my life when I haven’t been able pay my balance in full when the bill arrives.

Credit card debt is the enemy of a good budget, but life happens. Even the best budgeter can have unplanned expenses.

According to a recent study by Trans Union, the average US adult carries $4,878 in credit card debt. That doesn’t include zero percent balances. That means the average US adult owes almost $5,000 plus the additional interest.

If this is you, I want you to take a deep breath. Debt repayment is just financial housework. There’s nothing to be afraid of here.

Do you know what’s really scary? Having company due in 5 minutes when the bathrooms aren’t clean. When that happens, do you lock the front door and pretend you’re not home? No! You walk into the bathroom and decide which part needs to be cleaned first (just in case you run out of time before the doorbell rings).

That’s right. I just compared paying off credit card debt to scrubbing the toilet. That’s because you want to use the same thought process with your credit cards. Some cards will need more attention than others, so you need to make a list of your debts which includes the interest rate and minimum payment amounts.

There are two methods to setting priorities on your credit cards.

Option 1: Pay the highest interest rate first. Your list will look something like this:

This is the best option if you want to save money. Using the example above, you pay as much as your budget will allow on card #1, and only the minimum on cards #2 and #3. When #1 is paid off, you make card #2 the highest priority. Rinse and repeat until all cards are paid in full. When you pay the highest interest rate first, you pay less overall.

Option 2. Pay the smallest debt first. Your list will look something like this.

This option is good if you need to see results to stay motivated. Receiving a bill with $0 due is really satisfying. A positive emotional boost can really keep the momentum going. You can compare it to housework, dieting, or exercise. We like to see improvements.

Bottom line: You have chosen to get out of debt (your goal) and the actions that will get you there (your plan). You’ll know the best option for you and your family, and you can change tactics whenever you want as long as you’re moving forward.

Let us know which option you choose and how you are doing.

The next stop is 5. Robin Hardy at Integrity Virtual Services on Natalie Bradley’s Blog Hop! Thanks for visiting and I hope to see you again next month!

Blog Hop participants lineup:

Natalie Bradley at Natalie Bradley Consulting
Deb Brown at Touch Your Client’s Heart
Kim McDaniels at iBiz Design Duchess
Jill Russo at JillRussoFoster.com <<– you are here!
Robin Hardy at Integrity Virtual Services

How to Choose the Best Rewards Card

Last issue we talked about zero percent financing. Now, I want to talk about the benefits of ‘rewards cards’. You know, those credit cards that offer cash back bonuses, airline miles or other rewards that accumulate with each purchase.

Get the facts to determine if rewards cards are right for you.

Annual Fee and Interest Rates

First, rewards credit card generally have an annual fee and a higher interest rate than non-reward credit cards. You have to be absolutely certain that you will pay your balance off each and every month in full or the reward won’t be worth it.

Can You Use the Reward?

Nothing is worse than carefully accumulating points for a year, only to find you can’t use the reward. Ugh!

You need to find out what rewards are available, how many points and/or miles are needed, what are the exclusions? I was just reading an application for someone and for 25,000 points, they could get a free coach airline ticket valued at up to $400. That seems great on the surface, but what does that actually mean? Can you book that reward when and where you want to use it? How much do you have to charge to earn those 25,000 points?

If you were a part of my Nearly Free Travel Group, you know that we don’t have an airline miles rewards credit card. We earn our miles in more direct ways. We used to have several different types of rewards cards (airline miles, cruise points, etc.) but not anymore. But with everything in life, this is a choice we made. You may want to choose differently.

The Terms and Conditions

So what should you look for?

How the interest is calculated – single or double cycle billing?
How long is the grace period?
What percentage is the minimum payment (typically 2 to 2 ½ %)?

Take your time and ask questions before applying. Make a pros and cons list – does it work for your future plans and current spending habits? To start your research, go to Nerd Wallet’s Best Credit Cards of 2015 for a comparison chart that will help you determine if a rewards card could benefit you.

Is there good credit card debt?

Is there such a thing as good credit card debt? I believe the answer is yes, but you must be able to use the debt to your advantage.

For example, have you ever used zero percent financing to make a purchase?

This is how we did it. Back in November, we purchased a snow blower. It cost approximately $600 and we were offered zero percent financing for 1 year. It was a great offer and well worth it if as long as we paid in full before the free financing period ends.

We did pay it off with $100 installments, so it was all ours before the snow stopped falling. That was a good use of zero percent financing.

Zero percent financing is an expensive mistake if you don’t pay it off on time. But let’s say you still had a balance at the end of the finance period. What would happen?

You would have interest charges going back to the original price on the original date. So, for our purchase of $600 at the regular credit card rate of 18.99%, the minimum payment would be $15.00 per month. If you only paid $15 each month for 12 months, you would have only paid $180 of the $600 balance. If you continued this, it would take you 63 months and cost you $954.27. That’s a lot for a snow blower that’s only worth $600.

This is why it’s so important to know what you can actually afford to pay. We knew we could have the snow blower paid off in 6 months with a series of over payments. Each over payment was like insurance, giving us extra time should something else unexpected come up. Let’s face it, life is great at delivering unexpected surprises.

So, use the zero percentage financing options wisely. They can be a great deal under the right circumstances.

Holiday Credit Mistakes You Don’t Want to Make

Getting ready for the holidays? That will put extra stress on your time and budget. Every time you shop, you’ll be facing temptations that could send your finances off the cliff. If you want to keep away from the edge , keep listening:

Every store will push their own card. They’ll offer a 10-15% discount if you sign up at the register. With your little pile of purchases in front of you, it will sound like a good deal. Don’t do it.

Why not? Because they’ll run an inquiry on your credit report, instantly lowering your credit score and costing you more money in the long run. Don’t forget that store credit cards charge the highest interest rates out there. Think about the temptation you’ll face. With one purchase safely tucked away on a new credit card, you’ll find some breathing room in your checking account for more holiday purchases. Before you know it, you won’t have enough left to pay the store card in full. In the end, that discount will have cost you over 15%, putting you in the hole.

You will be off your routine and forgetful. Between preparation, gatherings, and parties, something will probably slip through the cracks. You might even forget to pay a bill on time. Don’t do it.

Why not? Missing a due date will cost you a late fee – sometimes $35. If it’s a credit card payment, they could penalize you with an increased interest rate at a time you need it least. Worst of all, the late payment could end up on your credit report, lowering your credit score.

You will want to spend more than you can afford. Don’t kid yourself. Holidays are a time of giving and sharing. You will get caught up in the moment and spend more than you planned. You may even spend so much, that you won’t have enough left over to pay your credit card in full when the bill arrives. Don’t do it.

Why not? It could take forever to pay off. If you have a $500 balance and only pay the minimum amount due (typically 2%) then it will take you 85 months (or 7 years plus) to pay off the balance. That is assuming you don’t make any other charges. Plus, you don’t want to start the New Year with new debt.

Plan ahead and use cash for holiday shopping to stay within your budget. That way, you can enjoy the holiday season without facing budget busting debt in January.

How to use a unique password for every account without going crazy

You know you should have completely unique passwords for every online account, and you’re not supposed to write them down anywhere. But that’s not enough. They also have to be hard to remember.

If you’re like me, that’s just not possible because you use a lot of online services. The internet has made my life easier in so many ways, but it comes with its own risks.

So, how do you keep your online accounts safe? Many people are turning to Password Managers.

A password manager is software that stores and organizes your passwords in an encrypted state, which makes them hard to hack.

The most popular versions will fill login forms automatically. Once you’ve downloaded the software and stored your passwords, they’re fairly easy to use.

Are they safe? The experts are mixed on this point. Some feel that it’s never safe to store your passwords. Others are comfortable with the encryption used on the best versions.

My assistant swears by LastPass. It’s free for your PC, but for $12 a year, you can use it on your smartphone.

If you want to use a password manager, you can choose between a web-based or a local service. LastPass is web-based as is Dashlane and Roboform. The information is stored in the cloud so you can easily use it on all your computers and devices. Keepass and SplashID are local, meaning they’re stored on your PC.

To do your own research, check out the links below.

How do you manage your passwords? Let me know in the comments.

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This month use Equifax

Personal bankruptcies on the rise

Financial Spring Cleaning: What should you do first?

Blog Hop participants lineup:

Links for Research