Improving Your Credit Score

This is the second article in a two-part series about credit score information.  Our [previous post] showed you what information is included in a credit score.

 

Now that you know a little more about what goes into your credit score you may be wondering what you can do to improve it. Here are a few simple tips:

 

Pay Your Bills!

First, and foremost, pay your bills ON TIME, EVERY TIME. You can pay them a few days early to make sure they process on time. Being even one or two days late affects your score the same as being 30 days late. Over 30 days late? You are hurting your score even more.

 

If you can afford it try and make more than the minimum monthly payment on your credit cards. It will save you money, in the long run, because you end up paying less interest. It will also show lenders that you take your debt seriously and work hard to repay it.

 

Close Unused Accounts

Close unused accounts. If you have paid off a loan or a high interest credit card and you no longer intend to use it, close it. You do not want to close every line of credit offered to you because another thing credit bureaus look at is your used credit versus your available credit. Bottom line: If it is a card with a high rate then have it closed.

 

Get a Free Credit Report

You can always get a free copy of your credit report once a year from all three major credit bureaus. It’s simple to call and request your report. Then you know what lenders are looking at when they evaluate you as a borrower. Looking at your free credit report can also help you determine where you can improve.

 

To request a free credit report, visit http://www.annualcreditreport.com

Winning Ticket

 

I almost won the lottery last night. I’m not kidding.  I bought my very first lottery ticket ever, I was nice to people all day and in my head I promised to give the nice man who sold me the ticket 5K of the winnings. Karma was on my side, I was going to win!


I’ve never played the lottery before and I wasn’t quite sure of all the details. So I got on the Kansas Lottery website, found out when the winning numbers would be posted and how to claim my prize when I won.

When 9:10pm rolled around I was hitting refresh on my computer screen frantically waiting for my winning numbers. It was a rush I had spent all evening calculating all the money left over after paying off my bills. I was even taking out 40% for the taxes I would have to pay. I’m realistic I knew Uncle Sam would want his share, but I’m not greedy.  


I was going to be responsible with my lottery money. I was only going to give myself one good shopping day and after that putting the rest away for my son’s college and retirement. I wasn’t going to buy a new house or new car just pay off the ones I have and debt free I would get to DECIDE if I wanted to have a job!!


Sigh. Needless to say as I write this I didn’t win the lottery. I didn’t even get two numbers right that would have won me my dollar back that I spent. The numbers were posted at 9:16pm and they were not my numbers. I was a little disappointed that karma did not pull thru for me but I also hope that the winner somewhere out there would have been as responsible as me.


If this turbulent year in politics and finance has taught me anything it has been pay off the good times you already had so in the future you can have interest free good times. (I think those will feel better!)

 My short term goals have changed from leave the state of Kansas to live a fabulous life in Paris or Toronto to drive my car until it is paid off, then keep driving it until I can buy my next car with cash.


But one thing is for sure, someday I will buy another lottery ticket. All that dreaming was worth the dollar I paid for it!

FDIC Insurance Limits

As part of the FDIC’s temporary liquidity guarantee program, participating institutions get full FDIC coverage for non-interest bearing transaction deposit accounts, regardless of dollar amount, until December 31, 2009. For purposes of the rule, the FDIC’s definition of a non-interest bearing transaction account is a traditional checking account that allows for an unlimited number of deposits and withdrawals at any time, and pays no interest.

Central National Bank is participating in this program, so our customers get full FDIC coverage on every dollar in their non-interest bearing checking accounts, regardless of the account balance. Business accounts and personal accounts qualify for the unlimited coverage, as long as they are transaction accounts that do not earn interest.

To clarify: all of our bank deposit account types are FDIC insured up to the $250,000 limit per depositor. The unlimited coverage is only offered on our non-interest bearing transaction accounts.

 

FDIC’s Press Release: http://www.fdic.gov/news/news/press/2008/pr08105.html

What’s the Deal with Credit?

This is the first article in a two-part series about credit score information.

When applying for a loan or a credit card it can seem kind of strange where that three digit credit score comes from? What are these strangers looking at that decides if you get a loan or not.

So what is a credit score? It is in essence your grade on how you have handled credit or debt in the past. It is not a random figure but more a formula that credit bureaus provide to lenders to help them assess the risk in giving you money.

What Information is Included in a Credit Score?

Chances are you were affecting your credit score before you even knew it. When you got your first bill all in your name with your social security number attached to it your repayment history was getting a score. Was that payment on time, was it paid in full? All these things contribute to your credit score-and more! Here are the 5 major pieces of information that comprises a credit score:

  • Payment History (35%)
  • Length of History (15%)
  • New Credit (10%)
  • Types of Credit Used (10%)
  • Debt (30%)

Something you might find strange is that your income is not figured into your credit score. Another thing to keep in mind is derogatory information can only stay on your credit report for 7 years. However, a Chapter 7 bankruptcy stays on your report for 10 years, but good information stays for life!

Where Do You Fit In?

The majority of the population have a credit score between 300 and 800 with only 13% of the population having a score higher than 800.

If your score falls into one of the categories below, here is what your credit score says about you:

  • 300-500: This score range usually means there is a pattern of late payments on bills. There might be one or more accounts that have gone to a collections agency for payment. There is usually other information on your credit report that shows you are a risk to lend money to and that is how lenders justify charging a higher interest rate or declining you new lines of credit.
  • 600-700: Means most payments have been made on time and no accounts have gone to collections. A score of this magnitude implies you are a dependable customer likely to pay the money back that you borrow.
  • 700+: A score this high shows lenders that you are financially savvy and do not take on more open credit than you can handle. People with scores this high can get credit quickly and easily with the lowest interest rates a lender can offer.

Tune in next week for information on how to improve your credit score!

Rule of 219

It’s that wonderful time of year again, TAX TIME!  Hopefully those of you who will be receiving a refund have a plan in mind for your money, if not, I recently heard some figures that will definitely make one stop and think.  At last week’s bank meeting, one of our financial advisors told us about the ‘Rule of 219.’  This rule involves determining the cost of eating for two people during retirement.  Let’s say two people eat three meals a day during retirement and each meal costs $5.  You then take that times 365 days a year, then multiply that by 20 years of retirement.  Here’s the math;

2 x 3 x 5 x 365 x 20 = 219,000

In this situation, it will cost two people $219,000 to eat during retirement. This doesn’t even factor in dessert! Throw in other costs, such as bills, transportation, travel, etc… and the number grows even greater.  One may argue that it will not cost $5 per meal for them, but even at $3 a meal, two people’s cost of eating would be $131,400!  Also, note that this is estimating for only 20 years of retirement.  With life expectancy increasing, it’s easy to raise that number another 10-15 years.

So when sitting down to determine what to do with your tax refund, it may be helpful to visit with a professional.  A financial advisor can help you reach your long term financial goals. They can assist you in making sure you get to spend your golden years eating steak instead of reverting back to the college days of ramen noodles.

 

A Tax Free Distribution For The Holidays

 

A lot of people are worried about their required minimum distribution (RMD) taking them into another tax bracket, or pushing them to a point that they are going to have to itemize their taxes. Are you or someone you know in this situation: a parent or grandparent maybe? If you’re at least 70.5 years old, you now have the option of making a tax free distribution. You have the opportunity to distribute some savings from your IRA to a charitable organization available (http://apps.irs.gov/app/pub78). When you take your RMD and donate it to a charity you don’t have to report this money as income for the year.  Another option is if you are supposed to take a $3000 RMD which may take you $1000 into your next tax bracket, and instead you could take $2000 towards your reportable income and the other $1000 given as a charitable distribution. This is an excellent opportunity for those who are interested in giving to charity. But you may want to act now, the government has designated these guidelines until December 31st, 2007 when they expire, so act quickly!Another option is to use the money from the RMD as a gift to a grandchild’s college education fund (529 plan). You’d still have to pay taxes on the RMD; however, the money can go to the grandkids income tax free.  The money is no longer in the giver’s estate and the giver of the gift still controls the spending of the money in the future. The grandchild never becomes the “owner” of the funds. 

 

·                    IRA owner must be age 701/2 or older

·                    Cannot exceed $100,000 per year per IRA owner

·                    Effective for distribution on or before December 31, 2007

·                    Have a check made payable to charitable organization

·                    IRA owner may hand carry the check to the charitable organization

·                    A qualified charitable distribution offsets an IRA owner’s required minimum distribution

·                    IRA owner addresses taxation on federal income tax return

 

*Contact the Central National Bank Trust Dept. for further information

 

*Info provided by Allison Gowing and Joe Karnes

Protecting Your Money

There are lots of people out there making a living off of tricking an honest consumer out of their money. Yet there are simple tips and precautions that can protect you. After all criminals look for the easy scam, if they were into hard work they would probably have real jobs!

 

Tip #1

Do not leave your wallet or purse in plain sight in an unattended vehicle. It takes less than a minute for a passing thief to break your window and snatch anything they want. 

 

Tip#2

Never write your PIN on your debit or credit cards or have them written down close to where you keep your cards. 

 

Tip #3

Buying products or services on-line must be done with care. Using reputable sites that have been around awhile is always encouraged. Sometimes when you authorize them to charge your card you are unknowingly signing up for a service as well. They might charge your card every month for a monthly e-newsletter or some other nonsense.

 

Tip #4

This is more a fact than a tip. Lately there has been an e-mail rumor going around saying if you are held up at the ATM and you put in your pin backwards the ATM will signal the police. THIS IS NOT TRUE! In fact most debit and credit cards have the option where the user can pick their own pin number. In that case if you pick 5555 as your pin there is no way the ATM could decipher what is forwards and what is backwards. 

Thanks to Sherol Rumbagh for sharing these tips!  

Gimme a little credit!

I admit when I left home and went to college, I was not the most financially savvy high-school graduate. Now at the ripe old age of 27 I wish I knew then what I know now, at least when it comes to my credit report.

I’m still not sure why I thought it would be a good idea to apply for seven credit cards in one day to get free one-size-fits-all t-shirts that sat in the back of my closet until finally making their way to the trash. Mind you, I never actually used any of those credit cards, so my credit report was safe, right? Wrong.

Why didn’t somebody tell me that was a sure-fire way to lower my credit score instantly? Maybe because I didn’t even know what a credit score was or why it was important.

Oh, and don’t get me started on student loans. You mean I actually have to pay those back someday? With interest? And who ever thought it was a good idea to offer me more loan money than I needed for tuition? Yet I gladly accepted it.

Well, I’m a little bit older and a little bit wiser, especially after I had the opportunity to attend a financial literacy seminar offered by my bank. Now I plan to make it my goal to spare the young and credit-naive the pain of learning from bad experiences. I recently had the honor of coaching a group of young adults who are enthusiastic about building a strong credit history for themselves. Maybe I can live vicariously through them as I watch them avoid the mistakes I wish I didn’t make!

HSA’s – Taking Care of Your Own Health Care Dollars

When I look at my paycheck and see how much money is taken out for health care, I feel like I’m going to lose my lunch.  After years of not going to the doctor’s office, I wonder why I am paying so much mullah for something I don’t use.  I believe the insurance people are using all my hard earned, unused money, to throw their daughters a sweet 16 party worthy of being on MTV.  When I think of all the things I could use that money for, well, I feel like I might actually need to see a doctor.

There is a way one can keep the money they don’t spend on health insurance; Health Savings Accounts!  HSA’s must be opened in connection with a high deductible health insurance plan, (So ask your boss if you have this, it benefits him too). HSA’s are tax deductible; the money inside them grows tax deferred and comes out tax free for qualified medical expenses.

Health Savings Accounts are ideal for healthy people who want to save money on health insurance by increasing their deductibles. If you don’t spend any of the money in an HSA in a given year the balance carries over to the next year and keeps growing.

Health Savings Accounts are the only investment vehicle where you get a tax break for putting money in, and then the moola (interest included) comes out income tax free.

I don’t know about you, but I’m starting to feel better already.  That HSA guy should be a doctor.