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Q&A: Building an emergency fund beats out building credit

February 12, 2018 By Liz Weston

Dear Liz: I am trying to raise my credit scores, which are very low. I have one negative mark on my account from a paid collection and I just got my first secured credit card. I have a bit of extra money right now and I’m wondering what’s the best way to use it to raise my scores. Should I get another secured credit card from a different issuer, get a secured 12-month loan through my financial institution or something else?

Answer: People rebuilding their credit often overlook the importance of an emergency fund. Having even a small amount of savings can keep a financial setback, such as a decrease in income or an unexpected expense, from causing you to miss a payment and undoing all your efforts to boost your scores. You can start with just a few hundred dollars and slowly build the fund over time.

Adding an installment loan can assist with building credit as well, but a secured loan may not be the best option if money is tight. The cash you deposit with the lender as collateral for the loan won’t be available again until you pay off the loan. Consider instead a credit-builder loan, in which the money you borrow is placed in a savings account or certificate of deposit to be claimed when you’ve finished making the monthly payments, typically after one year. That means you can keep the cash you already have for emergencies. Credit-builder loans are available from some credit unions and Self Lender, an online company.

You’ll want to make sure both the credit card issuer and the installment loan lender are reporting your payments to the three credit bureaus. If your accounts don’t show up on your credit reports, they’re not helping to build your scores.

In addition to making payments on time, you’ll want to avoid using too much of the available credit on the card. There’s no bright line for how much to charge, but typically 30% or less is good, 20% or less is better and 10% or less is best. Use the card lightly but regularly and pay it off in full every month because there’s no advantage to carrying a balance.

Filed Under: Credit & Debt, Credit Scoring, Q&A Tagged With: building credit, Credit Score, emergency funds, q&a

Friday’s need-to-know money news

February 9, 2018 By Liz Weston

Today’s top story: 2018 US Olympians open up about their money struggles. Also in the news: Tax forms to know about before filing your return, how to keep your tax preparer from hating you, and 10 cities where taxpayers receive the fattest refund checks.

2018 US Olympians Open Up About Money Struggles
Star athletes paid very little.

Tax Forms to Know About Before Filing Your Return
The most popular forms, explained.

How to Keep Your Tax Preparer From Hating You
Come prepared.

10 cities where taxpayers receive the fattest refund checks
Did yours make the list?

Filed Under: Liz's Blog Tagged With: 2018 Olympics, Olympians, tax forms, tax preparation, tax refunds, tips

Thursday’s need-to-know money news

February 8, 2018 By Liz Weston

Today’s top story: Why many consumers still #BankBlack. Also in the news: 3 reasons to choose a credit card over debit, how and why to use the Equifax free credit lock app, and how to review and dispute the salary data Equifax collects on you.

Here’s Why Many Still #BankBlack, Despite Fewer Options
Providing needed access.

3 Reasons to Choose a Credit Card Over Debit — and When Not To
Using your card strategically.

How and Why to Use the Equifax Free Credit Lock App
Locking your credit vs freezing it.

How to Review (and Dispute) the Salary Data Equifax Collects on You
Credit bureaus want your salary info.

Filed Under: Liz's Blog Tagged With: #BankBlack, credit freeze, credit lock, credit vs debit, Equifax, salary data

Wednesday’s need-to-know money news

February 7, 2018 By Liz Weston

Today’s top story: Why couples need their own slush fund. Also in the news: 5 signs it’s time to break up with your financial advisor, easy home touch-ups to bring in more buyers, and the dark reason so many millennials are miserable and broke.

Why Couples Need Their Own Slush Funds
Separate doesn’t have to mean secret.

5 Signs It’s Time to Break Up With Your Financial Advisor
What to look out for.

Easy Home Touch-Ups to Bring All the Buyers to Your Yard
Giving your home more curb appeal.

The dark reason so many millennials are miserable and broke
Social media is taking a toll.

Filed Under: Liz's Blog Tagged With: couples and money, financial advisors, home touch-ups, millennials and money, real estate, slush funds

You can do your own estate plan, but should you?

February 6, 2018 By Liz Weston

Estate planning mistakes can be expensive to fix — that is, when they can be fixed at all.

That’s the thought that haunts New York attorney Mari Galvin whether she’s creating an estate plan for a client or confronting the aftermath when people didn’t properly plan.

“People think, ‘Oh, I have a simple life,’ but you have to understand (that if) you make a mistake and you have unintended results, you can’t bring the person back to sign a new will,” says Galvin, a partner at Cassin & Cassin law firm.

In my latest for the Associated Press, why trying to save money by doing your own estate planning can cost big bucks down the line.

Filed Under: Liz's Blog Tagged With: Estate Planning, mistakes

Monday’s need-to-know money news

February 5, 2018 By Liz Weston

Today’s top story: More credit cards pile on rewards for mobile wallet spending. Also in the news: Dog-friendly designs attract home buyers and remodelers, new rules to help protect old Americans from financial fraud, and the reckless financial habit that will ruin your chances of ever finding love.

More Credit Cards Pile on Rewards for Mobile Wallet Spending
Perks for paying with your phone.

Dog-Friendly Designs Attract Home Buyers and Remodelers
Not your typical dog house.

These new rules will help protect older Americans from financial fraud
New protections put in place.

This reckless financial habit will ruin your chances of ever finding love
Show some restraint.

Filed Under: Liz's Blog Tagged With: bad financial habits, Credit Cards, dog-friendly designs, dogs, financial fraud, mobile wallet, older Americans, perks, rewards, valentine's day

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