Protecting your credit health and identity is extraordinarily important. A poor credit score could cost you thousands yearly in higher borrowing, insurance, and home rental costs. And bad credit can stop you from getting the job you need to get out of financial trouble.

Meanwhile, identity theft is a growing problem that affects 1.4 million Americans each year. It can ruin your credit and obsess your mind while trying to untangle your finances from the fraudsters’.

Credit monitoring can be an effective way of protecting your credit health and identity. It can alert you when a new account is opened in your name, allowing you to act quickly before the criminal can wreak too much damage. It lets you improve your score by telling you when you’re doing harmful or beneficial things yourself.

Why credit health is important

Harvard University Employees Credit Union explains to its members the value of a high credit score:

Having a low credit score comes at a double cost. It can be more difficult to access financial products (such as credit cards, home loans and car financing) if your credit is less than stellar, and usually, the products end up costing more.

How much poor credit can cost you — in dollars

That sounds bad enough. But Syracuse University reveals the difference between a poor and excellent credit score in more stark terms. It reckons that, compared to someone with excellent credit, those with poor credit could pay:

• $48,425 more in interest on a private undergraduate student loan
• $591 a year more for homeowners insurance
• $1,374 a year more for car insurance
• $1,006 more for a security deposit for each home rental
• $9,320 more for each car loan
• $4,975 more for each credit card

Meanwhile, the median home price was $467,700 in the last quarter of 2022. A calculator on the MyFICO website shows those with a 620-639 credit score would, on average, pay $727,387 mortgage interest on that home over 30 years. That compares with $548,822 for someone with a 760-850 score.

Wow! That’s a $178,565 saving ($5,952 annually or nearly $500 a month) just for an excellent credit score.

Poor credit could easily cost you hundreds of thousands of dollars over your entire life.

Poor credit and your career

Worse, Syracuse University says 47% of employers run credit checks on new hires. So, the job you were counting on to get your credit score higher could be denied to you.

To be clear, employers can no longer check employees’ and prospective employees’ credit scores.

But, with your permission, they can still pull your credit report. And that shows every credit-related slip-up you’ve made going back at least seven years.

Of course, you could withhold your permission. But how would you explain that at your interview?

The good news is that it’s never too late to improve your credit health. So, read on to discover how credit monitoring could help you push your score higher. But first, let’s explore the second part of our theme, “protecting your identity.”

Protecting your identity

In 2021, “the number of consumer identity theft complaints rose 3.3%, to just over 1.43 million,” according to Top 3 credit bureau Experian. But it’s been around for many years.

Indeed, in 2013, they even made a movie called Identity Thief. It was lighthearted fun, but that’s the opposite of the experiences of the millions of victims.

Once fraudsters have hijacked your identity, they can open new credit accounts in your name. And, of course, they won’t make payments, which can quickly see your credit score slide down into subprime territory. You might soon find it impossible to borrow.

The effect on your credit report will be equally devastating. And, as we just learned, that could bar you from switching employers. It might even stymie a promotion within the same company.

How to protect yourself from ID theft

The two most significant ways criminals steal your identity are data breaches and “phishing.” Phishing is when a fraudster calls, writes, texts or emails you claiming to be from a trusted company or organization. And you believe them enough to part with personal information — perhaps including your Social Security Number.

Or you may click on a link that downloads a virus onto your computer or smartphone. The phishing virus typically allows the thief to access all the personal data you keep on those, sometimes including your bank passwords.

Phishing protections

The Federal Trade Commission suggests ways to recognize phishing scams. Even if you receive an email or text that looks to be from a bank or company you use and trust, be highly suspicious if it:

• Has a generic greeting rather than one that includes your name
• Says your account is on hold because of a billing problem
• Invites you to click on a link to update your payment details

In addition, you should install security software to protect your computer and phone. Make sure that the software and your operating system are set to update automatically. Whenever you’re offered the opportunity, opt for multi-factor authentication. That makes it much more difficult for a scammer to access your accounts.

Data breaches

It’s harder to protect yourself from data breaches. This is when a hacker gains access to an organization’s database that contains information about you. One of the worst examples of this (because it included Social Security Numbers) occurred in 2017. That’s when credit bureau Equifax lost control of information concerning 148 million people. There have been bigger hacks (Yahoo once had data compromised on 3 billion people), but those rarely included SSNs, something very useful to identity thieves.

Nowadays, an organization that suffers a data breach will generally let you know quickly. And it would be best if you immediately changed your password. But your best protection is credit monitoring. Because that quickly lets you know when an account’s opened in your name. And you can nip the identity theft in the bud.

Protecting your credit health with credit monitoring

Most people aren’t credit experts. They’re too busy living life. However, a good credit monitoring service can provide all the expertise you need.

Take Credit Sesame’s free credit score offering, for example. It refreshes your credit score daily, enabling you to track your score effectively in real-time. Imagine the power that gives you.

Better yet, it provides advice about your actions that are helping or harming your score. So, you can do more of the former and fewer of the latter.

And, as your score improves, it will suggest beneficial changes. For example, once your better score makes you eligible for a credit card with a lower interest rate than the one you have, it will tell you. And you can begin to save money quickly by applying for the plastic with a high probability of getting approved.

With such simple ways of protecting your credit health and identity, what’s stopping you from signing up for credit monitoring today?

If you enjoyed Protecting your credit health and identity with credit monitoring you may like,

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• How to avoid tax identity theft

Your credit score made simple with Sesame Grade

You can see your credit picture at a glance with Sesame Ring. The unique user interface enables easy and intuitive review of TransUnion data. Credit report information from all three bureaus is available if you choose to upgrade to Premium. In addition to data and information, the app provides a measure of overall credit health with your Sesame Grade, and provides alerts, personalized action plans and AI-driven customer support. As you embark on your journey of credit and financial health improvement, knowledge is your most potent asset. Insights from all three bureaus can help you make sound financial choices, negotiate from a position of strength, and nurture your credit health. Regular reviews enable you to maintain accuracy, detect discrepancies and shape your financial future with confidence. Remember that credit is a tool that, when used wisely, can open doors to financial opportunities.

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Protecting your credit health and identity with credit monitoring appeared first on Credit Sesame.

Everyone wants to feel contented. But, for many, money problems keep getting in the way. There’s a solution to that: budgeting for contentment.

You don’t have to overturn your way of life or deny yourself the pleasures you treasure. You just have to take back control of your money and focus your spending on the things you need and value.

The good news is today’s apps make this easy. You can let your smartphone do the hard work while you reap the benefits.

What is budgeting for contentment?

There are many reasons people decide to create household or personal budgets. Some may struggle to manage their finances, perhaps because they’ve taken on too much debt or have experienced a sharp drop in income. Others may want to save for something important, such as a wedding or buying their first home.

As federal regulator the Consumer Financial Protection Bureau (CFPB) says, “Making and sticking to a budget is a key step towards getting a handle on your debt and working towards a savings goal.”

A great wedding, the achievement of a homeownership dream, or the luxury of not constantly worrying about money can all bring happiness. But budgeting for contentment is a little different. This refers to people who may have no pressing need to budget but recognize they may feel more secure if have full control of their money.

What is budgeting?

The aim of a budget is to let you see where your money is going. What you do with that information is up to you.Once you see all your outgoings laid out, you may ask yourself questions. You need the answers.

Some fairly common reactions when examining historic spend are:

• How can gas be costing me that much each month? Should I think about getting a different car with better fuel economy?
• I’m still paying for gym membership even though I haven’t been for months. Should I cancel?
• Who knew my coffee shop habit had gotten so expensive? Should I start making my own?
• My grocery (or junk-food-delivery) bill has hit the roof. Should I try cooking for myself more often?
• The cost of heating or cooling my home is astronomical. Would I notice if I adjusted the thermostat a couple of degrees?

Those are only examples and you do not have to change anything. If you’re budgeting for contentment, you can afford your present lifestyle and can legitimately choose to leave everything as it is. But the chances are that you’ll spot some painless economies that you can’t resist making.

Some options when you’re budgeting for contentment

If you have a passion in life, budgeting for contentment may just mean eliminating wasteful spending so you can funnel more funds into the thing that gives you the most joy.

The comfort blanket of an emergency fund

You may want to divert some extra cash into creating an emergency fund. Few things make you more contented than knowing you’re ready to deal with whatever the world throws at you.

Emergency funds give you a cushion to help you get through challenging times. A period of sickness, unemployment or working shorter hours when your normal income is cut or eliminated. Or perhaps when you unexpectedly face large costs for essential house or car repairs or medical bills. Having cash saved can mean you don’t have to turn to expensive borrowing, which might also affect your credit score.

Don’t think you cannot be affected by a suddenly reduced income. In April 2023, the World Bank warned of a “lost decade” of global growth. And, days later, the International Monetary Fund (IMF) talked about 2023-28 having the weakest economic growth in 30 years.

If they’re right, few people will escape the consequences completely and some are in for a miserable time. And that’s before taking into account the possible impact of artificial intelligence (AI) on countless currently secure jobs.

With such grim prospects in view, you might think it a no-brainer to do what you can to get yourself in good financial shape. And that typically means reducing your debt levels and building an emergency fund.

But which should you focus on first, save for an emergency fund or pay off credit card debt?

The process of budgeting for contentment

Budgeting for contentment involves the same processes as budgeting for anything. It’s about identifying where your money’s going and then eliminating wasteful spending so you can prioritize the things that you find most valuable.

Time was, that involved going around with a notebook, noting every cent you spent. You’d then transcribe the figures into a ledger or spreadsheet, allocating spending to different categories of expenditure. But nowadays there’s an app for that.

Choosing a budgeting app

When deciding on the app you want to download, read customer and expert reviews online. There are plenty of them.

You can get some great free apps and you may think that’s your best way forward. But, before you choose, take a look at the extra functionality that paid-for apps can deliver. Do they deliver sufficient extra value to you to be worth the cost?

Most apps sync with your bank account and some with your savings and investment accounts. That provides you with a fuller picture of your finances.

Some top apps

Here’s a list of free and paid-for apps to research. It’s not exhaustive so check out others if they sound good.

• Mint
• YNAB
• Goodbudget
• Pocketguard
• Splitwise or Honeydue — when you’re budgeting with a significant other
• Fudget

The hardest part of many self-improvement initiatives is taking the first step. So, don’t put off budgeting until tomorrow. Act now!

If you enjoyed Budgeting for contentment you may also like,

• 5 Golden Rules for Saving a 3-Month Emergency Fund
• How to live extravagantly on a budget in 2023
• Eat like a king on a budget: 7 tips to save on groceries

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Budgeting for contentment appeared first on Credit Sesame.

Tax preparation is the annual chore that almost everybody hates. It is no surprise that many of us put it off until the last minute. But 2023’s filing deadline is April 18, which is looming large. What can you do if you’re not ready?

Are you due a tax preparation extension?

If you live in an area that’s been affected by a natural disaster, you may be entitled to delay filing your return by months. For example, those affected by such FEMA-designated events in Alabama, California and Georgia have their filing deadlines extended to Oct. 16. Victims in Mississippi get until Jul. 31 while those in New York can file as late as May 15. Visit this IRS webpage for the full list and more details.

Alternatively, you can apply for a general extension. This gives you extra time (until Oct. 16) for tax preparation. But it does not give you extra time to pay the taxes you owe. You must estimate those and pay them in time for the Apr. 18 deadline. Otherwise, you might incur penalties and interest charges.

Sprint for the line

Extensions are fine but they just postpone the inevitable. You might prefer to lace up your running shoes and make a sprint for the line.

The good news is that there’s help available. The IRS has hired 5,000 more people to support taxpayers through its call centers. But even that number may not be enough to handle call volumes at this time of year. So start with the IRS’s website, which is regularly updated with helpful advice.

Even if you don’t use a reputable tax professional, you stand a good chance of being able to file by yourself.

Use the IRS’s free software for your tax preparation

If your adjusted gross income is below $73,000, you can use the IRS’s free Guided Tax Preparation online service. You answer a series of simple questions and the app does the math. It may even help with your state taxes.

If you earn too much for that free app, the IRS can still help with its Free Fillable Forms service. You download a PDF guide but you don’t get active guidance. You fill in the standard IRS forms online, allowing you to create a paper filing or to file online. Unfortunately, this does not help with state taxes.

If your affairs are complicated, the private sector can help. Use one of the paid-for tax preparation apps that are downloadable or ask a reputable tax professional to do the work for you. Just take care when choosing one.

Special free help for the elderly and disadvantaged

The IRS has two programs that can help those most likely to struggle with tax preparation, Tax Counseling for the Elderly (TCE) and Volunteer Income Tax Assistance (VITA). IRS partners provide these free services, which are often not-for-profits, across the country and one-on-one assistance is on hand from volunteers who are or were tax professionals.

The volunteers have met or exceeded the IRS’s standards for tax law training. They are bound by the same rules of confidentiality as any tax professional. The IRS says, “Each filing season, tens of thousands of dedicated VITA/TCE volunteers prepare millions of federal and state returns.”

Eligibility and finding your local service

You are eligible for TCE if you are 60 years or older. And it will likely be delivered by the American Association of Retired Persons (AARP) Foundation’s Tax-Aide program. To find your nearest AARP TCE Tax-Aide center between January and April use the AARP Site Locator Tool or call 888-227-7669.

Individuals eligible for help under the VITA program must:

• Earn under $60,000 annually (adjusted gross income, AGI)
• Or have a disability OR
• Or have limited English-language skills

Use the VITA Locator Tool or call 800-906-9887 to find your nearest service.

The standard deduction shortcut

The standard imaginary depiction of tax preparation is of somebody hunched over a dining table trying to sort through boxes of receipts as they struggle to itemize their deductions. But things have moved on since then.

In the 2019 tax year, a whopping 87.3% of taxpayers claimed the standard deduction, making wading through a year’s worth of receipts to itemize deductions unnecessary. Why the change? Because the standard deduction is much more generous now than it once was.

In the 2022 tax year (filing now), the standard deductions are:

• $25,900 married couples filing jointly
• $12,950 single taxpayers and married individuals filing separately
• $19,400 heads of households

If your itemized deductions do not add up to the sum in that list that applies to you, there’s no point in itemizing. Indeed, if you stand to save only a small sum by itemizing, you may decide to forego that amount to avoid the headache, especially if you are late preparing your taxes.

Preparing for tax preparation

Before you complete and file your tax return, you must pull together a small pile of documents. These include:

• Last year’s tax return for your adjusted gross income
• Your Social Security number and the ones for your spouse and any dependents who need one and who appear on your return
• Paperwork showing any Social Security benefits and unemployment compensation you received during the year
• Income receipts from rental, real estate, royalties, partnerships, S corporation and trusts
• W-2 forms from all employers showing your annual wages
• Form 1099-INT showing interest you’ve received during the period
• Refunds, credits or offsets received for state and local taxes (Form 1099-G)
• Dividends and distributions received from retirement and other plans (Form 1099-DIV or Form 1099-R)

If you are an Affordable Care Act (ACA) filer, you also need Form 1095-A, your health insurance marketplace statement, and possibly Form 8962 if you claim a premium tax credit.

That may sound like a lot of paperwork, but many taxpayers have uncomplicated finances and do not need all the forms. Whatever the requirements, do not delay if you have not yet started tax preparation for 2022.

If you found 2022 tax preparation and filing: Are you ready? useful, you may enjoy,

• Tax deductions 101: Common deductions and credits that can save you money
• Do you need to file a tax return?
• 10 Ways to Make Next Tax Season Less Stressful

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post 2022 tax preparation and filing: Are you ready? appeared first on Credit Sesame.

Annually, March 15 is Everything You Think is Wrong Day. Who knew? This day is not intended to suggest that we are wrong about everything we think we know. But it invites us to revisit some of our assumptions because doing so can improve our lives.

Credit Sesame is on a mission 365 days a year to improve people’s lives by helping them better understand how their finances work. Myths hold us back financially. So, let’s use Mar. 15 as a cue to demolish some of the most damaging.

Income and credit score myth

One myth that hurts many people is that you have to be rich (or, at least, have an above-average salary) to save, invest or have a high credit score. That is not true.

It may be easier in many ways to cope financially if you have plenty of money, but people on below-average incomes have investments, savings and high credit scores.

In 2022, Credit Sesame conducted a survey that revealed that 31% of Americans with an annual income under $15,000 had good or exceptional credit scores. And 8% of those earning more than $75,000 annually had a poor or very poor score.

Surprised? That’s the point of Everything You Think is Wrong Day.

Savings and investment myth

Anyone regardless of income level can be caught unprepared for a big bill or unexpected events, such as a medical issue or car repair. If you have no savings, you may be forced to borrow. Desperation may mean you consider using payday lenders or unregulated lenders. These lenders may charge extortionate rates of interest. You may also consider stopping payment on your regular bills.

However, if you’ve built up an emergency fund, you may not need to borrow, saving yourself interest payments and not damaging your credit score by missing regular payments.

People who budget carefully, live within their means and get into the habit of saving can build an emergency fund. Once they’ve saved enough to cover emergencies, they can invest the excess in stocks or other ways of building wealth.

Nobody is pretending it is easy to do these things on a below-average income. But building a savings plan into your personal finance goals is possible.

Seven common personal finance myths

Let’s quickly demolish seven myths about personal finances that might hold you back or sabotage your efforts to build a better life:

1. FALSE: Having a household budget is hard work and stops you spending on fun things. This is not necessarily true. Smartphone apps can do the hard work now and some are free. Tracking spending lets you stop wasting money on things you don’t value so you have more left for things you do
2. FALSE: If you can fund it, you can afford it. It’s not quite as simple as that. Getting a loan offer does not always mean you can afford something. Lenders know a certain proportion of borrowers default and build that risk into their interest rates and loan charges. Taking on extra debt must be considered as part of your overall budget and personal finance plan.
3. FALSE. There are 100% safe investments. Hmmm, you may get low interest bank accounts with a set rate, but even though U.S. Treasury bonds are considered low risk investments, no one claims they are totally without risk. If anyone guarantees you a high return with zero risk, check very carefully to ensure it is not a scam.
4. FALSE: You can spend up to your card’s credit limit without penalty. This is partly true. You can spend up to your card limit and you may not incur a penalty, as such, if you pay it off every month. But you may harm your credit score if you do that. Keep your balance below 30% of your card’s limit — some say below 10% for the highest score
5. FALSE: It’s better to use a debit card than a credit card. Define “better!” Credit cards provide statutory protections if your supplier goes bust, your goods are faulty, were misdescribed or you’re defrauded. Debit card refunds rely on the goodwill of your bank. Also, using a credit card responsibly can help build payment history. In turn, this can help build your credit score.
6. FALSE. Always keep a balance on your credit card. This may not be the best idea. You need to use each credit card sometimes for it to contribute to your credit score. But paying off the balance in full every month may help your score rise
7. FALSE. You lose everything if you declare bankruptcy. It is more complicated than that. When you declare bankruptcy, you may be required to give up certain assets to help pay off your debts. However, each state has its own list of exempt assets, which may include your house, car, retirement plan, household goods and clothing. Some states let you keep more assets.

One (budget) size does not fit all

Some years ago, Lindsay VanSomeren shared her budgeting experiences on Credit Sesame’s website. She had to try lots of ways to budget before she found one that suited her. But, when she settled on one, it worked really well.

After just six months on her program, Lindsay had made real progress. And she was proud that within that time she had built an emergency fund that would cover an entire month’s expenses. This was despite her income having fallen during the previous year. She wrote:

Think of budgeting as training wheels for your financial bicycle. Once you’re able to consistently manage your spending and saving without micromanaging it, you can consider scaling back on the ledger.

Lindsay VanSomeren, 7 Steps I Used to Create a Realistic Budget, After a Few Failed Attempts

What can we learn from Lindsay? Perhaps:

• We’re all different and one size does not fit all
• Perseverance pays
• It’s amazing how much slack you might find in your household budget even when times are tough — But you have to look to uncover it

Take action on Everything You Think is Wrong Day

The biggest obstacle to improving your life may be not starting in the first place. So, whether you read this on Mar. 15 or any other day, take action now and pledge to yourself that you will improve your personal finance management.

• Spend time going through your financial statements to understand your situation.
• Download a budgeting app to track your spending.
• Consider applying for a new credit card to spread your balances with lower credit utilization.
• Open a savings account and set up an automated payment to build an emergency fun.
• Check out your investment options and balance your risks and rewards.

If you enjoyed Everything You Think is Wrong Day and your personal finances, you may like,

• 6 Reasons for a Budget Makeover in 2023
• Ten Ways to Build Credit on a Budget
• Budget Calendar: Worth Buying or Build One for Free?

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Everything You Think is Wrong Day and your personal finances appeared first on Credit Sesame.

Everyone’s done it at school. Most of us still do it. We fail to ask a question because we fear appearing dumb. But, of course, it’s the smart people who ask questions.

International Ask a Question Day is a prompt and an opportunity to fill gaps in our knowledge. It’s an annual event held on Albert Einstein’s birthday, March 14. No question is too basic to ask.

Gaps in knowledge about personal finances and credit health can be especially harmful, sometimes drastically undermining a person’s lifelong prosperity. So, Credit Sesame wants to fill some of the gaps in knowledge that many readers may share.

Ask a question about personal finance basics

Here’s a list of some of the biggest topics in the personal finance sphere. Getting straight with these could improve your credit health, which is important for optimizing your prosperity.

Budgeting

Having a personal or household budget doesn’t curtail your spending freedom. It extends it.

Knowledge is power. And understanding where your money goes allows you cut back on stuff you don’t value so you can spend more on the things you really want.

Today, there are dozens of apps that automate the budgeting process. Some are free. So, don’t be put off by the prospect of hours of working on a spreadsheet or ledger. You don’t have to do that.

Saving

Fewer than half of Americans have sufficient savings to cover an unexpected expense of $1,000. And 25% say they’d have to use a credit card to cover the cost.

Borrowing when surprise expenses arise can be expensive and risky. It may not be an option if your finances have been under sustained pressure.

So do your best to build up an emergency fund in a savings account. Here are five tips to get you started.

Investing

If you invest in stocks, real estate investment trusts or bonds, you’ll build up a “passive income.” In other words, the money rolls in without you lifting a finger.

Alternatively, you can take an active role in your investment, perhaps by starting a business or becoming a landlord.

Either way, having a source of income and capital growth that supplements your salary can build your net worth and increase your spending power.

Managing debt

Are your debt payments overwhelming your budget? Don’t despair!

Instead, discover how to manage your debt burden so you can cope easily again. There are four main strategies:

1. A debt settlement company could reach agreements with the organizations to which you owe money (your “creditors”). These might reduce the amounts you owe. But take care choosing one of these companies. Some are scams
2. Debt management companies also negotiate with your creditors. They might reduce your monthly debt payments. Choose a reputable, nonprofit, credit counseling agency to avoid making things worse
3. Bankruptcy sounds scary for good reasons. But it is an option that should not be overlooked to give you a fresh start. COnsider carefully before choosing this route.
4. Boosting your income can make your debt more manageable because you then have more money to make payments. Not everyone can take second or third jobs. But try it if you can

Budgeting, saving, investing and managing debt well can all contribute to your credit health. In other words, they can make you eligible for loans and cards you otherwise might not get. And they can earn you lower interest rates and smaller fees when you wish to borrow.

Credit health

Is it worth focusing time and energy on your credit health? You bet!

Having a very good credit score rather than a fair one could save you $316 a month if you have average debt levels across credit cards, personal loans, auto loans, student loans and mortgages, according to Forbes. That’s roughly $56,000 over 15 years. Imagine the difference over your entire life as an adult.

However, it’s not just in cash terms that good credit health improves your life. Poor credit can exclude you from mainstream borrowing, forcing you into the arms of payday lenders and loan sharks.

Poor credit health affects more than borrowing costs

Worryingly, there are other penalties for having poor credit. Insurers can use your low score to up your premiums. Landlords can turn down your tenancy application or charge you more in rent or deposits.

Employers and prospective employers can’t access your score anymore, but, with your permission, they can check your credit report, on which your score is based. So, the promotion or new job you hoped might get you out of your financial mess could be denied to you.

Get ahead of all those issues. Ask yourself how you got into your less-than-ideal financial situation. And ask others how to get out of it.

Tips for improving your credit score

FICO, the company behind the most widely used credit scoring technologies, recommends:

1. Check your annual credit report for errors. These can materially affect your score so get them corrected
2. Pay all your bills on time. The biggest single factor in your score
3. Reduce the debt you owe. In particular, getting each of your credit card balances below 30% (preferably 10%) of the card’s credit limit makes a huge difference
4. Don’t open or close existing credit accounts unless you really need to. If you have credit cards you never use, keep them. And use them occasionally
5. Don’t open several new credit accounts over a short period. You may look like you’re in financial difficulties.

Read How to increase your credit score for more details and tips.

How to ask a question about personal finance and credit health

It’s difficult to ask questions about personal finance and credit health. Adults are supposed to have acquired all the knowledge they require through some magical version of osmosis.

Luckily, the web provides all the answers you need if you know where to look. You rarely have to ask a question of a human being.

Of course, there are times when only another person will do. For instance, if you’re in big trouble and need a credit counselor. Even if you’re not in financial trouble, you may benefit from a financial advisor. If you’re getting into something new, professional help may be a good idea.

Ask a question, get an authoritative answer

You have to choose reliable and reputable sources. Try these for authoritative answers:

• CFPB — The Consumer Financial Protection Bureau is a federal regulator
• Experian — One of the Big Three credit bureaus, it has tons of advice articles
• FICO — The company that builds the most widely used credit-scoring technologies
• Credible news outlets with serious fact-checking resources

Each site should have a search facility on its homepage. So, ask a question and get an answer you can trust.

Ask a question: Here are things you may need to know

If you’re unclear about any of the following, you’ll find detailed answers when you search one or more of those sites:

• How can I improve my credit score? Try Credit Sesame’s Credit Builder.
• What’s the best way to save for retirement? Automatically. Set up automated payments or wage deductions and forget it, except for annual reviews to keep yourself on track
• How can I build an emergency fund? Start now! It’s the single biggest step. And set up automated transfers from your checking account to a savings account
• What’s the secret to a good household budget? Be realistic and methodical. And make it easy by using apps

If your credit or personal finance question has not been answered, use International Ask a Question Day to fill some holes in your knowledge.

If you enjoyed International ask a question day March 14, 2023, you may like.

• 9 Questions to Ask Before You Lend Money to a Friend
• 11 Money Questions | MoneyCoachVince
• 5 Reasons Your Credit Score Matters with Irene Renee, Credit Repair Specialist

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for formal professional advice.

The post International Ask a Question Day March 14, 2023 appeared first on Credit Sesame.

Your credit score can get a worthwhile boost when you’re an authorized user on someone else’s credit card account. However, this works better in some cases than others and there are a few potential pitfalls you should know about.

What is an authorized user?

You become an authorized user when you’re added to someone else’s credit card account with their permission. The card company issues a new card in your name.

However, that company normally mails the card to the account holder. So, it’s up to that person, the primary cardholder, to decide whether to give it to you. If it’s your mom or dad, they may choose whether to hand over yours based on how responsibly you’ve managed money in the past.

According to Experian, one of the three biggest credit bureaus in the United States, you do need to use the card occasionally for your score to benefit. So, you need to agree with the main cardholder on how you may use the card, for example, at family dinners in a restaurant or when you fill up with gas.

Anyone can become an authorized user, regardless of their credit history. You need to meet the card issuer’s minimum age requirements and some card issuers cap the number of additional users on any one account.

Some credit card companies charge a fee for issuing a card to a secondary user. The size of those fees varies widely. The account holder may wish to take that into account.

Being an authorized user differs from opening a new joint account or co-signing. With those, both the signers are legally responsible for the account. But when you’re a user on someone else’s account, only the account holder is legally liable for all the charges, including yours — even if they die.

Will adding someone as an authorized user help their credit?

Once your name is registered on someone else’s account, you effectively piggyback on that person’s responsible behaviors. Remember, someone has to use your card occasionally (perhaps once or twice a month) to get this benefit.

Every time you or the primary cardholder makes an on-time payment on that credit card and keeps its balance low compared to its credit limit, it appears on your credit report and may improve your score over time.

Of course, if the account holder gets into financial trouble, any late payments or high balances also appear on your report. Those are likely to affect your score adversely.

Naturally, if you display bad behaviors on other accounts listed on your credit report, the impact of piggybacking on the card account is severely blunted. The negative effects of those may swamp the positive ones you gain by being an authorized user. Unless you exhibit good credit management across all your debt accounts, your credit score is likely to keep falling, though perhaps not quite as quickly.

How big are the gains from being an authorized user?

There’s some evidence that being an authorized user boosts credit scores in the real world. A 2019 survey of U.S. adults ages 20 to 29 “found a direct correlation between people who had been added as authorized users and good credit scores.”

You should take the more detailed results of this survey with a pinch of salt because the number of respondents was small. However, with that caveat, the poll revealed:

• 13% of authorized users had credit scores below 600 versus 24.6% of those who were not authorized users.
• 46.4% of authorized users had scores of 680 or above compared with 27.7% of those who were not.

If those numbers are correct across the wider population, then asking a great money manager to add you to a card account seems to be a good idea.

Do the gains vary depending on credit score starting point?

People in some circumstances likely benefit more than others from these arrangements. For example, young people with little or no credit history may get the biggest boost.

This is a common situation for younger adults. They can’t build a credit score without open credit accounts. And they can’t open a credit account without a decent credit score. This Catch-22 situation is called having a “thin file” in the industry jargon.

There are various ways to build credit from scratch, including the free Sesame Cash debit card. But becoming an authorized user on a credit card can appreciably accelerate the process.

It may take longer for those with excellent credit to reap the rewards. Your score can go only so high, and you already have so much good stuff going on that being an authorized user may provide only a minor though consistent boost.

Similarly, having a very low credit score can also slow the positive impact of piggybacking on someone else’s credit. That’s the case if your low score is a result of lots of recent negative items on your credit report.

Those become increasingly unimportant over time — until they eventually drop off your report, often after seven years. But it takes some time for them to fade. In the meantime, the improvements gained from being an authorized user may be slowed or negated by your past poor credit behavior.

Most (but not all) credit cards work

Before your parent, friend or whoever is willing to authorize your use of their credit card applies, ask them to check one thing. They need to call the card issuer to make sure it reports the account’s status to all the big three credit bureaus — aka credit reporting agencies.

Those are Equifax, Experian and TransUnion. They calculate your credit score using information on the credit report maintained on you by each of those three. So, you may have a different score from each, depending on which of them your existing lenders furnish information.

When a new lender decides whether to lend to you and what interest rate to charge, it consults one, two or all three of those bureaus.

So, if the card issuer reports to only one of those and your lender checks with one of the other two, your score won’t have benefited from your being an authorized user.

Most credit card companies report to all three. But not all do. So get the account holder to check before getting you a card that might prove useless.

Potential drawbacks if you are the authorized user

There are a couple of potential drawbacks to piggybacking on someone else’s credit card. The first is one we’ve already mentioned: If that account holder gets into financial trouble and sees his or her score plummet, yours will be damaged, too.

So, find someone who’s been a good money manager in the past and whose future financial prospects look bright. And don’t hesitate to cease your authorized use as soon as anything goes wrong. When you delete yourself from the account, this is one of the very few times that the credit card company is likely to take instructions directly from you.

The only other serious downside for you is the risk your actions pose to the account holder and your relationship with him or her. Presumably, that person is a friend or family. Who else might let you loose with their card?

If you go rogue with the card and run up huge balances, that person is liable for the resulting payments. But, entirely separately, your excessive usage could inadvertently harm your friend or relation’s own credit score, even if he or she doesn’t mind your charges.

Do you want to take that risk of damaging a relationship?

Potential drawbacks if you are the account holder

The potential downsides of these arrangements for the account holder can be more serious. To start with, you might have to pay a fee to get a secondary card.

But the main risk is the possibility of the authorized user running up huge charges on your account.

You are legally liable for all those charges. And you may struggle to recover them from the person who ran them up.

Because you might find it tough to prove in a civil or criminal court that certain charges were unauthorized. After all, the person who made them was someone whom you explicitly named as authorized.

Still, you can easily revoke your authorization at any time. A federal regulator suggests:

First, call customer service and ask that the authorized user be removed from your account. You can also ask the card issuer if you should get a new card with a new number. This may be a good idea if the authorized user has your card number.

— Consumer Financial Protection Bureau, “How do I remove an authorized user from my credit card account?” – Aug. 27, 2020

Credit utilization

You could also trip up over something called “credit utilization.” This is your balance as a percentage of your card’s credit limit.

So, suppose you have a card with a $10,000 limit. And, one month, your balance is $3,000. Your credit utilization ratio would be 30% that month.

That’s generally fine. Most credit experts urge you to keep your credit utilization ratio at or below 30%, though some urge you to maintain it at 10% or under especially when you’re working on your score.

But what happens if the additional charges made by your authorized user increase your ratio? Your score might suffer.

One solution is to ask your card issuer to increase your credit limit when you add your new user. That may push your credit score a little higher because you’re applying for “new” credit. But it should typically be back to normal within a few months.

Choose wisely

Should this put you off adding a user to your card account? Of course not, on two conditions:

• The person is a good money manager and trustworthy (the two aren’t always the same)
• You are willing to accept the risks

This could be your chance to truly help someone who’s important to you. But be sensible when deciding to do so.

If you found How Being an Authorized User Impacts Credit Score useful, you may be interested in:

• How to Build Credit Fast
• How to Build Credit with Credit Cards

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post How being an authorized user impacts credit score appeared first on Credit Sesame.

It’s a little harder to find a free checking account now than it was in the early 2000s, but they’re far from rare.

If you are comfortable with technology, you may benefit from online banking – aka internet banking or web banking. This is a fast-growing sector within banking, with analysts predicting a 13.6% compound annual growth rate between 2020 and 2027.

Online banks have much lower overheads than traditional banks with expensive brick-and-mortar outlets and high staffing levels. So you may find especially good deals in that sector.

Before you choose the type of bank you want, decide on the account characteristics you want and need. What should you look for in a free checking account?

5 features you might want in a free checking account

Consumers have a variety of needs from their bank accounts. For example, some people have high balances and want to earn interest. These people may value good interest rates on savings accounts. Other people have low balances and are not as concerned about earning interest.

You may like a personal, face-to-face service while others prefer the speed and convenience of managing their money through their smartphones. People who travel a lot often want access to tens of thousands of in-network ATMs spread across the country or the world.

Take a moment to think through the things you personally find valuable. Let’s run through five of those things that you might or might not want.

1. A truly free checking account

There’s free and then there’s “free.” It’s not hard to find a bank that does not charge a monthly fee, but some waive that fee only in certain circumstances.

Often those circumstances revolve around your account balance. If you’re the sort who always maintains a high balance no matter what, you won’t be bothered by this. But if your balance frequently dips to low levels, you need to establish what triggers a fee and how often that’s likely to happen to you.

2. Attractive yields

You pay an annual percentage rate (APR) when you’re charged interest on money you’ve borrowed. But you receive an annual percentage yield (APY) when you get interest on your investments.

Nobody’s going to get rich on the yields currently offered by banks on checking or savings accounts. But there’s no point in throwing away money by settling for less than the highest yield you can find.

Naturally, this is going to be of particular concern to those who maintain high balances. If your balance is typically in the low hundreds, you’ll be lucky to get the price of a cup of coffee from your year-end yield. So, you might prioritize other features over the account’s yield.

3. ATM fees

A free checking account is only rarely free when it comes to out-of-network automated teller machines (ATMs). You’ll likely pay a fee every time you withdraw cash from one of those.

But not all banks are equal when it comes to this. A few may cover all your ATM fees. But most will charge you. 

If you live and work close to in-network ATMs, this won’t bother you, providing you don’t travel very often. Otherwise, these fees can vary from zero to $3 a pop, depending on your bank, according to Business Insider. And the out-of-network provider typically takes its own fee. So, don’t ignore ATM usage.

If your location or lifestyle makes this important to you, check your candidate banks’ policies on ATM fees before you commit. A few even refund a limited amount of those fees each month.

4. A bank you can work with

Don’t underestimate the importance of customer service when it comes to banking. Chances are you’ll barely notice it most of the time besides a cheery smile when you visit a branch or a helpful call-center agent. 

But, if you encounter problems, the last thing you want is to spend hours on hold and dealing with call-center associates who are not empowered to help you.

It’s tricky working out which banks have great and terrible customer service. Review websites inevitably have some negative comments for any organization with millions of customers. And those with gripes are more likely to post. But try to get a feel for how big a priority your candidate banks give to caring. And check their ratings on the Better Business Bureau’s website. 

If you are comfortable with an online service, take a look at your candidate banks’ smartphone apps and other consumer interfaces. Not all banks offer as much functionality and ease of use as others. 

5. FDIC cover

All traditional banks are FDIC insured. That means that, if your bank goes under, the Federal Deposit Insurance Corporation reimburses you up to $250,000 per depositor per insured bank. 

But the FDIC warns of some financial technology (fintech) companies that offer accounts without its protection. It says, “ … non-bank companies are marketing and offering fintech apps for accounts that may not be FDIC-insured.” If in doubt, use the FDIC’s information and support webpage or call 1-877-ASK-FDIC (877-275-3342).

Some fintech companies are FDIC insured. For example, the Sesame Cash account comes with full FDIC protections. 

To sum up

Different people need different things from their free checking accounts. So, nobody can say “this is the best free checking account.” That depends on what you want.

Use this guide to determine what’s important to you. And then invest a few hours in shopping around for your perfect banking partner. Don’t forget to read How to Open a Bank Account Online.

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post What to Look for in a Free Checking Account appeared first on Credit Sesame.

The most obvious advantages of an online bank account is convenience. You can manage your money in moments from any device, wherever you are, 24 hours a day, 365 days a year. No more finding time to visit a bank branch during opening hours.

There are other, less obvious advantages. Most importantly, many online accounts often offer lower (or zero) banking fees compared to traditional banks. Also, you may find better yields on your balances in checking and savings accounts.

For some people the disadvantages outweigh the advantages of online banking. There are no face-to-face encounters with their bank staff. A familiarity with technology is required. Perhaps there are security concerns over keeping money in a virtual environment.

Online banking versus mobile banking

This article treats mobile banking (accessing your account using a smartphone or other mobile device) and online banking as the same thing, even if they are considered to be different technologies. Both require internet access.

• Mobile banking customers access their accounts via an app on a portable device (smartphone or tablet)
• Online banking customers access their accounts via a browser on any device (desktop, laptop, smartphone, tablet)

The Federal Deposit Insurance Corporation (FDIC) reports in a survey updated at the end of 2021, ” … mobile banking as a primary method of account access continued to increase sharply.” It says that usage grew to 34% in 2019 from 9.5% in 2015. By 2019, the FDIC says mobile banking had overtaken online banking as “the most prevalent primary method.”

Meanwhile, online banking (as defined by the FDIC) had declined over that period as the primary method of account access. It fell to 22.8% in 2019, compared with 36.9% in 2015.

However, mobile and online banking may be grouped together as they both involve self-management of accounts via the internet. If you add the FDIC’s 2019 figures for mobile and online banking together, they show most Americans now choose those one of these technologies as the primary way they access their accounts.

Perhaps the most telling number in the FDIC’s data is that, in 2019, only 21% of people used bank tellers as their primary method of accessing their bank accounts.

What segment of the population banks online?

There are no great surprises when you look at who uses online and mobile banking. Age may be the biggest determinant of who appreciates the advantages of online banking and who doesn’t.

Statista reports: “Approximately 63% of banked households whose reference person was between 15 and 24 years old were using mobile banking as their primary method to access bank accounts, compared to only 8% of households aged 65 years and older.” A chart showing the ages of users shows a strong correlation between how old someone is and the likelihood of their adopting mobile banking.

Convenience advantages of an online bank account

Time-saving is arguably the most important of all the advantages of an online bank account. In today’s frenetic world, who has time to visit a branch to withdraw and deposit funds, apply for a loan or mortgage or do any of the other things that 25 years ago used to be done in on bank premises?

Today’s online banking services allow you to do all those things anytime and any place. Using simple, intuitive interfaces on websites and mobile apps, you can manage your finances when you’re at work, on a road trip, sitting in your backyard or sunning yourself on a Mediterranean beach. The only constraint is the availability of Wi-Fi or a cellphone signal.

You have to be aware of some basic security issues but, for digital natives (young people who’ve never known a world without at least personal computers), these are generally second nature.

That’s almost certainly why millennials and their succeeding generations embrace online banking while many older people worry about security. They know they can make their banking secure, even if some feel out of their depth when people use jargon terms like virtual private network (VPN), phishing and hacking.

Financial advantages of an online bank account

The running costs of a traditional bank are high. Brick-and-mortar branches require massive investments in real estate and ongoing costs for staff, utilities, property taxes, building maintenance, local IT provision … the list is endless.

An online-only banking operation has no need for prestigious offices and branches. It can start operations in a cheap business park anywhere in the country. It needs way fewer staff. Its main investment is in building and maintaining its technologies, not its bricks and mortar properties. Online banks require strong finance, marketing, customer support and operations teams. but it have reduced outgoings compared to a traditional bank.

What does an online bank do with all those operational savings? It allows better deals for customers through lower or zero banking fees and higher checking and savings account yields.

What to look for in an online bank

Reading the small print about fees and yields is essential when shopping around for any type of new bank account. In particular, check whether those yield and fee deals are tied to minimum balance levels.

Some online banks not not charge ATM fees but others restrict free use to ATMs in their network. If you choose an online bank that charges for out-of-network ATMs, make sure there are in-network ones near to where you spend most of your time.

Ideally, balances and savings should be protected against the bank going under by Federal Deposit Insurance Corporation (FDIC) insurance. Reputable banks are pretty much always FDIC insured. That means each depositor gets up to $250,000 back if their bank fails. The FDIC says, “Banks that are FDIC-insured must indicate that they have FDIC insurance in advertisements and at teller windows.” Just check your candidate online banks’ websites.

You may also be interested in:

• Sesame Cash account with pre-paid debit card and access to credit builder. No Fees. FDIC insured. 
• How to Open a Bank Account Online
• The Consequences of Living Without a Bank Account

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post The Advantages of an Online Bank Account appeared first on Credit Sesame.

Start by remembering that even if you feel hopeless and helpless about your low credit score, you can become highly creditworthy. The process takes time and effort, despite ads you might see from scammers promising instant results. You have to be patient and determined to succeed. But that is pretty much the only qualification you need.

This guide outlines ways to build credit and develop good financial habits to keep a high score high.

Reasons your credit score is low

Ways to build credit

Secured credit cards

Using a secured credit card

terms and conditionsSesame Cash secured credit card

Credit-builder products

Credit builder loans

Sesame Cash Credit Builder

Use a co-signer for new loans or credit products

Become an authorized user on a credit card

Make sure bills are in your name

Make building credit a habit

Maintain credit habits during good times and bad

Sign up for Sesame Cash Credit Builder today

Reasons your credit score is low

There is usually one of three reasons why people find their credit score is lower than they would like. These are:

1. Having a “thin file.” They have not borrowed enough in recent years for lenders to know whether they are responsible borrowers. This is often a problem for the very young, who have never borrowed previously, or older people who have avoided borrowing as retirement approached
2. Damaging a previously better score. Perhaps they went through a period of sickness or unemployment or reduced earnings that stressed their finances to the point they could not keep up with debt payments
3. Never having had a good score. Some people are naturally bad money managers. It is not necessarily their fault because their brains may be wired differently from those who manage their personal finances well. Of course, this does not have to mean they cannot develop better habits

In all those situations, a low credit score today is no bar to a much better one in the future. Indeed, you might find it easier to raise a low score than a high one, simply because you have more levers to pull (more ways to build credit) than someone who already has excellent credit. Or, as credit-score technology company FICO puts it: “In general, the higher starting score, the longer it takes for the score to fully recover [from a hit].”

Ways to build credit

In 2020, Forbes magazine said:

It pays to have good credit. In fact, bumping your score from the “fair” range to the “very good” range could save you a whopping $41,000 on your mortgage (and thousands on student, car and personal loans, too).

And those are not the only savings. In some states, people with high scores can save $1,000+ yearly on their homeowners’ and auto insurance. Meanwhile, landlords often approve or deny tenants — and set their security deposits — based on credit scores.

Over your lifetime, a high score could save you tens of thousands of dollars, perhaps even hundreds of thousands. Read on to discover several proven ways to build credit.

Secured credit cards

Those with low credit scores generally find it hard to get approved for any sort of borrowing, including a mainstream credit card. This can put them in a Catch-22 position: They cannot get credit with a low score, and they cannot improve their score without credit.

A popular way out of this trap is a secured credit card. These are among the best ways to build credit from a low starting point and are available to almost everyone. That is because you are not borrowing any money. Instead, you deposit your own money and use the card for spending. So, in some ways, you can think of these as prepaid cards.

However, there are important differences between secured cards and prepaid ones. First, your card issuer reports your behavior as you manage your account to credit bureaus as if it were an ordinary credit card. That allows you to build your credit score — providing you do everything right.

And, secondly, you have to keep up with minimum monthly payments. Your “lender” will not touch your deposit unless you default. So, you must reduce or zero your balance each month as you would with a normal credit card.

Using a secured credit card

Doing everything right with a secured card mainly involves four things:

1. Funding the card regularly — You may wish to pay early because you never, ever want to be late
2. Keeping your balance low as a proportion of your “credit limit” (the amount you deposited) — If you want to build your score quickly, keep that balance below 10% of your limit. But, if you are in less of a hurry, keep it below 30%
3. Making at least the minimum payment — Again, if you want fast results, zero your balance each month
4. Not initially applying for more than one secured credit card — Live with one for several months before thinking of applying for a second

If you follow those rules for maybe six months, you may find that your score is rising. But it is likely to take longer to reach a point where mainstream lenders begin to welcome you. Still, eventually, you could trade in your secured card for a normal one.

Just beware of one thing. There are some bad players with rip-off fees in the secured cards market. So check online with sources like Trustpilot and the Better Business Bureau before you sign up. And be sure to read the small print in the contract before agreeing to anything.

Sesame Cash secured credit card

Of course, Credit Sesame is famous for providing ways to build credit. And we believe our Sesame Cash secured card, combined with our Credit Builder service, gives unbeatable help to those who want to build their scores. But, as with all financial products, you should comparison shop before you commit.

Sesame Cash offers online banking with effectively no fees:

1. Just two fees — $2.50 when you make an out-of-network ATM withdrawal and the same for an international ATM withdrawal. Seriously, that is it! Read the card’s fee schedule on its terms and conditions webpage
2. Government (FDIC) insurance on your deposits
3. Highly functional Mastercard®
4. Cashback rewards
5. Free mobile device protection
6. Two-day early payday

Visit the website for answers to your questions.

Credit-builder products

A credit-builder product should do what its name implies. It is a tool that helps you build your credit score.

Credit builder loans

Some companies offer secured “loans,” which they describe as “credit builder loans.” Here is how federal regulator the Consumer Financial Protection Bureau (CFPB) describes these:

“Financial institutions, typically credit unions, deposit a small “loan” (often $300-$1000) into a locked savings account, and then you pay the
institution back with small-dollar payments over 6 to 24 months. These payments are reported to the credit reporting companies. Once you come to the end of the loan term, you receive the accumulated money back in total.”

Sesame Cash Credit Builder

Some other companies offer a more fully featured credit builder service. Take Credit Sesame’s offering:

1. No credit checks
2. Shop with debit to build credit — Your debit account monthly payments are reported to the Big 3 credit bureaus as if they were made on a credit card
3. Daily access to your credit score
4. Cash rewards when you pass credit score milestones
5. Cashback on many purchases
6. No fees — Except for international and out-of-network cash withdrawals. Third-party and cash deposit fees may apply.
7. Seamless integration with the Sesame Cash card
8. Get recommendations of cards and loans for which you’re likely to be approved

Of course, we think that is an unbeatable offering. But we would say that, wouldn’t we? Once again, always shop around for your best deal before committing to a new financial product.

Use a co-signer for new loans or credit products

Many lenders who would deny an application from an uncreditworthy borrower are willing to approve the loan if a co-signer comes onboard. That allows you to have an account in your name and so can be one of the most effective ways to build credit.

A co-signer is someone with good credit who signs an agreement to guarantee your debt. Nothing is likely to go wrong for the lender, who now has two people to chase — including one creditworthy one who may have plenty of financial resources — if your loan goes bad.

But plenty can go wrong for the co-signer if you make late payments, default or skip town. That is because any bad behavior on your part will appear on their credit report as well as yours — and potentially drag down their score.

Perhaps worse, the lender can demand full payment of the debt if you default. And it is likely to target the co-signer — who probably has savings — before you when it comes to collect. On a large loan — perhaps a mortgage or car or student loan — that could have serious consequences.

All this means any person who agrees to co-sign your loan will have to love you a lot. And, if you love them back, you shouldn’t ask unless you’re confident you can manage that loan perfectly.

Become an authorized user on a credit account

A common question is, “Will my credit score go up if I become an authorized user?”

Some credit accounts, and especially those for credit cards, allow the cardholder to add an authorized user. This can be another of the more effective ways to build credit. Better yet, it reduces the risks to your friend or family member compared to being a co-signer.

It does not eliminate those risks entirely. Because you typically get a card in your name on someone else’s account. That means the person who is helping you has to trust you not to go rogue and run up huge charges that you cannot repay. However, nowadays, almost everyone can monitor their accounts online, so your friend or relation could quickly cancel your card, should the need arise.

According to card issuer Capital One, ” … credit card companies aren’t required to report authorized users’ activity to the three major credit bureaus.” So, you have to make sure that the one you’re going to use does make those reports. Otherwise, the whole credit-building exercise will fail.

Capital One continues: “But if the card issuer reports information, seeing positive effects on the authorized user’s credit starts with both the account holder and the authorized user using the credit card responsibly.”

Unfortunately, not all credit card companies allow authorized users at all. So, ask the person who is helping you to call his or her card issuer to make sure you can become an authorized user, and that your credit will benefit if you both decide to go ahead.

Make sure bills are in your name

Traditionally, credit bureaus (aka credit reporting agencies) only tracked your credit accounts. Therefore, payments on things like rent and utilities did not appear on your credit report, and so did not affect your credit score.

However, that has been changing in recent years. VantageScore, alongside FICO, is one of the two biggest builders of credit scoring technologies. And it explains:

There is a trend evolving which gives consumers some control over the credit reporting of nontraditional credit accounts. For example, Experian Boost is available to help you add your utility and mobile phone accounts to your Experian credit report. This is an example of what’s being called consumer controlled or permissioned data. You choose and control whether or not it’s added, and for how long it’s reported.

Many landlords are willing to report rent payments, too, upon request. For many people with scores below 675 or 700, this can be among the quickest and easiest ways to build credit. And it’s free. The person who wrote that VantageScore article reported, “I personally tried Experian Boost. I added my power and gas utilities to my Experian credit report. My score went up 5 points. It cost me a grand total of zero dollars. I’ll take it!”

Of course, such quick hits are just a start. And months and years of on-time payments on rent and utilities should continue to improve your credit score. But only if the accounts are in your name.

However, this is potentially a double-edged sword. Your score should climb nicely as long as you continue to make full and timely payments. But it should fall every time you are late, skip a month or make a part payment. So, be sure you are able to manage these accounts well before you ask for them to be reported to credit bureaus.

Make building credit a habit

We have provided several ways to build credit. However, none of them will work in the long term unless you get into good credit-building habits.

In the long run, your credit score is determined by how responsibly you manage money. And that score is influenced most by the following behaviors (in order of importance):

1. Pay all your bills on time. And make sure every payment is at least the minimum required that month
2. Keep your credit card balances low. Do not let a card’s balance exceed 30% of its credit limit. If you are trying to improve your score, keep those balances below 10%
3. Do not open or close credit accounts unnecessarily. It is OK to do so if you need to, but do not act on a whim
4. Never make multiple credit applications for new accounts over a short period. It makes you look desperate and raises red flags (and your score)
5. Monitor your credit report for errors. And keep an eye on your score to track your progress. Do not worry; using a credit score monitoring service does not affect your score. Only credit applications do

Everybody goes through bad patches. So, there may be times when you cannot follow all those rules as strictly as you would like. For example, you might have no choice but to skip a payment or run up your card balances if you fall sick, are unemployed for a while, or face reduced hours.

Maintain credit habits during good times and bad

Of course, it’s always wise to build an emergency fund during good times that can help tide you over during bad times. And setting up a household budget now could help you with that. However, many of us do not have the sorts of good times that leave spare money for saving.

Still, even then, there are ways you may be able to reduce the impact on your credit score of your unavoidable actions. Call your lenders early on in your difficulties, explain your position and ask if they can give you some leeway. While you’re calling, request that they do all they can to reduce the impact on your score of what is happening. They do not have to help you, but many will.

Sign up for Sesame Cash Credit Builder today

Of all the ways to build credit we have described, the Sesame Cash Credit Builder service is probably the most affordable (it is free), accessible and immediate.

And it is designed to help everyone: rich or poor, and those with high or low credit scores. Indeed, Credit Sesame does not check your score at all before approving you.

It is easy to sign up. Apply now if you are ready to take your first step to a better credit score.

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post Ways to Build Credit and Create Good Credit Habits appeared first on Credit Sesame.

Do you want to apply for a new credit card?

Used wisely, a credit card can be a useful way to manage cashflow or spread the cost of larger expenses. Perhaps surprisingly several credit cards with low balances can be useful in helping to improve your credit score. In addition, many card have cash-back and reward options can provide real value. Before your apply for a new credit card there are a number of questions you should ask.

1. What are your chances of a successful application?

You should not apply for a credit card unless you are reasonably confident of success. When you apply for a credit card your credit score takes a small but meaningful hit. This credit score reduction is temporary but should be avoided if you do not believe your credit application will be successful.

Most card issuers give guidance on credit scores of applicants likely to be successful. If you cannot find this information online, don’t hesitate to call card issuers to discuss their criteria for success.

It is better for avoid multiple credit card applications within a short period of time, particularly if you are likely to be rejected.

Credit Sesame offers free credit monitoring and can provide approval odds for credit card applications.

2. How much balance do you plan to carry over each month?

Whether you pay off in full every month or carry a balance, and the amount of that balance, has an impact on the interest you pay and your credit score.

Pay off in full every month

There is no interest charge when you make a purchase and pay off your credit card in full at the next due date. If you are sure you will never carry a balance forward at the end of each month, you do not have to worry about the card’s interest rate or, more importantly, its annual percentage rate (APR).

Sometimes carry a balance forward

Suppose you might just occasionally see a mid-ticket item for $1,000 or less and then treat yourself. You might choose to charge the purchase to your card and pay down the debt over two or three months.

That’s probably fine. The Federal Reserve reckons that the average credit card rate in the United States was 16.17% in April 2022. And, according to the Calculators.com credit card tool, you would repay that $1,000 at $342.36 a month over three months. Your total interest paid would be $27.07.

That is probably affordable to most. And it is up to you whether you regard it as value for money.

Always carry a balance forward

However, things are very different for those who see credit cards as a way to borrow over the longer term. Some people never zero their balances. And, for them, the APR on a card should be the first thing they look at when considering making an application.

We just quoted the Fed’s figure of 16.17% as the average card interest rate. However, that really is an average, and outliers on mainstream, famous-name cards run from 13.49% up to 26.49%, according to a US News article.

The rate you pay will depend on your credit score and other factors. If you stray far from that mainstream, into subprime territory, card rates can reach frightening heights.

It is all too easy to allow credit card interest payments to grow and end up a significant drain on your household budget. So closely monitor how much you are paying, and be ready to reduce your card balances if things start getting out of hand.

3. Do you need to reduce your credit card balance(s)?

Try borrowing using a personal loan if you need credit to zero your card balances or make purchases. Those generally have appreciably lower APRs than plastic.

And you should consider a balance transfer credit card with a long introductory rate of 0%. Just make sure you can clear your balance before the standard rate kicks in.

While you’re watching your interest payments watch your interest rates, too. Credit card rates are typically tied to indexes that are related to the Federal Funds Rate. At the time of writing this article, the Fed had recently hiked that rate and was signaling that it planned many more increases. So expect your cards’ rates to rise, too. Never apply for a credit card if you are not confident you can keep up with payments.

4. Will your credit score be affected by a credit card application?

The standard advice for those concerned about their credit score is not to open or close accounts unnecessarily. However, this is important mainly before you apply for a big new loan — a mortgage, say, or auto loan.

When you apply for a credit card (or any new account) your score will take a small hit. However, it should recover from that after a few months of responsible use.

There is another way in which getting a new card or closing an existing account damages your credit score. It reduces the average age of your accounts.

FICO, the company behind the most widely used scoring technologies, says:

Although the length of your credit history only accounts for 15% of your FICO® Score, it’s still an important influence on lenders. It can definitely impact the chances of whether or not you get a loan.

What to consider

How great or small the damage will be will depend on several factors, including:

1. How recently you opened the account you’re closing (the more recent the better)
2. The number of existing accounts you have open (the more accounts the better)
3. The average ages of those existing accounts (the older the better)

Of course, none of this means you can never open or close credit cards or other accounts. Just don’t do so unnecessarily. And time such changes when you can live with a temporarily lower score.

5. Do you want to pay an annual fee?

Some people won’t apply for a credit with an annual fee. If that is your policy, you may wish to take a moment to review it. Some annual fees can pay for themselves many times over in cash back, points or miles, not to mention perks. If rewards don’t interest you, there are plenty of credit cards on the market with no annual fees.

Not all credit cards with annual fees are generous. But plenty are competitive. It’s worth pausing for thought when you apply for a credit card.

6. Are credit card rewards important to you?

Chase Bank suggests a four-step process to make sure your next card delivers the rewards you expect:

1. Work out your likely expenditures in particular spending categories that are important to you for the following month
2. Check your candidate cards’ offerings to calculate the rewards each card should deliver that month
3. Multiply that by 12 for your annual rewards. Deduct any annual fee
4. If your card delivers miles or points, see how much those will really be worth to you at the end of that first year

Be sure to shop widely for your candidate cards. There are hundreds out there and you need to whittle those down to a manageable shortlist.

Is there a reward card that aligns with your lifestyle?

The most obvious examples of aligning a card’s rewards with your own lifestyle are airline cards, travel or hotel cards. However, there are probably plenty of people whose rewards cards don’t align as closely with their interests and needs as they could.

Credit card companies know it can be worth creating card offerings that appeal to particular groups of people. For example, some cards are particularly rewarding for those who enjoy dining out. Others are good for commuters, concertgoers, those with gas guzzlers and so on.

Choosing the right card

There are hundreds to options to consider when you apply for a credit card. Make sure you you choose a card that suits you and your individual circumstances. One size does not fit all.

You may also be interested in:

• How Does the Credit Card Pre-approval Process Work?
• Does Credit Card Pre-Approval Mean You Will be Approved?
• How to Build Credit with Credit Cards

Disclaimer: The article and information provided here is for informational purposes only and is not intended as a substitute for professional advice.

The post What to Consider When You Apply for a Credit Card appeared first on Credit Sesame.