A credit card is more than a piece of plastic in your wallet. It’s a symbol of your financial independence. It’s a lifeline in the event of an unexpected expense. It’s a tool for building credit. And if you’re seeking practical ways to master credit card basics, you’ve come to the right place.

In this article, we’ll touch on some of the most important things you know to use a credit card well. We’ll share practical insights about how credit cards work and how to decide which is right for you. Then, we’ll dig into day-to-day management, ways to use your credit card for long-term financial health and potential pitfalls to avoid.

Understanding credit card terms

Before you apply for a credit card, it’s a good idea to know how they work. This ensures you enter the credit journey with a clear sense of what you can do after mastering credit card basics. It also gives you visibility into how a credit card affects your budget.

Credit report

Before a bank or another financial institution agrees to offer you a credit card, they might examine your credit report. This is basically a report card about your financial history and money management. It lists any other credit cards you hold, loan details and insights on houses you own or rent. A strong credit report signals to a lender that you pay bills on time and in full – and that you plan to do so in the future.

Credit score

Your credit score sums up the parts of your credit report into a single figure. Higher scores indicate you know how to manage multiple debts over an extended period. Lower scores mean you have room for improvement. They don’t render you ineligible for a credit card. It might just mean you get a lower credit limit.

Credit limit

Lenders don’t hand out blank checks or endless credit cards. Instead, they cap how much you can spend on a single credit card. This is known as a credit limit. To maintain a strong credit report and score and using some, but not all, of your available balance is a good idea.

Interest rate (APR)

This is the extra amount you pay monthly in exchange for your lender giving you a credit card. Interest is paid monthly and listed on your credit card statement. APR is effectively the same as interest and stands for annual percentage rate.

Authorized user

An authorized user is someone the primary cardholder has authorized as a second cardholder on their card account. Done responsibly, an authorized user credit card can build the primary cardholder and authorized user credit score.

Pre-approval

If you’d like to know how much credit you can get on a card, pre-approval can be helpful. This is a request for information from a lender to review your financials and determine an amount you are eligible to receive. Do research and narrow down your field of credit cards before seeking pre-approval, though. Too many credit inquiries in a short period can damage your credit score. Focus on pre-approval for one or two cards.

How to choose the right credit card

Several factors play into choosing the best credit card for you. Mastering credit card basics requires a good sense of which matter most.

First, assess your monthly budget and determine what function a credit card could play. Some people use a credit card for gas or other recurring expenses, then pay the balance at month’s end. Others use credit cards as an emergency backup for unexpected expenses beyond their egularal budget. Define your credit card’s purpose. This helps you decide how much credit, ideally, you would like to have.

Second, study interest rates. The lower the rate, the smaller your bill each month. Remember that most credit card interest rates are variable, meaning just because you have a low rate now doesn’t prevent it from rising in the future. Fixed-rate credit cards exist but are relatively rare. Aim low and be prepared tadjustto your budget if and when the rate rises.

Third, prepare your budget. Ensure you can pay your credit card balance in full each month. If not, consider how to avoid carrying a large balance for an extended period. Avoid putting your budget at risk or jeopardizing your credit score.

Fourth, seek pre-approval. This gives you better insight into the credit card type, limit and interest rate you’ll most likely receive. This helps you make an informed decision.

Managing credit card balances

If you’ve followed along, you’re in great shape for managing your credit card balance. Any credit cards should be included as separate line items in your household budget.

At the start of each month, write down your anticipated credit card expenses. Check in with yourself (and your partner, if applicable) mid-month to ensure you’re on track with your budget. At month’s end, sit down with your budget, pay your balance and consider what you’ve learned.

Life sometimes throws curveballs, and a credit card can help. What’s even better is studying your experiences and applying those lessons to next month’s budget. Celebrate your progress and your mastery of credit card basics.

Tips for improving your credit score with a credit card

To maintain and grow your credit score, it’s a good idea to pay what you owe on your card in full each month.

Use some of the credit available to you but not all of it.

Avoid carrying large balances from month to month. And don’t take out multiple credit cards within a short timeframe. These activities can affect your credit report and credit score.

Common credit card misconceptions

Some misunderstandings about credit cards can be harmless. Others can be damaging if you’re not careful.

First, some people view credit cards as financial tools anyone can get at any time. The reality is a bit more complex. Most lenders have certain criteria you must meet. Remember, the lender wants to ensure it makes its money back with interest. Recognize credit cards are a tool involving two parties, both of whom have responsibilities to the other. Do your part, use your credit card responsibly and recognize it’s a privilege to have one.

Second, there’s a common view that credit cards are a catchall for miscellaneous expenses or perhaps even “free money.” Don’t buy into this. Lax attitudes about credit card use can result in balances stacking up, big bills and the inability to cover monthly expenses. Use your credit card with a plan and define its use clearly and upfront. Nor are credit cards free money: You must pay back everything you spend with interest.

How to avoid common credit card traps

Practice and experience can help you avoid common credit card traps, such as:

• Maxing out your credit card. Pay balances in full each month and use only a percentage of the full credit available to you.
• Spending without focus. Determine how to use your card and then apply those principles responsibly. Your budget and your credit score thank you.
• Vacuuming up all the credit card offers. Too many credit requests in too short a time ding your credit score. Do your homework and find one or two cards that seem to fit best. Then seek pre-approval to ensure you are aware of the exact terms you must manage.

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

The post Mastering credit card basics appeared first on Credit Sesame.

A personal loan is an investment in your future self. Other types of loans, such as mortgages or auto loans, must be used for a specific purpose. A personal loan gives you a greater degree of flexibility. Learning how personal loans work helps you manage personal finances, achieve big goals and be a good steward of your credit.

Basic elements of a personal loan

A personal loan is a type of credit that a bank or online lending institution extends to help you meet a financial goal. These goals might include:

• Consolidating several smaller debts into a single account that’s easier to manage with better payback terms
• Covering an unexpected medical expense
• Funding your continuing education
• Paying for a small to mid-size home improvement project

Personal loans offer flexibility and financing capacity. They can be used broadly and are negotiated between you and a lender. You’ll likely have more credit to spend with a personal loan than a credit card.

This financial tool has clearly defined edges. Your lender determines the interest rate – often fixed – you pay and the period you pay it back.

Types of personal loans

Some personal loans are secured, while others are unsecured. Understanding this principle helps you decide how much risk to take on while meeting your lender’s expectations.

A secured personal loan means if you cannot pay your debt, the lender can take something of value from you. This might include a vehicle, a home or another asset. It gives the lender greater confidence that they can recover their money with interest if your financial situation changes. Secured personal loans often have lower interest rates because of this added financial security for the lender.

If you have limited assets of value, you might opt for an unsecured personal loan. This means the lender gives you funding without collateral backing you up if you cannot pay. To cover its bases, your lender might require a higher interest rate.

Many personal loans offer a fixed interest rate. This helps you predict precisely how much is owed each month. Some personal loans have a variable interest rate, which means you might owe less this month and more next month as the market fluctuates.

Advantages and disadvantages of personal loans

A personal loan can be attractive if you need money to cover expenses beyond your savings. Personal loans are available from various trustworthy lenders, both conventional and online only. You can shop around for interest rates, terms and other criteria that fit your financial situation best.

Personal loans can help you remain calm amid stress. An unexpected medical bill might normally throw off your budget for months. A personal loan could reduce stress because it lets you make payments over time versus all at once.

A final advantage of a personal loan is that you can manage it with other financial accounts. These include checking and savings accounts. You already know the ins and outs of your banking website or app. This can make tracking your personal loan and payoff progress a breeze.

On the other hand, personal loans come with potential disadvantages. Personal loans can become an excuse for spending beyond your means. Never pursue a personal loan unless you have mapped out how it impacts your monthly budget. Know the payback period and plan on fully paying what you owe each month so the loan doesn’t add more stress to your life. Paying extra is even better.

Another downside of personal loans is interest. If you can pay for something with cash savings, it might be best to start there versus opening an interest-bearing personal loan. A small-scale bathroom remodels funded with cash leaves you with a completed project and no debt. By contrast, a personal loan might mean you complete your remodel yet continue making payments for months or years to come.

A third watch-out with personal loans is their possible impact on your credit report and score. People with solid credit tend to have at least a couple of types of debt, so a personal loan can, in theory, be beneficial. Yet it’s important to make timely payments and avoid taking out too much new credit too quickly. Apply for a personal loan only when you understand how it could impact your credit health. Avoid falling behind on payments, which could negatively affect your score, and, in the worst-case scenario, send your bill to collections.

Tips for choosing the right loan and avoiding pitfalls

Several practical tips can help you ensure a successful personal loan experience. These tips include:

1. Identify your need.

Understand why you’re seeking a personal loan. Creatively examine all possible paths for covering that expense. Consider whether you need such a loan or might fund all or part of the cost with cash.

2. Do your homework.

Use Credit Sesame and other free resources to explore the types of personal loans available. Determine who offers the lowest interest rates and best overall terms. Avoid lenders that charge fees that seem unusually high or without a clear explanation. Your job at this stage is to limit risk to your personal finances while meeting a financial need.

3. Place inquiries.

Apply for a personal loan through one or two different lenders. See whose features best fit your need and your budget. Place these requests around the same time to avoid a negative impact on your credit report. An even better option might be to seek preapproval for a personal loan. This might not ding your credit at all.

4. Review proposed terms.

Assuming you qualify, the lender responds with an overview of the personal loan for which you are eligible. Take this opportunity to read slowly and carefully. Understand the interest rate you’ll pay, whether that rate is fixed or variable, and the timeframe for paying back the debt in full. Scan all documents to see whether the lender includes additional fees. Ask any questions to make sure you understand the numbers and your responsibilities once you have the loan. You can ask your financial adviser to take a look and give you a second opinion. Once these steps are complete, and you are sure you want and need a personal loan, you can sign the documents and make the loan official.

5. Use your loan and begin payments.

Once your loan paperwork has been signed, you should have access to funds within a few business days. This enables you to use the personal loan for the expenses you’ve earmarked and triggers the start of your monthly payments. Honor the terms you’ve agreed to and make payments on time.

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

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You want your special day to be absolutely right. For many couples, the joy of a wedding often competes with the dread of figuring out how to pay for it. According to Zola, a wedding planning website, the average cost of a wedding in 2023 is $29,000 up from $28,000 in 2022. Most people don’t keep nearly $30,000 hanging around and a personal loan can be a helpful option. It can cover expenses, maintain flexibility and keep your budget intact.

What are the benefits of a personal loan for your wedding? How do you choose the right loan? What terms should you consider? How can you minimize overall expenses along the way?

Key benefits of a personal loan to fund your wedding

If you do not love financial drama, a personal loan can save you time and headaches. There are several reasons why.

You have lots of choices with personal loans. Your existing bank likely offers these products. Many more options are available online via personal loan providers.

Personal loans offer flexibility. You can use the funds from a personal loan for a wider range of expenses than for other loan types, such as auto loans (used to purchase vehicles) and mortgages (used to purchase houses). This extends to cover costs such as dress and tuxedo rentals, catering, facility fees, honorariums for your officiant, and so on.

Personal loans offer compatibility. This means a personal loan can pair well with cash savings or a credit card. That provides full-circle financial resources to fund your wedding.

Finally, personal loans generally can be obtained more quickly than other types of loans, such as a mortgage. If you’re newly engaged and holding your wedding in the next few months, the accessibility of a personal loan can help you expedite the planning process.

How to shop for a personal loan to fund your wedding

As with other types of debt, it’s important to consider your financial objectives and personal boundaries when shopping for a personal loan. Keep these criteria top of mind.

• Interest rates. Determine the interest rate and whether it is likely to increase. Ask for a fixed rate whenever possible. This ensures a predictable monthly payment. Most personal loans have a fixed rate, but it’s always a good idea to double-check.
• Term. This refers to the number of months you spend paying off your personal loan. Generally speaking, ask for a shorter term with higher monthly payments so long as you can afford to make them in full. This helps you pay off your personal loan sooner with less interest.
• Fees. Depending on your personal loan provider, you might have additional costs to assess. For example, some banks or online services might charge processing fees or expenses for getting copies of statements via physical mail.

Fund your wedding without breaking the bank

You can plan an incredible wedding without losing sleep over how the dollars flow. Follow a few steps to ensure peace of mind throughout the planning process.

1. Start with the end in mind

Write down a number that represents your preferred all-in wedding cost. Factor in everything, including food, photography, clothing, travel, lodging and everything else. Talk through the full budget with your partner and agree on that target number. No matter how you end up financing your nuptials, it is wise to have a unified purpose and a clear goal to guide the rest of your decisions.

2. Check all your money pots

Options are always an advantage when you’re planning for a big expense. Consider all of the ways you might fund your wedding to keep costs in check and cover all expenses. For example, do you have some cash set aside in savings? Do you have a credit card that could be used for smaller-scale purchases? These can supplement a personal loan and help you focus on borrowing only what you need.

3. Avoid too many personal loan inquiries

From a credit perspective, remember that it’s good to have several types of debt, it’s not good to make too many applications for loans in a short period of time. Do your research and assess all possible lenders before applying for a personal loan. This works in your favor. You apply only for a loan that fits your personal financial situation. And you avoid too many credit inquiries, which can damage your credit score.

4. Evaluate repayment options

Your personal loan specifies exactly what you owe each month. That doesn’t mean you need to stick with the minimum payment, though. Work with your partner to determine if you can afford to pay a little extra. This can help you get out of debt sooner, leaving you basking in the glow of a fully funded wedding.

5. Look two steps ahead

Most big life events have a few unexpected turns along the way. Perhaps that venue is more expensive than you realized. Or maybe additional family and friends plan to attend your after-wedding dinner. Whatever the case, think ahead about the possibility of extra costs or hidden savings. This can give you and your partner the confidence to keep taking the next step in the wedding planning process without extra heartache or heartburn.

Whatever your wedding adventure brings, a personal loan can help you shore up your budget, anticipate the costs and create an experience to remember.

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

The post Can a personal loan fund your wedding? appeared first on Credit Sesame.

Think getting a personal loan requires a lot of effort today? Imagine being an ancient Sumerian. Back then, you needed something more tangible than a good credit report. They preferred silver for big expenses, such as land and houses, according to the book “Mesopotamia: Civilization Begins.” That’s just one of many examples illustrating the strange-but-true history of personal loans. Read on if you need a little encouragement or inspiration that personal finance has improved.

Loans of the distant past

Back to the Sumerians for a moment. Remember how big-ticket items required some high-class coin? Well, rest assured: if you needed to move quickly on a smaller purchase between 4,500 and 2,004 B.C., you had options. Lots of options. You could have used grain such as barley, copper or wool, according to various sources.

In Bible times, God gave Moses and the Israelites specific instructions about lending and the ethics of conducting financial transactions. Personal loans weren’t supposed to be a money-grab for the lender. Exodus 22:25-26 (NKJV) notes:

“If you lend money to any of My people who are poor among you, you shall not be like a moneylender to him; you shall not charge him interest. If you ever take your neighbor’s garment as a pledge, you shall return it to him before the sun goes down.”

Loan retribution in Rome

Not everyone extended grace to borrowers who took out personal loans. The Romans mastered the fine art of pay up or else. A fascinating if grisly summary of the Roman perspective on debt can be found in an article titled “The Loans of Ancient Rome,” by Kenneth S. Most of Florida International University.

It turns out Roman citizens typically didn’t need long-term debt like the modern personal loan. Short-term loans, good for a year or less, covered expenses for a primary occupation: farming. Once farmers harvested the crops, they could pay their loan in full. They didn’t have fancy bathroom projects or giant medical bills at the hospital, evidently.

It’s also likely that Roman punishments for nonpayment played a role. Today, bankruptcy and collections await borrowers who default on a loan. Back then, failing to pay a debt triggered a harrowing series of events.

First, the borrower went to debtor’s prison. Heavy chains limited their freedom to move. They could either find a way to pay the money or try to find some poor sap to serve the conviction for them. The Romans even subjected debtors to public humiliation. Borrowers had to stand in the square and say the amount of their debt out loud. Empathetic family or friends might hear the plea and cough up the cash.

Second, borrowers whose cries went unheard and whose pockets remained empty faced grim fate. They could be sold into slavery. They could be executed. And if they had multiple loans to settle, their corpse could be split into pieces.

Guilty consciences in the Middle Ages

It seems that morality didn’t make much of a comeback for personal loans from the 1100s to the 1300s, according to an article available from The Ohio State University’s history department.

People who made loans–known as usurers–occupied among the lowest positions in society. Church leaders condemned them for extracting money from borrowers without working for those earnings.

“The usurer found himself, in time, linked to the worst ‘evildoers’, the worst occupations, the worst sins, and the worst vices; for he was an evildoer of the highest degree, a pillager and robber,” the article notes.

Lenders who died clinging to their occupation faced the prospect of hellfire, according to a belief common at the time. More people in the early 1200s embraced the concept of purgatory, a place where people are said to get a second chance to make amends and get to heaven. Yet some still didn’t think these interest-grubbing professionals would make the cut. The bodies of people who made personal loans often found themselves buried in cemeteries apart from the general public.

The 1700s and 1800s: ‘Please, may I have a loan, sir?’

As humanity advanced its financial system, the personal loan managed to find itself embroiled in further weirdness.

In the 1700s, people had to get character witnesses to take out a bank loan, historian Sean Trainor notes in a report for TIME. (This was for shopkeepers, mind you. But the odd mental picture deserves inclusion here. Bizarre business loans left people seeking personal loans with the financial dregs. We’ll explain in a moment.)

Even into the early 1830s, banks focused on lending to businesses, not your average person on the street, according to an article by Amy Farber, a research librarian at the Federal Reserve Bank of New York. And lest you think businesses got the royal treatment, be assured they had strict rules you likely wouldn’t want to follow. Loans tended to be doled out and paid back in a span of three months. You didn’t get the full loan amount. The bank took its interest, then handed you the rest, printed on its own special paper. Good luck cashing that at the ATM!

Meanwhile, people seeking personal loans found their neighborhood banks’ doors sealed shut.

So they turned to the next best thing: Rich people.

Quoting from the records of a Massachusetts museum that studied early banking trends, Farber shares: “People in the 1830s who wanted a personal loan or a mortgage usually went to wealthy individuals with money to lend (such as Salem Towne, the prosperous farmer and businessman who owned the large white house on our common) … .”

The next time you consider a personal loan, just imagine the alternative: going door to door in your community, knocking on the doors of nice homes and hoping someone shows you mercy.

Nah, we’re good.

Post-World War II and the rise of crypto lending

Personal loans took on fresh adventures in the 20th century and continue into the present.

One unusual type of personal loan happened in 1947. Well, it actually involved a lot of people. Specifically, the entire country of France.

World War II left extensive damage throughout the European nation, so the World Bank agreed to extend its first-ever loan. Back then, the people of the country got $250 million for rebuilding, an article on the bank’s website notes. In today’s terms, that’s the equivalent of $2.6 billion. The bank hasn’t made such a large loan since.

Fast forward to today, and cryptocurrency continues to grow in popularity. Digital money has several things going for it, including the ability to trace every penny’s provenance from its point of origin.

But there’s more: Crypto lending is on the rise, according to a Reuters report. Fans say crypto lending benefits borrowers because it’s faster to secure a loan. Plus: fewer piles of paperwork! Companies making crypto loans include BlockFi, Celsius, Genesis and Nexo. Be aware, though, that regulation of crypto industry hasn’t caught up to the fast-changing financial environment. Crypto holdings can disappear with market shifts or if lenders leave the crypto economy for good.

Some things never change. Whether you’re seeking a personal loan at the dawn of history or in cyberspace, borrower discretion is advised.

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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 weird history of personal loans appeared first on Credit Sesame.

If you spend hours online each day, you’re not alone: On average, we consume more than six and a half hours on the internet daily, according to one study. That creates an ideal environment for criminals seeking to steal your personal information. As tax season approaches, giving special attention to preventing tax identity theft is a good idea.

What is tax identity theft and how does it happen? What damage can it cause and how can you prevent it? What can you do if you are a victim?

What is tax identity theft?

Tax identity theft occurs when someone steals your Social Security Number or other personal information to claim your tax refund for themselves. Criminals can also use your information to apply for a job. This often happens without your knowledge. People often discover that identity theft has occurred when they file their annual taxes. They then learn someone else has filed fraudulent information and claimed the corresponding refund check.

There are several reasons to be aware of tax identity theft. First, it’s among a growing number of ways people can steal your personal information. In 2022, consumer fraud cost Americans approximately $5.9 billion across more than 5.7 million reports of suspected misconduct, according to the Internal Revenue Service (IRS). Stolen information can also create lasting damage to your credit score through no fault of your own.

Monitoring your credit report and keeping track of your tax information means you are alerted to suspicious activity as soon as it happens. You can take steps quickly to protect your finances and your good reputation as a responsible money manager. This is important if you want to apply for a credit card or a loan in the future.

How can criminals steal your tax identity?

Bad guys look for ways to exploit innocent people whose guard is down. This can happen several ways.

A common technique is for criminals to send you fraudulent digital messages. This might happen as a phishing attack, which is when you get a suspicious email that contains a corrupt link or attachment. Clicking the link or opening the attachment can place harmful software onto your computer. Criminals might use this software to watch what you’re doing on your device. They can track your keystrokes, decode passwords and use that information to access your Social Security Number or bank account information. Phishing attacks can also occur via text message to a smartphone or direct message via a social media platform. At other times, data about millions of customers are leaked by hackers from websites you frequent.

Some criminals use a traditional phone call and a sense of urgency to get you to make a decision that’s not in your best interest. For example, someone might call claiming to work with the federal government. They might request your private information, including Social Security Number, after which they can file a fraudulent tax return. Remember that the IRS and other agencies will never call you to request this personal information. Hang up on such calls and report fraud to the authorities.

It’s also possible for criminals to steal information from snail mail. This might include grabbing a tax refund check out of your home mailbox or out of an unlocked P.O. box.

What kinds of damage can tax identity theft cause?

Tax identity theft can harm victims in several ways. In its most extreme form, tax identity theft takes away money that’s rightfully yours. This occurs when a criminal steals the tax refund check you’re owed. It can also happen if a criminal gains access to your bank accounts and removes funds you’ve worked hard to save.

Fraud also hurts your credit. Good credit and high credit scores develop over time with good habits, such as having a good credit mix and paying off balances. But fraud can damage this, such as when a criminal applies for multiple credit accounts in rapid succession. You might also find loans or expenses you never applied for in your name. These fraudulent transactions aren’t obvious to banks and other lenders unless you do the work of undoing the fraud.

Time and effort spent can be a major cost of fraud. You must work with the proper authorities, wait as old accounts are frozen to prevent further fraud, and pause until new accounts are set up so criminals can’t access them. This creates stress and friction in your personal and financial life.

What are some ways you can avoid tax identity theft?

There are many ways to prevent tax identity theft. Make sure you trust the sites where you provide personal details. Avoid oversharing any information that criminals could use. This is especially true for personally identifiable information such as a Social Security Number or financial account details.

Work directly with a trusted tax software platform or with a trusted tax provider to file your taxes via a secure internet connection. Never click on suspicious links or attachments. Don’t ever give out personal information if someone requests it over the phone. Learn how to report suspected fraud to protect yourself and others who might be victimized later.

Always check your mailbox regularly, or ask a friend to help if you are away. Keep your P.O. box locked when you are not present.

Consider purchasing affordable identity theft insurance. You get financial protection plus guaranteed help from trusted experts to manage the time-consuming post-theft recovery process.

What are your options if you are the victim of tax identity theft?

If you believe a criminal has committed tax identity theft, report it immediately to the Federal Trade Commission via the form at IdentityTheft.gov. During this process, file a fraud report. Provide answers to the website’s questions, which results in an affidavit confirming fraud has occurred. Access your personalized fraud recovery plan, which the website provides, to determine the next steps, secure your information and finances, and get back to normal as quickly as possible.

Assuming you hold identity theft insurance, contact your insurance agent and they can instruct you on next steps. Typically, they take care of all the paperwork, phone calls and emails needed to get you back in good standing financially.

If you have evidence a criminal is actively using financial accounts gained via fraud, get those accounts frozen. Contact your bank or credit card institution to suspend those cards so you can set up fresh accounts criminals can’t access.

Where can I find more information on how to avoid tax identity theft?

For more helpful information on preventing tax identity theft, visit the Federal Trade Commission’s Consumer Advice website. You can also see the latest statistics on identity fraud in the U.S. via the Identity Theft Tax Refund Fraud ISAC – 2022 Annual Report.

What should you do next?

Be aware that tax identity theft is common and growing as our world becomes digitized. Download the free Credit Sesame app to monitor your credit report and credit score. Research identity theft protection services and determine if it’s an investment that makes sense for you. If you suspect fraud, report it to the proper authorities. Encourage your family and friends to protect themselves.

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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 to avoid tax identity theft appeared first on Credit Sesame.

You have a right to access financial products and services free from discrimination. This principle underscores Zero Discrimination Day on March 1, 2023. This is a good day to reflect on your own money management journey, celebrate your personal financial growth and remember that rules are in place to guard you against unlawful policies. Across the world, financial institutions, businesses and other organizations are working to eliminate discrimination based on race, gender, religion, disability and sexual orientation.

How can discrimination affect your personal finances and credit health?

Discrimination can have wide-ranging negative outcomes. For example, if a lender refuses to extend credit on the basis of a person’s protected class, it might result in financial hardship. In addition to leaving innocent consumers without access to a credit card or a loan, it could have other impacts. This could include a lower-than-anticipated credit score and overall weaker credit health, since a mix of credit products are important for higher credit scores. Further, people without credit access lack the ability to demonstrate good credit habits, such as making timely payments and using the right amount of available credit.

Additionally, financial discrimination could cause stress for people who are victims of misconduct. This might contribute to health complications. Organizations such as the Centers for Disease Control and Prevention are working to promote health equity to help address discriminatory practices some people groups have experienced.

Why is good credit important for everyone, and what makes up a good credit score?

Good credit provides you with several advantages. It allows you to access the financial resources you need for big expenses in life, such as a car or a house. Good credit can unlock loans that complement cash savings or other financial tools you plan to use for such purchases.

Additionally, good credit contributes to a healthy credit report and a strong credit score. This can make you eligible for credit card offers, lower interest rates on loans and better odds of securing a rental home or apartment if you move to a new area. That’s because certain organizations are authorized to pull your credit report to determine if you are a good fit before they extend a loan or a rental agreement.

Several factors contribute to a healthy credit score. This number quickly summarizes how well you’re managing your available debt. Credit mix is an important part of the equation. Credit mix is having several types of debt, such as a credit card and a student loan, rather than just one type. Credit use is another factor. Lenders want to see you use just a portion of the credit available to you, rather than using it to the max.

Other factors that impact your credit score include timely payments on loans. If you make payments in full and on time, your credit score is likelier to increase over time. It’s also important to remain stable with your credit. Rather than applying for loan after loan over a short period of time, demonstrate responsible payments over a period of months or years before taking on new debt.

What tips can you use to improve your credit health?

Improving your credit health requires a series of small and manageable steps, not big lifestyle changes.

Take stock of the credit cards and loans in your name. Make sure your income is sufficient to cover monthly balances. Pay the installment or required payment in full each month.

Get the free Credit Sesame app to keep an eye on your credit report and credit score. Be sure the information on your report is accurate. Report suspected fraud to the credit bureaus.

Explore free money management courses online or in your local community. Read a personal finance book, listen to a podcast or watch trustworthy videos with practical tips for good credit health.

How can financial discrimination happen, and how can you report it?

There are several ways financial discrimination can happen. In the most extreme cases, a lender might refuse to meet with you or to extend any type of credit.

In other situations, a lender might offer credit but increase the interest rate. They could also extend a lower amount of credit compared to what they would offer someone else with comparable credit. They could add discriminatory fees and not tell you about them – or label them in a way that’s designed to mislead.

Excessive amounts of paperwork, special requirements or extensive review periods that delay access to credit could be other forms of discrimination.

If you experience financial discrimination, the first step to take is to file a report with the U.S. Department of Justice. Its Civil Rights Division can review your report and determine the best course of action. You can learn more about the rights you hold on its website.

Another step you can take is to file a complaint with the Consumer Financial Protection Bureau. The site contains detailed instructions about the information and documentation to include with your submission.

What can financial institutions do to support Zero Discrimination Day?

Institutions such as banks and lenders can start by learning and following the law to ensure everyone has equal access to financial products and services. For example, the Equal Credit Opportunity Act prohibits discrimination.

These organizations can provide regular training for team members interacting with you and other consumers. Financial institutions can also subscribe to updates from agencies such as the Consumer Financial Protection Bureau. The CFPB provides ongoing information about efforts to eliminate human- and machine-initiated discrimination.

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

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Pursuing higher education can be immensely rewarding and position you to grow your earning potential for years to come. To get a degree, there’s a good chance of needing to take out at least one student loan. According to the Education Data Initiative, more than 42.8 million Americans have student loan debt adding up to $1.745 trillion.

Most students know it is important to stay on top of their studies, submit assignments on time and prep for tests. Maintaining good credit while completing your degree is also a good idea. After graduation, you may need to rent a home. Landlords can pull your credit report and verify you can make monthly payments. Or you may want to purchase a home rather than rent. Good credit can mean the difference between a great interest rate on a mortgage or an average one. Although employers cannot pull your credit score, businesses can request your credit report. A good credit report indicates that you are responsible with money, a trait employers may like to see.

Student loans affect your credit scores and appear on your credit report like any other debt. Managed right, student loans can be positive for your credit scores.

Student loans add to your credit mix

People with higher credit scores tend to have a mix of credit types. Regular repayments on a variety of credit types, for example, a credit card, a car loan and a student loan, show lenders you’re capable of managing your money. Student loans add diversity that credit reporting companies and prospective lenders like.

Student loans payment history can impact credit scores

The most important thing you can do to maintain your creditworthiness is to make timely payments. Pay your monthly balance in full, rather than falling behind. You can even implement strategies to get out of student loan debt faster by paying extra on your monthly installment.

Some people who have high student loans and other debt might consider bankruptcy. This is something better avoided if possible. Bankruptcies stay on your credit report for years, which can lower your credit score and signal to banks it’s too risky to lend to you.

Student loan deferral can impact credit score indirectly

A student loan deferral does not impact credit scores directly because it is done with permission from the lender. Many people defer student loan payments while in school or even after graduation for various reasons. Typically, a student loan deferral allows you to postpone making payments on the principal, interest or both for a period of time. However, a deferral may increase the size and age of unpaid debt, which can harm credit scores. Also, waiting to defer until the loan is delinquent may also hurt credit score.

Cosigned student loans have pros and cons

Many students don’t have sufficient credit to take out a big loan for school. In those cases, some cosign a loan with a parent or other trusted adult. This can have pluses and minuses for your credit.

On the plus side, cosigning can give you eligibility for a student loan that diversifies your debt types. Your name goes on the account, along with the cosigner. This can positively affect your credit score by adding a new debt type. When you make payments, you can demonstrate your ability to manage money, further strengthening your credit. Associating your name with a parent whose credit is better than yours also gives lenders added confidence the debt will be paid.

On the minus side, cosigning comes with risks. If you cannot make payments on a cosigned loan, and your cosigner is in the same situation, you could quickly fall behind. This could hurt your credit and lower your score – and that of your cosigner. Cosigning brings an added level of responsibility for both parties to make good on their commitment to the lender.

What else should I know about student loans and credit?

Student loans bring a legal responsibility to repay the debt. Before taking out a loan, plan for how the funds will be used, know the interest-rate terms and understand the repayment timeframe. If it does not make sense for your financial situation, do not do it. There may be other ways to pay for your education, such as taking on a side hustle to earn extra money or taking a few classes each semester and cash-flowing your schooling.

If you decide to get a student loan, you might like to download the free Credit Sesame app to see how your credit report and credit score are doing as you go through school. Continue practicing good financial management with your credit cards and other debt so you are in good shape to cover education expenses when payments begin. Keep track of monthly statements and pay on time, every time

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

The post Do student loans affect credit scores? appeared first on Credit Sesame.

When inflation strikes, prices for many of your regular purchases climb higher. Your dollars seem to cover less and less. The hard-earned money in your bank account leaves your hands faster than in the past. But what exactly does all of that mean for your credit?

The answers often aren’t obvious, primarily because inflation generally happens slowly over a period of weeks or months. That makes it important to understand the potential effects of inflation so you can take steps now to maintain good credit.

How might inflation impact consumer credit reports and credit scores?

You aren’t likely to see major changes to your credit report or credit score because of inflation alone. However, side effects of inflation could show up with time. For example, if you get behind on payments, spend too much of your available credit or request multiple new credit lines in short succession, your score could fall. On the other hand, if you use inflation as a reason to double down your money management focus and put the right practices to work, you can maintain or even grow your credit score.

We’ll explain how these scenarios might play out below. Be sure to get the free Credit Sesame app to keep tabs on your credit report and score amid inflation.

How could inflation influence consumer credit card use?

During inflation, the Federal Reserve often chooses to increase interest rates, as it did several times in 2022. In turn, this can push variable interest rates higher, such as those on your credit cards.

If this happens to your credit card, don’t feel singled out. The Fed is operating on a principle designed to help the overall economy. The idea is that if interest rates rise, people curb their spending because things cost more. As this spending slowdown ripples through the economy, inflation cools and things become more affordable – or so the theory goes. There’s no guarantee of this happening, but it’s helpful to understand that concept when evaluating money management decisions. You will likely see more expensive monthly bills because of higher interest rates. If you do not wish to pay the extra cost created via higher interest rates, you might consider setting a spending “ceiling” on your credit card and stop using it once your balance reaches a certain level. For example, let’s say you typically set aside $250 a month to pay your credit card in full. To anticipate inflation, you might limit yourself to spending $225 a month and assume that the final bill will end up closer to $250, factoring in higher interest rates with inflation.

How can inflation affect my loans, such as a car loan, student loan or mortgage?

Your variable-rate loans may cost you more when it’s time to make monthly payments.

The principles you’re using to manage your credit card expenses apply here. Make a plan that applies to all types of debt you hold. This ensures you have an accurate and updated picture of total monthly debt payments, including those higher interest amounts. Following these steps can help you make a plan:

1. Log into the apps or websites you use for your banking and credit accounts.
2. Check out recent monthly statements or balances to get a sense of how much more you’re paying monthly today than, say, three to six months ago.
3. Update your personal budget to factor in these higher payments resulting from inflation.
4. Evaluate any changes you might need to make to ensure you’re covering your debts fully each month.

The best money managers first seek out the facts about their financial health and then plan to avoid surprises. It might feel a little scary to know exactly how much more you must pay, but you’ll have greater peace of mind and send every dollar right where you need it to weather inflation.

What easy steps can I take to reduce the risk of inflation hurting my credit?

The best strategy for helping your credit during inflation is to keep doing the right things to build credit. This includes making your monthly payments on time. When possible, pay your credit card balance in full. Manage multiple types of credit. Use a portion of the credit available, but not all of it.

Download the free Credit Sesame app to get to know your credit report and your credit score better. Make sure everything on your report is accurate. File a dispute if you see an error to ensure correct information is available to prospective lenders and landlords.

What other information can help me manage my credit during inflation?

Several free online resources can help you understand inflation better. Among them are:

• Inflation Monitor from the Bipartisan Policy Center. This fun tool provides quick and easy-to-understand updates about price changes for food, fuel and other things you buy. See if it matches up to your experiences in your local area. Also use it to spot trends and time your shopping trips, such as knowing when fuel prices are falling so you can gas up and save a little money.
• Consumer Price Index from the U.S. Bureau of Labor Statistics. You’ll find charts, bullet-point explainers and other details to help you monitor what inflation is doing to your wallet.

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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 is the impact of inflation on consumer credit? appeared first on Credit Sesame.

Life often seems best when we’re content with what we have. Rather than focusing on everything we don’t own, we appreciate everything that brings us joy right now. This February — and beyond, if you’re up to the challenge — see if you can enjoy life’s simple pleasures while embracing a frugal mindset. You can have fun while freeing yourself of the need to spend money at every turn.

The word frugal derives from the Latin frux, meaning “fruit” or “value,” and is even a distant cousin of the Latin word for “enjoy” (frui). It means, careful in the use of one’s money or resources.” With that in mind, get started on frugal February!

1. Make a budget and stick to it.

Living your best frugal life starts with a plan. Use a piece of scratch paper or a spreadsheet program on your computer. First, confirm how much money you’re bringing home this month. Then, jot down all of your monthly recurring expenses such as a gas or electric bill, a rent payment, an internet bill or a credit card statement.

Next, allocate remaining money to specific funds for purchases you regularly make. Set aside a certain portion of your income for food, clothing and other necessities. Remember to set aside money for any fun activities you have planned.

From here, it’s pretty straightforward. Stick to your spending plan. Give yourself a pat on the back for living within your means.

2. Find expenses you don’t need anymore and get rid of them

During the budget exercise, you might encounter costs you’d forgotten about. You might spot things you don’t need anymore, such as a streaming service that’s run its course or a magazine subscription you no longer care about. Highlight these on your budget.

Then, make the call. Go online and cancel those services. Contact the corresponding helpline and ask a customer service representative to assist you if necessary. Be aware they might try to keep you as a customer. After all, it’s their job. Be polite but firm. Let them know you’re sure about your decision. Frugality sometimes requires hard decisions. It’s worth it.

3. Explore ways to save money around the house

There are easy things you can do to live a more frugal life without extra work. Turn off lights when you’re not using them to save on your energy bill. Turn your thermostat down a few notches so your heater only kicks on when you really need it. Eat what’s in your pantry before going shopping again. Refrain from going online and searching for things to buy because you’re bored.

Surround yourself with things that aren’t connected to the internet or to a credit or debit card. It’s amazing what you can find to do that keeps you frugal and within budget.

4. Build a DIY home gym

If you’re a gym member, consider doing more exercise at home. Smart TVs and mobile devices bring the world into your living room. Find a free or low-cost exercise program online. Grab a few hand weights or consider investing in a used treadmill (but perhaps not in February). Get in shape while avoiding the cost of monthly membership and a commute. As a bonus, you avoid braving the cold and the elements.

5. Make more meals and drinks at home

You don’t need to be a world-class chef or a barista to have delicious and healthy food and beverages right in your kitchen. Search cupboards and refrigerator for ingredients that sound good together. Look for easy meals online or in a favorite cookbook. Determine how much time you need to set aside to cook meals that feel enjoyable, not rushed. Then, whip up gastric greatness. As a bonus, you get to enjoy conversation with family and friends.

6. Shop with a frugal filter

Go to the store only after reviewing your budget and knowing what you have left to spend. Rank your shopping list from “must haves” to “nice to haves.” Search for deals in the aisles you frequent. Delay gratification whenever possible. Hold off on expensive or impulse purchases.

If your loved one does most of the shopping, ask them to embrace frugal shopping habits. Have a rule you both need to agree on purchases before buying anything outside the budget or unexpected. If you support each other in the quest for frugality, you can both be tireless champions of frugal February living.

7. Use the most affordable and sensible transportation option

Depending on where you live, getting from one place to another can be as simple as using your own two legs. If you live in a place where businesses and homes are farther apart, consider public transportation. Buses, subways and ride shares are among the options. Bicycles and scooters enable you to get around and also provide you with fresh air and a little exercise. If you are a senior or have special needs, search online for free or low-cost options that provide top-shelf accommodations to help you get where you’re going.

8. When it’s available, go with free

Sometimes, at least a few of the best things in life are free. Whether you’re in the market for a new microwave, a bedframe or a lawn mower, start by asking around. Do your friends or family have an item gathering dust? Might they let you borrow it — or give it to you outright for free? Then, check out online marketplaces with products that people are giving away near you. You’d be surprised at the things people simply want out of their home or yard.

9. Bargain, barter or belabor the buy

Keep hunting for clever ways to save in style. You might assume prices at the store are hard and fast, but do you really know until you ask? Find a manager and see if you can work out a deal at a lower cost than listed. Back in your own neighborhood, think about things or services you might offer in exchange for something you want. For example, if you raise backyard chickens that lay eggs,, perhaps you can give the eggs away in exchange for the use of something you need, such as your neighbor’s power washer. After all, your deck needs washing in preparation for summer barbecues and family get-togethers.

If you can’t find a cheaper option, you can just stick to your frugal February ways and wait. It’s that simple. Eventually, the right time arrives and that item you want so badly finds its way home with you.

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

The post Nine Ways to Save Money in Frugal February appeared first on Credit Sesame.

Sometimes, life throws a financial curveball. One poor decision or mistake with money management can have long-lasting implications. It might seem as though it’s hard or even impossible to get back on track. Thankfully, there are several steps anyone can take to recover from a credit screw-up.

Ways a credit screw-up can happen

There are a variety of factors that can negatively impact your credit. Everyone’s circumstances differ. Some of these issues might ding your credit quickly, but many take effect over an extended period of time. It’s an important reminder that good financial habits that might seem small can add up to healthy credit. Issues that can result in a credit screw-up include:

• Late payments. If you are unable to keep up with bills, this can lower your overall credit. If a bill or two go to collections, the impact can be even more significant.
• High credit usage. If you are using all or most of the credit available to you, this can hurt your credit. That’s because lenders and other groups authorized to pull your credit report want to see that you live within your means. Maxing out credit cards is among the activities that can contribute to a credit screw-up.
• Many credit inquiries. When you seek out new credit cards or loans in a short period of time, it can raise questions. Landlords and renters want to see predictable credit activity over time, not a dramatic uptick in your requests for additional credit.
• Out of balance credit types. If you have only one or two types of credit, this factor could work against you. Lenders often like to see a blend of credit on your record. This could include an auto loan, a credit card, a student loan and a mortgage. Limited credit types could be a barrier to the strongest possible credit report and accompanying credit score.
• Bankruptcy filing. Thousands of people file for bankruptcy each year, and this type of activity can remain on your report for some time. It can pull down your overall report until enough time has elapsed to remove the bankruptcy from your annual credit report.

Steps to take if you have a credit screw-up

You are not alone if you’ve experienced any of these things that can result in a credit screw-up. The journey to healthy credit is personal. Everyone faces unique opportunities and challenges as they manage their finances. The good news is you can begin taking steps to recover from a credit screw-up quickly. Here are several strategies you can use to begin the recovery process:

1. Get your 3 free credit reports from AnnualCreditReport.com.
2. Get the free Credit Sesame app. Credit Sesame is a financial app for consumers who want to be confident their finances are under control. The platform uses AI to help consumers achieve credit health and financial fitness by managing and growing their credit and cash together. An all-in-one app to monitor credit score daily, receive insightful credit improvement and finance recommendations, and find the right credit cards and loans.
3. Assess your credit landscape. Once you’ve retrieved your annual credit reports, study them to understand what they says about your credit health. Each of the three reports varies because the credit reporting agencies – Experian, Equifax and TransUnion – pull data from different sources. Review the types of credit listed under your name and ask yourself several questions. Is everything accurate? Can you locate the list of factors negatively affecting your credit? What trends in your spending stand out? Are there details that seem unfamiliar or even inaccurate? If everything appears to be correct, you’re ready to move on to the next step. If you spot an error or suspect fraud, you should file a formal dispute. This can get your credit reports cleaned up so it’s as accurate as possible.
4. Plan the steps to build back your credit. Now, it’s time to formulate a plan to improve your credit score. This is key to resolving a credit screw-up. Your plan should include clear goals and a timeframe for taking those actions. For example, if you have maxed out two credit cards and need to get your credit usage back in line, your actions may include, “Pay down both credit cards in the next 6 months” or “Pay $50 extra each month for the next six months March.” Post these steps in a personal planner or in another location where you see them frequently. The goal isn’t to discourage progress. Instead, it’s to inspire you on the journey. You’ve evaluated your finances, made the decision to fix a credit screw-up and have a clear plan to make progress. Your credit report won’t reflect changes right away. It might even take months or, in the case of a particularly severe credit screw-up, years. But the sooner you get started, even with modest steps, the faster you improve your credit health.
5. Evaluate and adjust. With the Credit Sesame app, you can keep tabs on your credit health, including your credit score. As each month passes, you can check your information to see how you’re doing. Have you succeeded in chipping away at that credit card bill? Are you noticing your credit card balance is smaller with each bank statement? Celebrate these moments. If you have several other steps to take, find ways to start implementing those, as well. If you have a setback and need to adjust, it’s no problem. Recognize that rebuilding credit takes time. You know what needs to be done – and how to monitor your progress.
6. Maintain and grow a healthy credit mindset. Good financial management takes time. That can be challenging to find amid career, family and other activities. The Credit Sesame app can save you time and effort while showing how you’re doing.

Follow these steps if you have a credit screw-up and you should find yourself well on your way to more robust credit health.

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

The post Steps To Take If You Have A Credit Screw-Up appeared first on Credit Sesame.