BECU Dollars + Sense

Goals for building credit 1. Start small You don’t need a ton of credit cards to build your credit. Pick one bill a month to pay with plastic and pay it off each month. 2. View your credit report yearly Look for any mistakes and ask the credit reporting agency to fix them. 3. Use caution with store cards Store-brand credit cards often come with higher than average interest rates. 17 1 2 https://nfcc.org/wp-content/ uploads/2017/05/2017-FLS-Infographic.pdf, 13 Seattle Times 2017 NIE insert – “How to be a Financially Stable Adult” pg. 4, 14 www.experian. com/blogs/ask-experian/credit-education/ score-basics/what-is-a-good-credit-score/, 15 “Credit score distribution by age.”www.val- uepenguin.com/average-credit-score , 16 www. mint.com/money-management-2/6-damag- ing-side-effects-of-having-a-bad-credit-score, 1 7 www.usatoday.com/story/money/personal- finance/2016/11/01/store-credit-card-highest- interest-rates/92431750/, 18 www.creditcards. com/credit-card-news/cellphone-credit- check-1270.php, 1 9 www.igrad.com/calculators/ what-would-my-loan-payments-be, 20 www. igrad.com/calculators/what-would-my-loan- payments-be LIVE THE GOOD LIFE BUILD A CREDIT HISTORY WORTH REMEMBERING Don’t have enough cash on hand for all the things you want or need to buy? You are not alone. Many financial institutions, credit card companies and retailers loan customers money “on credit” to make big purchases. When you pay with credit, you borrow money from someone else and promise to pay it back in small amounts over time. Each time you buy with credit you build up your personal credit history and reputation as a borrower. Companies look at your credit history to decide how likely you are to pay back a loan. Cell phone ($1,000 – $2,000) Good credit • $0 down payment • $83 monthly payment for 12 months Bad/no credit • $500 down payment for phone 18 • $41.66 monthly payment for 12 months • $500 deposit to activate cell service Auto loan ($10,000) 19 Good credit • 5% borrowing fee • 5 years to repay • $189 monthly payment • $1,323 paid in total fees Bad/no credit • 18% borrowing fee • 3 years to repay • $362 monthly payment • $3,015 paid in total fees Private student loan ($25,000) Good credit 20 • 8% borrowing fee • 30 years to repay • $183 monthly payment • $41,039 paid in total fees Bad/no credit • 15% borrowing fee • 25 years to repay • $320 monthly payments • $71,062 paid in total fees Apartment rental Good credit • Lease easily approved • $250 security deposit • 2 months’ rent required at move in (first and last) • Proof of 3 months’ rent in savings required Bad/no credit • Lease application denied or requires a co-signer • $500 security deposit • 3 months’ rent required at move in • Proof of 6 months’ rent in savings required Know your flow: Monthly cash flow worksheet Use the worksheet to the right to figure out where your money is going each month. Add up your monthly bills and subtract that from the total amount of money you bring in each month. If you are budgeting well and spending less than you earn, your total monthly income should be greater than your total monthly expenses. A tale of two credit histories Compare what you’ll pay up front if you have good credit against what you’ll need to pay if you have a poor credit history or none at all. IN REAL LIFE GO WITH THE (CASH) FLOW BALANCE SPENDING WITH SAVING A healthy budget saves more than it spends. Make it a habit to review your bank account and credit card balances at least once per month. Sign up for online banking or download your bank or credit union’s mobile app to stay on track with your accounts quickly and easily. Goals for spending your money Don’t get caught with an empty wallet during a crisis. Here’s how to keep from running out of money when you need it the most: 13 1. Pay no more than 50 percent of your monthly income toward basic needs such as food, transportation and housing. 2. Aim to save 20 percent of your monthly income for emergencies, repaying debt or saving up for your future goal of buying a car. 3. Spend up to 30 percent of your budget on fun stuff like eating out, entertainment and travel. Bad credit: A bad reputation Making late payments or forgetting to pay bills will affect your credit history and give you a poor credit rating. • Can’t borrow money • Pay more to buy a car • Pay more to rent an apartment 16 • High borrowing fees • High insurance costs No credit: Starting from scratch If you avoid using credit, you won’t have any debt to pay back, but you also won’t have a borrowing history to show lenders. • Can only spend what you save • More requirements when borrowing money • Larger upfront payments required • Lower chance of identity theft People with “good” credit have a track record of paying their bills every month. AMOUNT Savings (Income x .20) $ Student Loan Payment $ Rent $ Utilities $ Auto Loan $ Auto Insurance $ Gas $ Food $ Clothing $ Phone $ Credit cards and other debt $ Entertainment $ Total Monthly Expenses $ SUMMARY Total Monthly Income $ Total Monthly Expenses $ — Monthly Cash Flow $ = 4 SUNDAY, APRIL 22, 2018 | Sponsored Newspapers In Education Content Sponsored Newspapers In Education Content | SUNDAY, APRIL 22, 2018 5