BECU Dollars + Sense

• Charged a late payment fee • Lose rewards points • Lose service • Borrowing fees go up • Appears on credit report • Lower credit score • Reported to collections agency • Car repossessed • Loss of home (eviction) Did you know? You have the right to request one free copy of your credit report from each of the three national reporting agencies (Equifax, Experian, and TransUnion) every 12 months. 22 Order your free copies from annualcreditreport.com GO FOR THE BIG SCORE Grading your credit report To make viewing your credit history easy, your personal financial data is collected and summarized in a single report. The information in your credit report is graded using a mathematical formula and given a numbered score. Credit scores can range from 300–850. THE BUCK STOPS WITH YOU Who’s paying your bills? It’s easy to shop online and forget you’re spending real money. Credit card companies and other bill collectors will want their money back whether you can afford to pay them or not. Here are some of the people who might be looking at your credit report: 23 • Cell phone retailers • Cell service companies • Car dealerships • Banks and credit unions • Car insurance companies • Private student loan companies • Potential landlords • Utility service companies • Rental insurance providers Here’s looking at you, kid Companies look at your credit report to decide if they want to lend you money and what fee they will charge for borrowing it. Potential employers, insurance agencies and rental property owners may also look at your credit report before choosing to work with you. Goals for paying bills 1. Pay bills on time and in full. 2.Make repaying borrowed money a priority. 3.Pay back more than the minimum amount required each month. Debit or credit? Tempted to buy a new TV or laptop using credit? Think beyond the sticker price and decide how much your budget can afford to spend on this each month and for how long. Monthly borrowing fees can really add up over time and add a lot of money to the total cost of your purchase. IN REAL LIFE 22 www.usa.gov/credit-reports#item- 35087, 23 www.gobankingrates.com/credit/who-looks-credit-scores/ , 2 4 www.thebalance.com/the-consequences-of- skipping-monthly-payments-960106, 2 5 www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx, 26 www.bankrate.com/calculators/ savings/loan-interest-calculator.aspx Here’s what could happen if you don’t pay your monthly bills on time or in full: 24 $50 per month making the minimum payment Years to pay off loan = 5 Years Total interest paid = $1,000 Total amount paid = $3,000 $100 per month making more than the minimum payment Years to pay off loan = 2 Years Total interest paid = $400 25 Total amount paid = $2,400 26 Here’s what it really costs to pay off $2,000 at an 18% interest: If you choose to pay the minimum amount, you pay $600 more and take an extra 36 months to pay back what you owe. Student Loan Payments $ + Auto Loan Payments $ + Credit Card & Other Debt $ Total Monthly Debt $ Total Monthly Debt $ ÷ Total Monthly Income $ = x 100 = Pain-to-Gain Ratio % 2 7 www.seattletimes.com/education-lab/washington-state-ranks-40th-in-average-college-debt-per-student/ , 28 http://www.autos.com/auto-loans/5-car-loan-pitfalls- to-avoid, 29 money.usnews.com/money/personal-finance/articles/2014/06/03/a-guide-to-creating-your-ideal-household-budget , 30 http://guides.wsj.com/personal- finance/buying-a-home/how-much-you-should-spend-on-a-home/ KNOW YOUR DEBT LIMIT Don’t take on more than you can handle Borrowing more than you can afford to pay back each month often leads to late or missed payments. Many companies charge penalty fees if you miss a payment deadline. If these fees pile up, along with bigger-than- normal monthly bills, you could end up in a downward spiral of owing more than you earn. Measure whether you are borrowing too much by calculating your pain-to-gain ratio, also known as your debt-to-income ratio. Compare the amount of money you owe (pain) to how much you earn (gain). Keep your “pain” to less than 36 percent of your income and your wallet will thank you. Did you know? 56 percent of Washington state college students had debt upon graduation, with an average of $24,997 in loans. 27 Make all auto loan payments on time and in full. If you don’t, your lender may take away your car — but not your loan payments. 28 Complete the FAFSA (Free Application for Federal Student Aid) at fafsa.ed.gov to estimate college expenses and government aid. Consolidate student loans upon graduation to lock-in lower borrowing fees. If you can’t afford the rent without a credit card, you can’t afford to live there. Spend less than 28 percent of your monthly income on rental housing. 30 Push through the pain of debt Paying for big-ticket purchases with credit is a smart financial move if you are already planning ahead, saving often, borrowing carefully and spending your money wisely. Here’s how the cool kids are using credit without breaking the bank: IN REAL LIFE The pain-to-gain calculator: What’s your number? Use your answers from the Monthly Cash Flow worksheet on page 4 to calculate your level of pain-to-gain below: IN REAL LIFE Your credit score is based on: 35% Payment history 30% Amounts owed 10% Now credit 10% Credit mix 15% Length of history 6 SUNDAY, APRIL 22, 2018 | Sponsored Newspapers In Education Content Sponsored Newspapers In Education Content | SUNDAY, APRIL 22, 2018 7