Over the weekend, I had a chance to meet up with some great people from FinCon Pittsburgh–our local group here in the Ohio Valley–thanks to PenFed Credit Union. We hit up the Imaginarium and made it out of the escape room by the skin of our teeth!
A few months ago, we had another meetup at a winery in Ohio so we could have good food and drinks with our Columbus friends.
I love these get togethers. It gives us all a chance to get to know each other a little better without being behind a screen. In Ohio we talked shop, drawing from each other’s collective blogging knowledge, and this weekend we had straight fun while working together on a task that didn’t include SEO.
I also love these people. They’re super interesting and create some great content. That’s why I’m going to take a minute to introduce you. You may know many of them already!
Amanda started blogging as she was trying to get out from under a mountain of debt. She achieved her goal, and continues to write about personal finance as she pursues financial independence. She’s also big into creative writing, and she’s good at what she does. She finds ways to tie seemingly mundane financial occurrences to moments of deeper reflection.
Want to hear something potentially crazier? He and his family recently bought a house while they were on vacation. They had no intention of doing so before they left.
But they could. Because they’ve made different decisions with their money and lifestyle than others. Some early retirement blogs seem super unrealistic for your average worker and obsessed with money over—pretty much anything else in life.
That’s why I love Eat the Financial Elephant: it’s not that. This family has found a way to balance living a full life today while socking away a high percentage of their income for tomorrow. It’s inspiring.
Brent Sutherland is a CFP who had a ton of experience in the traditional world of finance. In the past few years, he’s decided to buck the norm by starting his own business to help people reach financial independence.
That’s enough of a premise for an entire book, nonetheless a blog–right?
But there’s moooreee! Their blog, Married & Harried, covers how they handle the madness of child rearing while staying true to frugal values. From organization to purchasing decisions, grocery shopping to productivity, they’ve got everything for modern-day parents covered in a very non-Mary Poppins way. Which is appreciated. Because since I became a mother, Mary Poppins I am not.
Cindy, the writer at Smart Family money, is such a cool person. We come from different backgrounds, but as we were talking we realized that the people we’re trying to reach with our writing are the same: women who want to make the best financial decisions possible.
Not everyone in our group is a blogger; Emily Yost is an SEO specialist and PR professional who does work in the financial services area, and Richard at Sawyer PF is a financial coach. They’re both awesome and add a lot to our group.
I already found out about one other PF blogger in the area since we met up this weekend. If you know of anyone else in Western Pennsylvania, Eastern Ohio or West Virginia, leave a link to their blog in the comments!
But a recent study from US News & World Report would indicate that 32% of people with bad credit don’t stand a chance of finding that article–because they’re not actively trying to improve their credit.
Those numbers would make it appear as if 32% of people had just given up. Maybe they have. But maybe they just have other things to worry about–like how they’re going to pay rent or get together enough gas money to get to work.
The same study reveals that about 51% of people with bad credit have needed plastic at least once–and in many cases more frequently–in the past year just to get by. They’ve used credit to purchase items like gasoline, groceries or other household necessities.
When we consider that more than half of this group is swiping just to get by, it makes a whole lot more sense that a third of them aren’t actively working on their credit score. There are more immediate problems at hand.
I know you think you’re not poor, but…
When we think of a group of people that has problems meeting their basic needs, it’s easy to mentally classify the whole as impoverished. Their income must be crazy low. They probably live in Section 8 housing. They must not have access to resources or education. The more crude among us may even imagine someone that’s gaming the system because they’re too lazy to get a J-O-B.
Just to be clear, that last one is not something I personally would ever, ever say about welfare recipients.
Whatever you consider your socioeconomic standing to be, get real with yourself, because this post is for everyone.
I can’t pay my bills.
If you are struggling so badly that you can’t meet your basic needs, get help. Welfare recipients get a really bad rap, but the vast majority of people are just trying to get through a tough time until their hard work pays off.
Humble yourself and get basic needs like food, electricity and childcare met. Qualifications are going to vary based on where you live, but look into eligibility requirements even if you think you make too much money or don’t consider yourself to be “poor.”
In many areas, those limits are higher than you may think, and simply filling out an application can make you aware of programs you didn’t previously know existed.
Maybe you don’t qualify for those programs. Maybe you can’t meet your basic needs because you’re in massive debt and your minimum monthly credit card payments are insane. If you have bad credit, you’re not likely to qualify for a card with a 0% introductory interest offer–so you feel like you’re stuck paying interest rates above 20%.
You could refinance and consolidate your debt into a personal loan. With bad credit, you’re not going to get the best rates, but they’re likely better than the interest you’re paying on your credit card.
If you need help figuring all of this out, you may want to go in for credit counseling. Do your best to stay away from debt relief and debt settlement firms, though, as they tend to be shady and sometimes even predatory in their dealings. Vetting a good one is difficult, so credit counseling is not only safer, but easier.
I’m not going to patronize you here. If you’re having trouble making ends meet, I totally believe you when you say you know your budget down to the penny. Been there. Done that.
But I will suggest the Golden Rule of Budgeting. Use it when you sit down to crunch your numbers next paycheck. If you come up short, the Golden Rule allows you to be aware it’s going to happen ahead of time, which in turn allows you to hustle like crazy before you’re in a bad spot.
If done properly, you’re also highly likely to have a little bit of extra money left over at the end of the month. Take every penny and throw it at your debt and an emergency fund. Paying down debt should eventually up your credit score as a nice side effect. Having even a small emergency fund can mitigate the damage of the next financial emergency that is surely around the corner–it’ll keep you from having to pull out the plastic again.
Stop Using the Credit Card
This is really hard when you can’t make ends meet. But it has to be done. Do whatever you can to make sure that balance is going down instead of up. Frugality is key, here as you attack the big, monthly bills first:
Find ways to hustle in your off time. I know there’s not much of it. And I know it adds even more stress to an already depressing situation. You may already feel hopeless. But if you can do this for a little bit of time, there’s a decent chance your tomorrows will be far less stressful.
Here are some hustles I picked up when going through a seriously rough financial patch:
You can also do things like temp part-time, become a brand ambassador, teach English online or become a virtual assistant. This last one is particularly good if you’re into social media–it’s a task a lot of small business owners, even bloggers, don’t always have time for.
You’ve got this.
Just because your money’s a mess doesn’t mean you’re lazy. You’re going through a hard time, and it’s a lot. You’re not alone in your suffering, but you can get through it.
Any time you apply for credit, the lender is going to take a look at your credit history and credit score. A good credit score can be the difference between abysmal interest rates and manageable interest rates. Better rates can save you a ton of money over the course of repayment.
You don’t just have one credit score, though; you have many. There are several systems your lender may use to compute your score. On top of that, you have different scores depending on which product you’re applying for. For example, when you apply for an auto loan, your history with auto loans is typically weighted more heavily than if you were applying for a mortgage.
What is a good credit score, then? Well, today we’ll delve into the answer. We’ll be looking exclusively at FICO scores, though you should note that some creditors will pull your Vantage score. Most run off of the FICO model, though.
What is a good credit score when buying a home?
When you’re taking out a mortgage, a Good credit score usually falls between 680 and 699.
You’re likely to be offered even better interest rates if you have a Very Good credit score, which is typically in the 700-759 range.
But the best rates are usually reserved for those with an Exceptional credit score. The magic range for this rating is between 760 and 850. (Eight-hundred fifty is the highest credit score in the FICO model.)
What is a good credit score for auto loans?
Thinking about taking on a car note? In the auto lending industry, a good credit score is referred to as “Prime.” There is also a “Non-Prime” category, and finally a “Subprime” category. If you’re in the latter, you either want to work on getting your score up or buy in cash—the interest rates will be crushing.
A prime credit score usually falls between 661 and 850.
While non-prime scores are in the 601-660 range, you’re going to have a hard time getting approved by a traditional lender with a bearable interest rate if your score is below 620.
What is a good credit score when applying for a credit card?
Many lenders will pull something called your FICO Bankcard score when you apply for a credit card. This score actually goes all the way past 850 up to 900.
A Good Bankcard score is traditionally considered to be between 680 and 749.
An Excellent Bankcard score will help you get approved for even more exclusive cards. These are usually the ones that have mega rewards benefits. You typically fall into this category if your Bankcard score is 750 or above.
There are a lot of services out there offering “free” credit scores. Typically, you have to sign up for advertorial emails in order to access this score. Be careful, though. If you read the fine print, these scores are typically estimates, and may not be accurate.
They may also be based off of your Vantage score, which, as we’ve already established, only a small amount of lenders actually use.
If you want to get your FICO score and already have a credit card, odds are you can easily access it simply by logging into your account online.
If you don’t already have a credit card, you can find it for free through Discover.
How to Improve Your Credit Score
Not happy with your number? There are a few things you can do.
First, you need to check your credit report to make sure all the information on it is accurate. You are entitled to get a copy of your credit report from each of the three credit bureaus—Experian, Equifax and TransUnion—once per year.
If you’ve checked your credit report and everything’s accurate, there may still be something on there that you’re not happy about. Maybe a hospital sent your medical bill to collections without notifying you. Maybe you lived through a natural disaster and were too busy trying to put your life back together to remember the due date on your latest credit card statement.
If something like this happened to you, you can try writing a Goodwill Letter to get the negative line item removed. It’s not guaranteed to work, but it is a fairly simple process.
If the information is all accurate and you don’t have an extenuating circumstance that would justify removal, you just have to work on establishing good credit habits moving forward. Building your number back up can take some time, but if you’re consistent, it should work. Negative information only stays on your report for seven years max.
Here are three of the big things you can do to show you’re a responsible borrower:
Pay on time. If you’re more than 30 days late on a bill, that can show up on your credit report. If you’re dealing with medical debt, consider applying for financial assistance. You should also request to be put on a payment plan you can afford.
Keep your debt burden low. A big factor used to determine your credit score is your debt-to-credit ratio. If you have a $14,000 limit on your credit cards but you only owe $1,000, your debt-to-credit ratio is decently low. If, however, your limit is $1,000 and you’re carrying that same $1,000 balance, your ratio is incredibly high. This does not bode well for you when calculating your credit score.
Pay off debt, but don’t close your cards. If you have debt, pay it off. If you’re paying off credit card debt, it can be tempting to close them down after you’ve achieved your goal. Don’t. If you only had one credit card with a $14,000 limit and paid it off, your debt-to-credit ratio is looking pretty awesome. If you shut it down, you now have $14,000 less in credit, which is going to raise your ratio—not a good thing.
Do you have experience improving your credit score to get it into the “good” range? Leave your story in the comments!
While I was in NYC last month, I got a chance to sit down and talk with Chris Chippindale, COO of Public Service Credit Union in Denver, Colorado. We talked about the intersection between credit unions and technology, and how that affects members’ security.
This interview happens to be 360. Feel free to grab a headset and look around–you’ll see my friend Kristie in there with us, too. Or, if you’re watching on a PC, click and drag your mouse to move your viewpoint around.
If you’re using CC and YouTube’s attempt is making you crazy, or if there are parts you just can’t hear (my audio work will be better next time,) I’ve created a transcript for you below:
What are Credit Unions?
Femme: All right, hi, everyone! This is Femme Frugality and I am here with Chris. Chris do you want to tell us where you’re from?
Femme: Awesome, awesome. We are going to talk with Chris today about credit unions. I was wondering if you could tell me a little about what a credit union is and how it differs from a bank.
Chris: Sure. Credit unions are similar to banks in the sense that we offer more or less all the same financial products, but our mission is what really differentiates us from banks. We’re not-for-profit so we put the interests of our members [first]. That’s versus banks who have customers and they’re focused on profits.
What that means to you on a personal basis is that you should expect to see better rates. Lower on lending, and higher on savings.
How Do Credit Unions Use Technology?
Femme: Awesome. That’s amazing. So we are here at CO-OP THINK, and I know CO-OP is pretty much the technology behind credit unions that takes their ATMS and their credit unions across the country, and makes it so you’re able to access it just like your credit union at home. I know that technology is super important to credit unions. I was wondering if you could talk to me a little bit about the history of that relationship—credit unions and technology? I know that you guys were pioneers with a lot of these technologies, so I’d love to hear about it.
Chris: Yeah, we were [pioneers,] and I think one of the big reasons technology is so important to credit unions is, first and foremost, we don’t have the resources to go out there and build branches the way a large bank does. So we use technology to level the playing field and be able to compete because we know members of credit unions still need access to financial services. We can’t go out and build hundreds of branches across the community or across the state or across the country, so we use technology to be able to reach out.
A couple things CO-OP does for us? My credit union, as a member of the CO-OP network—our members can go to ATMs at any other credit union that also participates in the network, and use those ATMs surcharge-free. Instead of paying $3.50, $7, $10 to get your money out of an ATM, you can go to a CO-OP ATM, and they won’t charge for that.
Femme: I know they were saying earlier that that network is larger than a lot of those big, major banks.
Chris: Yeah, it would be larger than any one bank’s network.
Femme: That’s amazing.
Chris: One of the other things CO-OP does with us is something called shared branching, where, again, if you participate as a credit union in the shared branching network, your members can go into branches of other credit unions and transact business there. That’s another nice way to supplement our limited resources.
My credit union in Denver, we have 20 branches in Colorado, which is the most of any credit union in our state. That certainly pales in comparison to some of the banks with their branches out there, but by partnering with other credit unions, my members can go to other branches within the state or across the country and get service there.
Why Do I Have to Use Chip Cards?
Femme: One big tech issue that I think impacts everybody, but not necessarily everybody understands, is on our credit cards, and in some cases debit cards, I believe—that little RFID chip? What is that? And how does it work? Can you explain that in layman’s terms for us?
Chris: Sure. It’s a protocol that allows the card and the terminal to communicate. So instead of swiping the MAG stripe, you’re inserting the card—most cards have the chip these days. It’s just another way to allow the transaction to go through.
Femme: And are there any security concerns with that technology?
Chris: There are. I’m not an expert on that, but there certainly can be a case of intercepting transmissions from time to time. It’s a more secure technology than just the mag stripe. It’s something that we’re always wary of, but we do believe getting away from the mag stripe is making cards more secure.
The chip in particular—that’s probably more common these days. The chip itself puts in a cryptogram every time you insert it into the machine. So if you were to get someone’s card number in the past, that’s basically all you needed to commit fraud. Now with the chip, you need the card number plus this secret code, if you will, that changes every transaction. It made chip-on-chip transactions more secure. It hasn’t helped online, but it helps in retail environments, etc.
What Are Today’s Biggest Financial Security Risks for Consumers?
Femme: Gotcha. As we’re looking forward, what are some of the security issues of tomorrow, and how are credit unions working to address those?
Chris: Sure. As we’ve seen an improvement with the chip-on-chip technology, the two big things my credit union and many other financial institutions are seeing this year are account takeover fraud and online fraud.
One of the things you can’t do with your chip card is stick it into your phone or stick it into your computer for a chip-on-chip transaction, so most of the cards out there today still have the mag stripe information. Bad guys are getting that and committing fraud. They’re doing it online and they’re doing it at places where the merchant doesn’t have a chip card reader.
What Will Payments Look Like in the Future?
Femme: This is totally theoretical, but is that something you think we could start seeing in the future? [Sticking your card into your phone or computer.] Like now I can plug my memory card directly into my computer. Ten years ago I couldn’t have done that. I would have needed an external drive, and before that, I might have even just had to go to Target or Walmart where they had those capabilities.
Chris: I don’t think so. I’m not going to predict the future, but what we’re seeing happening is this idea of tokenization. So more along the lines of Apple Pay or Samsung Pay where the whole card number changes every time. So you’re not sitting there with a static, 16-digit account number on the card all the time. Every transaction would be unique. So I think that’s where we’re headed. Every transaction will be unique, and account information is “one-time,” if you will.
Social Media and Securing Your Financial Identity
Femme: Very cool. We just came out of a panel, and one thing that came up that I thought was kind of interesting was social media and what kind of a precarious situation we all put ourselves in without even really thinking about it. I work in an industry where people go as far as listing out their financial data online as a way of tracking and accountability. It really helps a lot of people, and it builds community.
But when they [in the panel] were talking about different social media profiles making it easier for people to hack your accounts—is there anything specific people can do to protect themselves? And/or, I know they said that CO-OP specifically was looking at this issue?
Chris: I would say my guidance is—you know, I’m a little bit older, and don’t fully understand some of the draw about social media and putting so much information out there, but it happens. It seems to be “the way of the world.” I would just caution people about how much information you put out there. It’s certainly great to let people know what’s going on and where you are and things like that, but that’s potential information that can be used against you.
When our members call into a communication center and you can’t see them eye-to-eye or get their ID, we ask [for] information that we would hope only they would know. The more information we put out there, the more likely it is that the bad guy can start piecing some of these pieces of information together to start figuring you out, and start getting past some of the techniques that we use on our end.
So we [financial institutions] always have to be vigilant and continue to understand what kind of information is out there, and have that balance of—you don’t want it to be super difficult when you call into the communication center and want information about your account. Because 99% of the time, it is you. We don’t want to make it a real difficult phone call for you, but at the same time, we want to be diligent in making sure it is you, and if you start giving out that personal information…
So we always caution people about how much of that they’re sharing.
Thanks so much to Chris for answering these questions! Do you guys like the 360 interviews? Or would you prefer if I kept the 360 for travel videos? It would be amazing if you could use this poll to help me make the best content for you in the future:
It’s not a convenient truth. But it’s a reality the vast majority of us face. You can’t always count on a raise. You can’t always count on a lateral move that pays more. Heck, if the Recession taught us anything, it’s that you can’t always count on having a job or a home six months down the line.
But there are some things you can do to straighten your line out a little bit. You might not have a steady, increasing source of income, but there are financial habits you can build that will help you not throw up in your mouth as you ride the ups and downs of a lifetime of income fluctuation.
Build Resilience Through Savings
I’ve been through some pretty crazy ups and downs in my financial life. I’ve been unemployed. I’ve lived in poverty. I’ve had great jobs that I loved, and even a great job that paid well.
But nothing is static. It’s true in life, and it’s true for your money.
To build resilience during those times of trial, you need to sock money away while things are good. Avoid lifestyle creep, and instead invest in your emergency fund and retirement accounts.
I know this is a good idea because I once had to live for five months without work after an involuntary cross-country move. Fortunately, I had built up a five-figure emergency fund by living frugally while I had a (comparatively but not really) fat paycheck.
Being unemployed didn’t feel good, but it felt a heck of a lot better than it could have because I knew I could pay my bills while I looked for work.
Maintain a Side Hustle
A few years ago, there was a regional shortage of work in my unionized field. Because I didn’t yet have crow’s feet, I was on the bottom of the employment register, and lost nearly all my income as the primary breadwinner for my family.
Luckily, I had this side hustle going on called blogging. I used all that extra time I had gained from not working my 9-5 to build up my business to the point where it could sustain my family, and even exceeded the max income I could have earned in the career I classically trained for.
I was blogging for a few years before I was at a point where all this was possible. Because I was able to work in my off hours to build up a side source of income, I was able to avoid financial stress and jump as cleanly as possible into a new form of employment.
Keep a side hustle going, even if your income flow is making you happy right now. You never know when you’re going to need it.
When I had my oldest child, things were not going well financially. Neither my husband nor I had a degree, and our income was extremely stunted.
To this point, we hadn’t asked for help. There were literally times where we chose between the electricity bill and food. Between sporadic stints of employer-sponsored insurance, we didn’t get to go to the doctor. We didn’t get to go to the dentist. We lived on this suspended hope that everything would be okay–someday.
When I found out I was expecting, I checked my pride real quick. I realized that I was responsible for another life, and that I couldn’t do this on my own. I needed consistent health insurance. I needed food. I needed help.
So I got it. Applying for benefits was one of the most humbling things I’ve ever done, and in retrospect, I can’t believe it took me so long to do it. Those programs helped me get on my feet and facilitated our upward mobility so much faster. Because of that help, I now pull in a decent income, paying it back both through those taxes everyone complains about and charitable giving.
But I couldn’t have gotten to “good” without asking for help to get out of the “bad.”
Get humble. Get what you need to make things better. Don’t sit in squalor because of imposed cultural shame.
You know how earlier we said that nothing was static?
It seemed like a bummer because I was telling you the good times don’t last.
Well, guess what? It works the other way, too.
When things are bad, they don’t stay bad forever. Things will eventually get better, especially if you’re working hard towards your goals. It might take a while, but you can fend off (situational) depression by knowing that no matter how low things seem right now, there’s a high point around the corner. Start taking action today to reach it.