Most of us are concerned about our physical health, sore joints, bad back, and general heart conditions, but you can’t forget about your financial health. To maximize your financial health it’s important to know how Lenders make decisions when determining if you’re fit for a loan or lump sum.
Here are the top 8 factors that are taken into account the most.
- Payment history – Do you pay your bills on time or are you constantly late or in default?
- Current debt – Do you have too much debt, can you take on more?
- Collections – Have you defaulted on your obligations and now a collection agency is handling the issue of collecting a debt?
- Public records - Have you had any bankruptcies or liens? Sold structured settlement payments in the past?
- Types of credit – What kind of accounts have you signed up for? (credit card, auto loans, mortgage, etc.)
- Credit history – Have you established a credit history and how long is it?
- Recent activity – Have you been actively seeking a loan or lump sum, how many new credit inquiries have you had?
- Credit score – What is your credit score? Your credit or FICO score can range from 300-850
These factors are all important and are often used by lending institutions when considering your application.
Your FICO credit score is important to your overall financial picture. The higher the score the more likely a lender will feel you are likely to pay them back and not default. It tells lenders how you’ve managed your accounts in the past and whether they should have any concerns. You are entitled to a free credit report once a year from the credit reporting agencies, you can obtain a copy by visiting www.annualcreditreport.com
To achieve peak fitness for your financial health, be mindful to:
- Pay your bills on time. Nothing hurts your credit score the most than late payments, being reported to collection agencies and bankruptcies.
- Get your free annual credit score. Like a visit to the doctor check your credit periodically, if there are any mistakes or red flags notify the credit agencies immediately.
- Control your debts. Don’t run up your credit card, it’s easy to swipe it and forget it, review your activity weekly and stop using it if you are getting close to the max
- Build your credit history. Start to build up a credit rapport responsibly. Begin having some bills put in your name and pay them on time every time. If you get a credit card pay more than the minimum every month and use it sparingly.
- Avoid too many inquiries. Every inquiry on your credit report is recorded, lenders may often be leery if you’ve had to many inquiries in a short period of time indicating you are taking on too much debt
Get financially healthy. Here are some tools to help you out
It’s that time of year again—dread tax day. This year two-thirds of Americans are expecting a tax refund. If you are one of the fortunate ones—congratulations this article is not for you. However if you’re part of the one-third who owes Uncle Sam—have you given any thought as to how you are going to pay your taxes?
The IRS offers several ways to pay your taxes: cash, electronic funds transfer, check/money order or credit/debit card. Obviously the government has made it extremely easy to pay them, however some of the ways are more desirable than others.
Cash-If you don’t have a bank account, don’t want to buy a money order and you don’t owe that much money you could, in theory, pop over to your local tax office that accepts cash payments but it seems rather risky to carry huge amounts of money around Philadelphia. They only accept exact change.
Electronic Funds Transfer-This option is free (Unless your bank charges you a convenience fee.) as well as convenient for those people who owe taxes but have money in the bank. You can pay by using the Internet or phone. The only downfall is if you overdraw the account which could cost you bank fees.
Check or Money Order-This option is a good ole standby but what happens if your check or money order gets lost in the mail? Your payment could be late and you may have to stop payment on the check or replace the money order which could cost you more money.
Credit/Debit Card-On the surface, paying by credit card can seem like a great idea if you don’t have the money to pay your taxes or you want to rack up rewards. Unfortunately, the IRS uses a 3rd party processor which charges a processing fee that ranges from 1.89-3.93 percent. Therefore if you owed $1000 and you paid a 2% processing fee that adds up to an additional $20. Plus if you don’t pay the balance in full, you have to worry about paying interest on $1,020. Most experts believe the costs outweigh any rewards you might receive. In addition, you could end up causing yourself additional financial hardship.
What are my options?
Payment plans-If you can’t pay your taxes all at once, your best bet is to make payment arrangements with the IRS. Although there is interest to be paid, it is far less costly than high interest credit cards. Also if you don’t file your taxes because you can’t pay you are looking at huge penalties, interest, additional costs as well as tax liens.
Short-term administrative extension-The IRS sometimes allows individuals an extension if they can pay the full amount within 120 days. This option is often used when individuals are obtaining a home equity loan or 401k loan. The interest rates are typically less than what the IRS would charge although it is not always ideal to incur more debt.
Sell your future payments-Many individuals who have illiquid assets such as future annuity payments are discovering that their best option for paying their tax bill is to sell some of their payments. The rates are significantly lower than credit cards, you will not incur additional fees and your balance can be paid off in full. When you sell your payments you are not borrowing money so you are not incurring new debt and you will be up to date on your tax bill so you won’t get in trouble with the IRS.
No matter which payment method you chose it is important to remember to file your taxes yearly and make timely payments.
If you are interested learning more about how you can pay your tax bill using the proceeds from the sale of your future annuity payments, give Rescue Capital a call today at 866.688.3532.
- Yeah! February Jobs Report - Government releases a better than expected jobs report.
- Up, up they go - The stock market opened high thanks to the jobs report.
- Doing the numbers - 6 numbers you need to know for financial success.
- Financial traps - Consumer advocates want to put an end to payday type loans from banks.
- Make a move - 7 smart money moves to make while interest rates are down.
With the end of the year approaching many people are starting to make resolutions. Some of which include getting out of debt. Instead of making a resolution, I would make improving your finances a priority for 2012. To help you get started here is a list of our favorite financial blogs.
- Rescue Capital – Our blog contains a little bit of everything from budgeting to selling your future payments.
- Get Rich Slowly – This blog provides practical advice on saving money, getting out of debt and investing.
- Kiplinger – Gives advice on personal finance and how to secure your future.
- MSN Money – Saving, investing, retiring and getting out of debt advice.
- Smart Money – Advice on how to save, spend, borrow, plan and more.
- Learn Vest – How to live frugally.
- Savvy Sugar – Advice on money, careers and travel from a woman’s point of view.
- The Consumerist – Gives independent advice on scams, deals, issues, recalls and more allowing to readers to make informed buying decisions.
- Daily Finance – Money and finance tips galore.
- Bankrate – Bankrate publishes personal finance tips as well as rates on mortgages, credit cards, savings accounts and more.