Stay in control of your credit financial health
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
Celebrity Pre-paid Debit Cards
The latest celeb to hit the pre-paid debit circuit is personal financial guru Suze Orman. The “Approved Card”, her first financial product, is marketed as an alternative to traditional checking accounts and credit cards. Her goal is to help users improve their credit scores. Does Suze’s card have what it takes to make you a master of your financial future or is it just hype?
About 1 in 12 families do not have a bank account, according to the Federal Reserve. As a way of enticing the unbanked or under-banked individual, financial service companies are marketing prepaid cards. There are some pros to having a card; you can’t overdraw the account, some are FDIC insured, and some offer protection against theft or loss; but they also have cons too.
One of the biggest complains are fees. While Orman’s card is cheaper than most, depending upon your spending and funding techniques you may have up to 20 different fees. The card costs $3 and there is a $3 monthly fee. There is no charge to reload the card via direct deposit or automatic transfers from a checking account but there is a $4.95 fee to put cash on the card at Western Union and MoneyGram. If you load it with cash instead of electronically, you have to pay $2/ATM withdrawal. You also get 1 free call to customer service per month. Extra calls are $2 each. If you get cash from Allpoint network it is for free but you will incur a $2 charge for using other ATMs—plus whatever fee the ATM operator imposes.
In a recent interview with Audie Cornish of NPR Orman states, "the main purpose of this card is for the first time in history, a prepaid card - a debit card - is going to be sharing information with TransUnion, a major credit bureau, so that over the next 18 to 24 months a major credit bureau - and I hope the other two join me - will be able to evaluate this information and determine if activity on a debit card can create a FICO score, or a credit score for you.”
Orman hopes to change how FICO scores are created but the pilot program with TransUnion is only sharing aggregated, anonymous information and you have to opt-in to the program. So I am not sure how it can actually help build your credit.
There is obviously a need for these cards because it is almost impossible to live without a debit or credit card. But I still think the advice put out by consumer advocates during the summer still holds true. Consumers should read the fine print before purchasing one of these cards. Compare cards to determine what the fees will be for at least 6 months to a year. Familiarize yourself with transactional restrictions in addition to the minimum balance requirements. When using the cards for travel, look to see if it allows foreign transactions as well as check the exchange rates. Some debit cards charge higher fees oversees for withdrawals, purchases or balance inquiries. Consider using a bank or credit union instead. They offer more sophisticated consumer protections, the fees should be lower and the money may earn interest thereby making it work for you. Many banks are offering budget accounts to lure lower income families back to banks.
Fact or Fiction: People say the funniest things about selling structured settlement annuities
As you may be aware there are many companies as well as brokers involved in the structured settlement factoring industry. There are also quite of few hired guns posting and tweeting about how and why you should sell your future payments to whomever they are representing. One of my biggest complaints is that on many occasions I have come across posts that are blatantly wrong, misleading or confusing to even industry professionals. Is it SEO, lack of industry knowledge, language barriers or creative marketing that causes bloggers and copywriters to post statements that are somewhat questionable?
I decided that it might be fun to grab a few of my favorites and play a game called Structured Settlement True or False.
How to play: Simply decide whether the statement is true or false.
- You have more security when you sell your future payments to a real FDIC insured bank.
- FALSE: When you sell your annuity payments, which aren't FDIC insured, you're selling the rights to the annuity payments in exchange for a cash lump sum. FDIC doesn't have anything to do with annuities or the transaction unless, of course, you decide to deposit the money into a bank that becomes closed by a federal or state banking regulatory agency.
- Other companies are brokers who wedge themselves between structured settlement annuitants and the financial institutions that actually purchase the payments.
- FALSE: Yes, there are some people in the industry who are brokers but it is not the general rule. Companies like Rescue Capital actually purchase your payments.
- Because they need to make a profit, structured settlement factoring companies will not be willing to give you as much of a payment as a bank will.
- FALSE: Banks need to make a profit too otherwise they would go out of business. Every company that purchases future payments has some sort of overhead and need to charge accordingly. Publicly traded banks have to worry about their shareholders and the perceived value of their stock. That value comes with their ability to make a profit. Smaller, agile privately owned companies can charge significantly less because they have lower overhead.
- Banks have reputations to protect and need to keep their customers happy, you can feel confident that they will not try to fool you or unfairly take your money.
- FALSE: Is this author unaware of all the recent banking scandals? Remember folks, when you sell payments they need to be approved by the courts. Most companies would like their customers to be happy, have repeat business and referrals. No company can survive in the long-term if they were stealing from their customers.
- Working with a bank can not only help you receive the money that you want but can also give you peace of mind that you are working with and established company.
- FALSE: I guess there are no new banks and banks never fail. There are many companies that are established in the structured settlement factoring business. Being an established bank is irrelevant since these individuals don't necessarily know the ins and outs of the industry. Some industry professionals have more than 18 years experience in the structured settlement factoring industry and are considered to be subject matter experts. When you sell your payments you should more concerned with industry experience, pricing and company reputation.
- A good number of companies that will buy your structured settlement quickly sell the payments to a bank.
- FALSE: When factoring companies purchase your payments, they resell those payments to individual investors or through a process called securitization which combines all the annuity payments into one large pool, the issuer can divide the large pool into smaller pieces and then sell those smaller pieces to investors. The process creates liquidity by enabling smaller investors to purchase shares in a larger asset pool. Individual retail investors are able to purchase portions of the annuities as a type of bond.
- Structured settlements are a popular way to resolve personal injury claims, lottery payments, insurance claims and other situations where one party must pay another.
- FALSE: A structured settlement is a financial arrangement. An annuity is a financial product that provides a series of payments over a specific period of time such as a lifetime. Delivered on a set schedule, these payments can be paid monthly, quarterly, biannually, or annually. There are many different types of annuities but they are typically sold by insurance companies. Many individuals purchase them in order to have a reoccurring source of income during retirement. As in the case of a structured settlement, the insurer, or designated third party, purchases an annuity from a life insurance company in order to provide periodic payments to the claimant. When you win the lottery you have the option of receiving a cash lump sum or an annuity. This is not a structured settlement.
- Structured settlements are a way of settling a debt that became popular in the United States in the 1970s.
- FALSE: Before 1970, when a lawsuit was settled the injured party would immediately receive a cash lump sum. Then there was a major liability case in Canada and Europe that resulted in a great percentage of catastrophically injured people. Suddenly there was a need for settlements to last throughout the injured party's lifetime. Hence, the modern structured settlement was born. In order to protect the annuitant, Congress enacted legislation that made compensation paid as a result of a personal injury tax free to recipient. Congress later enacted additional legislation which gave insurance companies tax benefits for setting up structured settlements.
- Personal injury claims, lottery payments, insurance claims and other financial arrangements are increasingly being paid with structured settlements.
- FALSE: These payments are paid by an annuity which is a financial product that provides a series of payments over a specific period of time such as a lifetime. A structured settlement is a financial arrangement that allows court-awarded compensation to be paid in regular installments rather than in one lump sum.
- They have become popular because the payments are made over time, benefitting both parties, but sometimes the person receiving payments would rather have a lump sum payment.
- FALSE: The need for income to last throughout the injured party's lifetime is the reason they are popular. Plus there are tax benefits to having a structured settlement.
Resolutions aren’t solutions for financial problems
How lifestyle changes can improve your bottom line
Another year comes to an end and many of you are starting to think about 2012. Perhaps you may try to come up with resolutions like getting out of debt, quitting smoking or losing weight. Every year approximately 45% of American adults will make 1 or more resolution. However within 6 months almost half of those resolutions were abandoned.
There are many reasons why these resolutions fail including unrealistic goals, not having a plan in place goals that are too broad and no accountability. According to some experts, resolutions are about taking something away, leaving a person feeling deprived. By accentuating the positive you change the whole mindset. Instead of making a resolution, make a commitment to change in the New Year.
Whether it is looking better, feeling better or breaking the cycle of debt you need to look at what are the underlying cause of the problem and address it first. By breaking habits such as shopping when you are depressed, not taking account small daily purchases and stop impulsive spending you will be headed in the right direction.
Another issue is that consumers are often too optimistic about potential earnings. For example, relying on a tax refund, future raises or selling future annuity payments to pay for items later can be dangerous to your finances. If you do not get the amount of money you need to pay off your purchases you leave yourself open to huge interest rates or penalties.
So maybe you decided you want to make a change but you’re not sure how to get started. The best way to start is to define what you want to accomplish and make a plan. Make sure you develop obtainable, measurable goals and develop rewards for when you accomplish your goals. Below are some suggestions on how to get started.
- Define your financial goal. Whether it is to become debt free by 2013, create an emergency fund or go back to school put it in writing.
- Determine what is holding you back from accomplishing those goals. Is your spending getting in the way of your dreams, perhaps you are not sure.
- Create a spending diary to see where your money is going. Track every purchase you make no matter how small it is. Identify places you can make small changes that can really add up.
- Create a budget and stick to it. Don’t forget to save money too. It will help you avoid the debt roller coaster when emergencies happen.
- Reward yourself. Give yourself little treats that won’t derail you when you hit milestones.
- Don’t let setbacks derail you. If you have a setback, don’t quit trying to obtain your goal. Just regroup and move on.
- Change your relationship with money. Avoid triggers like shopping your way out of a better mood and spending mindlessly by developing better habits such as exercising when you’re depressed or leaving your credit cards at home.
- Get organized. Late fees and penalties waste money and they are damaging to your credit score. Develop a system that works for you and pay your bills on time.
- Get professional help. Sometimes you are in over your head. Perhaps you need professional credit counseling or financial advisors who can help you develop a system that works for you.
- Keep your options open. Sometimes your financial situation requires a more drastic approach such as selling some of your future annuity payments to avoid foreclosure or to pay off high interest debt. Remember to research all your options and don’t make hasty decisions.
If you have periodic payments from a structured settlement annuity, a divorce settlement, a single premium immediate annuity, life insurance policy, inheritance, royalties, or even a pension and you want to know more about selling some your future payments, call Rescue Capital at 866.688.3532. With today’s lower rates, your future payments could be worth more than ever before.
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