How Your Budget Can Help You Build Credit

The building blocks of a healthy financial life are all tied to your budget — how much money is coming in, going out and where is it being used? Answering those questions and creating a budget that works for you can have a ripple effect on the rest of your finances.

Specifically, a good budget can help you maintain of build a great credit score, which can actually help your budgeting in the future, since a good credit score can save you tens of thousands of dollars over your lifetime (the lifetime cost of debt calculator can show you just how much).

Here are two key ways that your personal budget and your credit score are connected, and how you can ensure that your budget helps improve or maintain good credit.

Your Cash Flow & Payments

Here’s where we get into the sneakiest part of your budget — where your money is being spent.

Having the money to pay your bills on time every month is a key part of budgeting, but it also has a major credit score impact since payment history makes up 35% of your credit score.

Of course to pay bills on time, you’ll need to have the necessary money in your checking account and you’ll need to be organized enough to make your payments as agreed each month. To make sure the money is there when a bill is due, take a close a look at your cash flow. How often are you paid? What are your fixed monthly expenses? How much money do you have leftover each month for savings? Do you have money set aside for an emergency fund or must you rely on credit cards to get you through a tough financial time?

Creating a budget that allows you to live within your means, pay your bills, meet your current credit obligations with ease and build up savings for future goals will help you in the long run.

Making mobile and online payments is a quick way to pay monthly bills. You can automate your payments as well, though it’s always wise to double-check that payments go through and that you’re not overdrawing on your bank account.

Need help remembering due dates? Signing up for email and text reminders of upcoming due dates will help you stay on track.

How You’re Using Your Credit Cards

For some budgeters, tracking their spending is easiest on their credit cards, since their transactions are digitally recorded and you don’t have to go through the hassle of keeping receipts or recording your purchases. But that convenience may come with a cost — if you charge everything to your credit cards to track your spending better, you risk overspending, which can hurt your budget and your credit simultaneously. Here’s how.

The budget impact is obvious — if you overspend on your credit cards and have to carry a balance over to the next month, you’ll pay interest on that balance until you can pay it off. That eats away at your budget since it takes money from your savings or other budget categories to pay off the debt.

Carrying a balance on your credit cards won’t in itself hurt your credit score, but increasing what’s called your “credit utilization” — which makes up almost 30% of your credit score — may.

Your credit utilization measurement calculates the amount of revolving credit card limits that you are currently using. It measures the credit utilization of each credit card account that you carry, plus the total credit limits and balances of all revolving credit card accounts on your credit report. So if you carry a balance on a credit card, then continue to spend as usual on that credit card, you’ll eat up more of your available credit and raise your utilization. Keeping credit card balances at less than 30% of your credit limits is a good rule of thumb, though less than 10% is an even better goal to strive for. You can see how your credit utilization is affecting your credit by getting a free credit report summary on Credit.com.

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This article originally appeared on Credit.com.

This article by Lucy Lazarony was distributed by the Personal Finance Syndication Network.


5 Money Tips for Vacationing With Friends

You love hanging out with some compatible friends or families and you both love to vacation. Why not go on a joint vacation? It can be tricky to navigate trip-planning and financing with others, but you also have the potential to enhance your experience and even save some money. Communication is obviously key to a successful joint vacation, but here are some more concrete tips that will ensure you have a fun, financially comfortable trip together.

1. Make a Budget

It’s important to create an open forum early on in the planning process where each vacationer can disclose how much they are able to spend, which aspects they are willing to splurge on and where they prefer to scale back. Each person or family may have a different budget.

While this may make it a bit more difficult, you can still vacation together. You can set times to do activities separately or if you plan to rent a home, you can have families pay for what they’re using (like paying more for using more bedrooms or for an ensuite bathroom). If you want an easy way to know the full budget, you can look into all-inclusive vacation options. You can also appoint a money person to keep track of spending so everyone on the group stays on track.

2. Plan Ahead

Find out what everyone wants out of the vacation and discuss logistics once you have a target budget in mind. Pick the dates and location carefully because this will dictate the activities you’re able to do. You may not be able to do everything that everyone wants, but reaching a consensus on as many details as possible will save discussions and disappointment down the road. You can even make it fun by having a pre-vacation planning party to lighten the mood and get excited.

3. Look Into Deals

One great part about traveling in groups is the ability to save on your vacation. Most destinations offer a variety of lodgings. You can rent a home instead of staying in hotels or talk to travel agents or sales managers about discount group rates. The same works for nearby museums, parks, zoos and fun activities. You can also pool your resources and see if anyone’s job or connections can offer up some discounts.

4. Talk About Discrepancies

If you were comfortable enough to plan this trip together, you should be able to discuss any issues that come up. It may be tricky, but if someone isn’t pulling their weight on financial, cleaning or preparation duties, bring it up. The worst you can do is let it boil up inside you. For example, if you offer to use your airline rewards credit card to book everyone’s flights, contingent on being paid back by each individual, explain when you need to be paid back and how much everyone owes before booking. This can lead to hard feelings (and a damaged credit score) down the road if someone doesn’t pay you back and you have to carry a high balance on your credit card. (You can see how your balances are affecting your credit scores for free on Credit.com.)

It’s a good idea to avoid being accusatory and instead discuss what you think isn’t quite going right so you can come to a solution together.

5. Be Flexible

Flexibility is an important factor for any travel, but especially when it comes to joint vacations. It’s important to be willing to try new activities, foods, schedule or methods of travel and lodging. Try to focus on the fun and embrace however the vacation is going. You also might want to build in some time apart.

If you are careful about how you go about a vacation with friends or fellow families, you can make memories that will last a lifetime. Just take the necessary precautions to avoid any awkward or uncomfortable feelings around finances.

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This article originally appeared on Credit.com.

This article by AJ Smith was distributed by the Personal Finance Syndication Network.


Should We Kill the Social Security Number?

While tax season is still producing eye twitches around the nation, it’s time to face the music about tax-related identity theft. Experts project the 2014 tax year will be a bad one. The Anthem breach alone exposed 80 million Social Security numbers, and then was quickly followed by the Premera breach that exposed yet another 11 million Americans’ SSNs. The question now: Why are we still using Social Security numbers to identify taxpayers?

From April 2011 through the fourth quarter of 2014, the IRS stopped 19 million suspicious tax returns and protected more than $63 billion in fraudulent refunds. Still, $5.8 billion in tax refunds were paid out to fraudsters. That is the equivalent of Chad’s national GDP, and it’s expected to get worse. How much worse? In 2012, the Treasury Inspector General for Tax Administration projected that fraudsters would net $26 billion into 2017.

While e-filing and a lackluster IRS fraud screening process are the openings that thieves exploited, and continue to exploit, the IRS has improved its thief-nabbing game. It now catches a lot more fraud before the fact. This is so much the case that many fraudsters migrated to state taxes this most recent filing season because they stood a better chance of slipping fraudulent returns through undetected. Intuit even had to temporarily shut down e-filing in several states earlier this year for this reason. While the above issues are both real and really difficult to solve, the IRS would have fewer tax fraud problems if it kicked its addiction to Social Security numbers and found a new way for taxpayers to identify themselves.

Naysayers will point to the need for better data practices. Tax-related fraud wouldn’t be a problem either if our data were more secure. Certainly this is true. But given the non-stop parade of mega-breaches, it also seems reasonable to say that ship has sailed. No one’s data is safe.

Identity thieves are so successful when it comes to stealing tax refunds (and all stripe of unclaimed cash and credit) because stolen Social Security numbers are so plentiful. Whether they are purchased on the dark web where the quarry of many a data breach is sold to all-comers or they are phished by clever email scams doesn’t really matter.

In a widely publicized 2009 study, researchers from Carnegie Mellon had an astonishingly high success rate in figuring out the first five digits for Social Security numbers, especially ones assigned after 1988, when they applied an algorithm to names from the Death Master File. (The Social Security Administration changed the way they assigned SSNs in 2011.) In smaller states where patterns were easier to discern the success rate was astonishing — 90% in Vermont. Why? Because SSNs were not designed to be secure identifiers.

That’s right: Social Security numbers were not intended for identification. They were made to track how much money people made to figure out benefit levels. That’s it. Before 1972, the cards issued by the Social Security Administration even said, “For Social Security purposes. Not for Identification.” The numbers only started being used for identification in the 1960s when the first big computers made that doable. They were first used to identify federal employees in 1961, and then a year later the IRS adopted the method. Banks and other institutions followed suit. And the rest is history.

In fact, according to a Javelin Research study last year, 80% of the top 25 banks and 96% of the top credit card issuers provide account access to a person if they give the correct Social Security number.

There are moves to fix related fraud problems elsewhere in the world, in particular India where, in 2010, there was an attempt to get all 1.2 billion of that nation’s citizens to use biometrics as a form of identification. The program was designed to reduce welfare fraud, and according to Marketwatch, 160 similar biometric ID programs have been instituted in other developing nations.

In 2011, President Obama initiated the National Strategy for Trusted Identities in Cyberspace, a program that partnered with private sector players to create an online user authentication system that would become an Internet ID that people could use to perform multiple tasks and aid interactions with the federal and state governments. There may be a solution there — but not yet.

The first Social Security card was designed in 1936 by Frederick Happel. He got $60 for it. It was good enough for what it had to do (and was clear that the card wasn’t a valid form of identification). That is no longer the case. That card is nowhere near good enough. Perhaps one solution is a new card design — one with chip-and-PIN technology. Just how something like that might work — i.e., where readers would be located, who would store the information & support authentication, etc. — would have to be a discussion for another day.

The point is, we need to do something.

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

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This article originally appeared on Credit.com.

This article by Adam Levin was distributed by the Personal Finance Syndication Network.


Shirley, You Can’t Be Serious. Airplanes Are Hackable?!

There are two ways to describe an important report issued by Congress’ General Accountability Office this week about airplanes and computers. Here’s how the GAO titled its paper: “FAA Needs a More Comprehensive Approach to Address Cybersecurity As Agency Transitions to NextGen.”

And here’s how many observers described the report: “Airplanes can be hacked through passenger WiFi!”

As always, the truth is somewhere in the middle. The world’s air transportation systems are going through the same changes as all industrial control systems, and these changes bring both opportunities and peril. Once upon a time, it was nearly impossible to remotely hack into a power plant because the plant used old-fashioned proprietary systems that required hands-on users for operation. Slowly, critical infrastructure systems like power plants are transitioning to off-the-shelf software, and at the same time, they’re being connected to the Internet. This allows remote access, which is both a good and a bad thing. It’s good to be able to manage power plants from a long distance. It’s bad because it creates an avenue by which, at least theoretically, hackers can also break in.

So it is with airplanes. The Federal Aviation Administration is transitioning to its “Next Generation Air Transportation System,” known as NexTGen. Modernizing is a necessity. But as air traffic control systems and in-flight avionics systems are increasingly networked, the risk of unauthorized access increases. Any time you connect a computer to the world, the world can connect to that computer.

It makes sense to ring the alarm bell about these possibilities before they actually occur, and that’s what this week’s GAO report does. Auditors asked 15 cyber experts to conjure up worst-case scenarios, and they did a fine job of it. The report does not say that airplanes are currently being hacked. But it does raise a series of possibilities that frankly sound straight out of a horror movie — such as a computer virus causing a flight disaster.

“One cybersecurity expert noted that a virus or malware planted in websites visited by passengers could provide an opportunity for a malicious attacker to access the IP-connected onboard information system through their infected machines,” the report noted.

You would think that in-flight WiFi could never be used to connect to pilot controls — after all, the systems are quite different — but several experts said it could be possible.

“Firewalls protect avionics systems located in the cockpit from intrusion by cabin system users, such as passengers who use in-flight entertainment services onboard. Four cybersecurity experts with whom we spoke discussed firewall vulnerabilities, and all four said that because firewalls are software components, they could be hacked like any other software and circumvented,” the report said. “The experts said that if the cabin systems connect to the cockpit avionics systems (e.g., share the same physical wiring harness or router) and use the same networking platform, in this case IP, a user could subvert the firewall and access the cockpit avionics system from the cabin.”

The report also talks about the added risk of an insider threat from connected systems — a malicious airline employee or FAA worker might be able to remotely cause havoc with specialized knowledge of Internet-connected planes. There’s also the contractor problem. The FAA and airlines must not only certify the security of all the systems they build, but of systems built for them by third parties. Imagine a back-door being inserted into a critical airplane system that a malicious programmer could use later.

It’s important to notice the presence of the word “if” in all these disaster scenarios, as in “if the cabin systems connect to the cockpit avionics systems.” They shouldn’t be physically connected, of course. It’s easy to imagine that happening, however, in the pressure-packed, cost-sensitive world of airline operations.

That’s why the GAO report urges the FAA to “develop a holistic threat model” towards airline hacking, and criticizes the agency for failing to do so. The report does praise the FAA for other cyber security initiatives it has already undertaken.

The FAA says it has already addressed many of the concerns the GAO report raises.

“We take this risk seriously,” said Keith Washington, acting assistant secretary for administration for the FAA, in a response to the report. He noted that the FAA recently established a cyber test center so it could more closely examine potential threats.

But the GAO report, while not suggesting that air travel is unsafe today because of hackers, pulls no punches about possibilities in the future.

“Significant security control weaknesses remain that threaten the agency’s ability to ensure the safe and uninterrupted operation of the national airspace system,” the report concludes.

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This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.


9 Essential Steps for Financial Survival

You can set yourself up for success with your money by employing these 9 simple steps for financial survival. Plus get 5 quick tips for lessening expenses!Managing your money well doesn’t have to be a complicated process, and you don’t have to earn a degree in finance to learn how to be financially savvy.

It is absolutely possible to live a comfortable, financially fit lifestyle, and it’s a worthwhile endeavor for obvious reasons.

There are several essential tools that financially successful people employ, and if you want to get ahead with your finances and live well, you need to implement the following steps for financial survival.

1. Spend Less Than You Earn

The most obvious rule of thumb when it comes to surviving financially is to spend less money than you earn. It sounds simple, and it is, because it’s the only way to save money and to live within or below your means.

If you’re charging your expenses on credit cards that you can’t pay off at the end of the month, then you’re spending more than you earn to sustain a lifestyle you can’t afford.

If you have to charge it, then you can’t afford it, period. Cut up your credit cards or freeze them in blocks of ice, if that’s what it takes.

[bctt tweet=”If you have no choice but to charge something, you can’t afford it.”]

Spending less than you earn might be a difficult step to take, but it’s crucial if you want to take control of your finances and save some money.

2. Track Your Spending

In order to spend less than you earn, you first have to know how much you’re spending each month, which means that you have to track your spending.

It may seem daunting initially, but it doesn’t have to be difficult. There are many ways you can do this.

You can pay everything via a debit or checking account for an easy way to track expenses. If you prefer cash, you may have to write every charge down on paper (or record it on your phone or computer), or save all the receipts to sort later.

There are online resources to help you as well, like the free website Mint.com.

The way you choose to track your spending isn’t important. Just take charge and actually do it. You won’t have any idea how much you’re spending unless you track it first.

3. Hold Yourself Accountable

Once you can see clearly on paper (or screen) how you’re spending your money and what you’re spending it on, hold yourself accountable and don’t make excuses for your purchases.

Be honest with yourself about how much you spend on everything, whether it’s cigarettes, bar tabs, clothing, shoes, your Starbucks habit, or your inexplicable dedication to collecting beanie babies or cat posters. (You know you’re out there!)

Whatever it is, acknowledge it. We all have our weaknesses!

4. Make a Budget

From there, make a budget. It doesn’t have to be a fancy budget, and you don’t have to be a whiz at Excel to do it. You don’t even need a computer to do it.

Many first time budgeters appreciate an all-cash budget to start with. The all-cash method is easy because once the money’s gone, it’s gone.

If you overspend in one area, you have to pull the cash from another area, so there’s really no way you can fudge this kind of budget.

It’s fool proof (and beginner proof!).

5. Make Adjustments

This is where it might get tough because you may have to make some spending cuts. You might have to give up an expensive hobby or a financed toy that you pay out the wazoo for, mainly to keep tucked away in your garage. (A motorcycle, an old convertible, a boat — I’ve been there.)

Adjust your lifestyle if you must in order to get your spending under control so you can gain some breathing room and start saving some money.

The goal is to rid yourself completely of consumer debt if you have any, and never step foot into it again.Once your debts are paid off, you can focus on socking away all of that extra money (which is way more fun than paying off debt!).

6. Spend Less or Earn More

If you find out you are spending too much, you have two clear options: spend less or earn more.

I enjoy my free time, so I always tend to think the better option is to simply spend less, but if you really think you can’t make any further cuts, consider other ways to make additional money.

Side hustles are hugely popular these days, and it can be fun to try to turn a hobby into a money-generating business if you’re able.

You could consider freelancing in your field to earn extra money, opening an Etsy shop, or picking up weekend work such as babysitting, mending clothing, or mowing lawns.

There’s no shame in creating an extra income stream for yourself. Creating a side hustle you enjoy could be more exciting for you than simply taking on a second job.

7. Live Below Your Means

The only way to live a comfortable financial life and save money on the side is to live below your means.

Many people don’t live within their means (since it’s the American way to live off of credit), but that kind of lifestyle will catch up to them eventually.

If you aren’t living below your means, then you aren’t saving any money, and that’s a great way to set yourself up for financial ruin, such as bankruptcy.

If you have to pay off some debt to gain some breathing room in your budget for savings, work on doing it now rather than later. Then, work on that budget and stick to it no matter what.

[bctt tweet=”Need a crash course in financial survival? Follow these 9 simple steps to secure your future.”]

8. Start an Emergency Fund

An important step to setting yourself up for financial survival is to create an emergency fund if you don’t already have one.

The amount you need in your emergency fund is dependent on what makes you comfortable and what you can afford to set aside. The general rule of thumb is always 3 to 6 months of living expenses.

It’s also a wise idea to keep this fund completely separate from your other checking and savings accounts. It needs to be harder to get to so you aren’t tempted to spend it on things that aren’t really emergencies.

What constitutes an emergency? You need a clear definition of what counts as an actual financial emergency, especially if you share your expenses with a spouse.

A sale at your favorite store does not count as an emergency, but the hot water heater going out in your home probably does, as does a job loss.

If you do have to empty out your emergency fund for any reason, make replenishing it a priority as soon as you’re able.

9. Determine Your Bare Bones Budget

In the event of a job loss, it can also be practical to determine your bare bones budget.

As its name implies, a bare bones budget is the minimum amount of money you can get by on per month. You may even want to base your emergency fund off this amount (multiplied by 3 to 6 months).

Start by taking your regular budget and removing all unnecessary expenses. Expenses that should remain are mortgage/rent, utilities, grocery bills, debt repayment, etc.

Cable bills, clothing expenses, dining out, and entertainment need to be put on hold until your financial situation is back on track.

Quick Tips to Survive a Financial Rough Spot

What happens if you’ve done none of this and you’re in a tight spot now? Here are a few tips to get you started.

Just Say No to Credit Cards

Do your best not to charge anything on a credit card if you’re in a financial emergency, unless you can afford to pay it off in full at the end of the month.

It will be so much easier to get back on track in the near future if you aren’t funding your life with credit cards today. Avoid it at all costs.

Don’t Borrow From Your Retirement Accounts

Anytime you withdraw money from your retirement account, you’re hurting your future self and setting yourself up for some major tax penalties now.

A withdrawal from tax advantaged accounts typically means you’ll not only pay taxes on it today, but you’ll also pay a 10% early withdrawal penalty. It’s not worth it.

Get Creative with Your Grocery Bill

Get as creative as you can with your grocery bills, and try not to buy unnecessary items if you can (soda, sugary snacks, chips, processed cereal, and general junk food). It maybe be cheap, but it adds up and you can live without it.

Shop the far recesses of your pantry and freezer to use up items you’ve had for a while. It may result in some interesting meal options, but creative dinners like this will help you save a ton on groceries. Just remember, it’s only short term!

[bctt tweet=”In a financial bind right now? Here’s 5 super quick tips on how to reduce your #expenses!”]

No Eating Out or Shopping

Absolutely no eating out or shopping, as in none, period.

Eating out always costs more than making your own meals at home, so cut this expense if you’re experiencing a financial rough spot.

The same goes for shopping. You probably have enough clothing in your closet to last you years, so there’s no excuse to buy any clothing right now.

Stay at Home

Last but not least, if you’re currently in a financial bind, simply stay home (unless you’re searching for a job).

It’s the easiest thing you can do to save money, and it will help you from being tempted to spend money on entertainment and food if you are out and about.

Staying home will also greatly reduce the gas bill for your car. (Just avoid that online shopping temptation.)

Whether you’re in a current financial emergency, or simply trying to prepare for a future financial crunch, sometimes it’s not always going to be easy to save money.

During those tough times, remind yourself why you’re doing it. Put a note in your wallet and one on your refrigerator if you have to.

Remember, you’re trying to help yourself by giving yourself a better financial future, and that is absolutely worth it.

What do you do to prepare for a financial emergency or give yourself a secure financial future? 

This article by Robin McDaniel first appeared on Everything Finance and was distributed by the Personal Finance Syndication Network.


The First Credit Card With an On/Off Switch

Have you ever misplaced your credit card, but weren’t sure if it was truly lost or stolen? When this happens, you may want to cancel your card, but then you know that you will have a lot of inconvenient problems to deal with. On the other hand, you might continue to look for the card, by which time a thief could be going on a spending spree with it.

But now, one credit card offers customers a third option when they want to temporarily disable their account without declaring their card lost or stolen. The Discover card now has an option called Freeze it that allows cardholders to suspend their card when it is misplaced.

How Freeze it works

Cardholders can now go to the Discover website or mobile app and place a freeze on their account, or by calling Discover. This triggers a freeze on new transactions including cash advances and balance transfers, but does not affect any telephone, Internet or automatically scheduled bill payments. This feature is available on all versions of the Discover it card, all of which have no annual fee.

Without this feature, cardholders who choose to cancel their credit cards won’t be able to make any online or telephone transactions, as their account will be completely frozen, not just their physical credit card. In addition, they will have to wait until a new card can be printed and physically delivered to them. Also, those who have set up automatic bill payments will have to contact each biller, cancel the payment, and provide them with a new card number.

Other Possible Uses for Freeze it

While Discover is promoting this feature as a way to combat potential fraud without reporting a card lost or stolen, it is conceivable that cardholders could use this feature in other ways. For example, some credit card users have taken to actually freezing their credit cards in blocks of ice in order to help control overspending, rein in their debt and boost their credit (you can see how your credit card spending is affecting your credit scores for free on Credit.com). Freezing their account in this manner could be a more practical alternative, yet the impracticality of melting a large ice block is part of the attraction of the original method.

Using Freeze it might also be a way for a primary cardholder to temporarily cut off their authorized cardholders. Let’s say that you have made one of your family members an authorized cardholder, but you wish to temporarily rescind those charging privileges. Freeze it would accomplish that goal, however the cardholder would still be able to make online and telephone transactions, while you as the primary account holder would also be unable use your card in person.

Other Ways to Avoid Reporting Cards Lost or Stolen

As mobile wallet providers gain traction among credit card users, we could see a time when loss or theft of physical credit cards become rare. This will result in both more convenience for cardholders and fewer expenses for credit card issuers, who must print and mail out new cards, often using an overnight delivery service. Furthermore, the addition of EMV smart chips has increased the cost to manufacture new credit cards from around 10 cents each to more than a dollar.

Finally, cardholders must also be aware that they are always protected from fraudulent charges by the Fair Credit Billing Act, which limits their liability to a maximum of $50. In practice, nearly all credit card issuers waive this limit by offering zero liability policies.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

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This article originally appeared on Credit.com.

This article by Jason Steele was distributed by the Personal Finance Syndication Network.


The One Graph That Explains Why a Good FICO Score Matters for Homebuyers

When it comes to buying a home, there’s a lot more to the process than just finding an affordable home for sale and having enough money for a down payment. Most people need loans to finance such a large purchase, but even as the housing market has rebounded from the foreclosure crisis and low property values of 2010, mortgages remain very difficult to acquire. A report from the Urban Institute, a Washington-based economic-policy research group, concludes that 1.25 million more mortgages could have been made in 2013 on the basis of conservative lending standards practiced in 2001, years before the housing bubble began to inflate.

Whether or not a lender approves a borrower for a mortgage depends on several factors, like income and outstanding debt, but looking at the credit scores of mortgage borrowers during the last several years shows just how tight the market has been post-recession. Here’s how it breaks down.

Urban-Institute-FICO-Score-distribution

The Urban Institute estimates that the stringent credit score standards for mortgage origination resulted in 4 million mortgages that could have been made (but weren’t) between 2009 and 2013. From 2001 to 2013, consumers with a FICO credit score higher than 720 made up an increasingly large portion of borrowers, from 44% of loans in 2001 to 62% in 2013. Consumers with scores lower than 660 made up 11% of borrowers in 2013, but they represented 28% of home loans in 2001.

The study authors note that their calculations do not account for a potential decline in sales because consumers may not see homeownership as attractive as it had been before the crisis.

“Even so, it is inconceivable that a decline in demand could explain a 76% drop in borrowers with FICO scores below 660, but only a 9% drop in borrowers with scores above 720,” the report says.

On top of that, the authors found that tightened credit standards disproportionately affected Hispanic and African-American consumers. In comparison to loan originations made in 2001, new mortgages among white borrowers declined 31% by the 2009-2013 period, 38% for Hispanic borrowers and 50% for African-American borrowers. Loans to Asian families increased by 8%.

Millions of Americans are still feeling the impact of the economic downturn on their credit scores, because negative information like foreclosure, bankruptcy and collection accounts remain on credit reports for several years. Rebuilding the credit and assets necessary to buy a home takes time, particularly in such a tight lending climate, but by regularly checking your credit — which you can do for free on Credit.com — and focusing on things like keeping debt levels low and making loan payments on time, you can start making your way toward a better credit standing.

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This article originally appeared on Credit.com.

This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.


How a Church Tried to Evict a Woman From Her Home

One doesn’t usually think of a church as the sort of organization that would work to kick a woman out of her home, but that’s what happened to a woman in Springfield, N.J. Donna Maxwell has lived in a trailer there for 28 years, but she hasn’t paid the taxes on it in a few years, so there’s a tax lien against the property.

Here’s where the church comes in: FS Properties 194, a company created by Fountain of Life Christian Church of Florence, N.J., bought Maxwell’s lien as part of its investment strategy, according to the Times of Trenton. Fountain of Life foreclosed on the property, on which Maxwell owes more than $50,000 in back taxes (the annual tax on her property is about $2,400), and sent Maxwell a notice that the county sheriff would arrive at her home to remove her from the property on April 22. Maxwell told the Times of Trenton the church is working with her on a plan to help her stay, and she believes she will not be evicted on that date.

One of the church’s companies, Mercer SME Inc., was the subject of a class-action lawsuit brought by homeowners alleging Fountain of Life bought tax sale certificates and sold them to what the lawsuit called “shell companies” (a term the church disputes) like Mercer SME to disguise the church’s involvement, the Times of Trenton reported. SME Mercer pleaded guilty to violating anti-trust law, and it settled the class action suit for $250,000.

The church reportedly stopped buying tax liens and tax sale certificates as part of its investment portfolio in 2012, and in a March 1 letter to its congregation obtained by the Times of Trenton, the church apologized and said it should never have been involved in such practices.

“Several years ago, the Fountain of Life Church began the process of divesting itself from its tax lien portfolio,” Steve Spadaro, a member of the church’s Board of Elders, said in a statement to the Times of Trenton.

The frequent buying and selling of debt can make the issue very confusing for a consumer. Whenever a person or company claims you have a debt, ask for verification of that debt in writing — that’s one of your many consumer rights in the debt collection process. Things like collection accounts, tax liens and judgments have a seriously negative impact on your credit standing for many years, so while they may be confusing and difficult to address, it’s important that you don’t ignore them. You can get a free credit report summary at Credit.com to see if any of these negative items are affecting your credit. You can also get free annual credit reports under federal law at AnnualCreditReport.com.

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This article originally appeared on Credit.com.

This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.


The Airlines With the Most Passenger Complaints

If you feel like airline service is slipping, that’s because it is. In fact, it has slipped back to levels not seen since the recession, according to a new “Airline Quality Rating” report out this week. The rating considers four factors most important to travelers: on-time performance, involuntary bumping, mishandled baggage and complaints. Only Virgin America, Alaska and Hawaiian upped their game last year, according to the study, while all other major airlines offered worse service.

University professors Brent Bowen (Embry-Riddle) and Dean Headley (Wichita State) have conducted the research using Department of Transportation data for 25 years, and found that performance levels have sunk back to where they were in 2009, during the Great Recession.

“The Airline Quality Rating industry score for 2014 shows an industry that declined in overall performance quality over the previous year. As an industry, performance in 2014 was worse than the previous four years,” the authors say. “Of the 11,364 complaints registered with DOT regarding all U.S. domestic carriers, 62.7% were for either flight problems, customer service problems, or baggage problems.” Overall, complaints skyrocketed 22% in 2014.

So which airline attracted the most complaints? To adjust for airline size, the authors published a rate of complaints per 100,000 passengers. The industry average was 1.38 for 2014. At the “top” of the list is Frontier and United. Alaska and Southwest attracted the fewest complaints. These stats aren’t a fluke: Alaska also had the fewest complaints per 100,000 in 2013, while Frontier and United had the most last year, too.

The Most Complaints per 100,000 Passengers

  1. Frontier 3.91
  2. United 2.71
  3. American 2.12
  4. Envoy 1.59
  5. JetBlue 1.17
  6. Virgin America 1.14
  7. ExpressJet 1.01
  8. Hawaiian 0.89
  9. SkyWest 0.84
  10. Delta 0.72
  11. Southwest 0.53
  12. Alaska 0.42

Frontier didn’t immediately respond to a request for comment.

“I’m not surprised by the latest results,” said consumer travel advocate Chris Elliot, who operates Elliot.org. “Airline passengers are fond of referring to the industry’s customer service record as a race to the bottom. These numbers leave little doubt that the race is far from over.”

The results also reveal a backslide from improvements that airlines had made since the recession, Elliot said.

“These numbers suggest that the uptick in customer service was only temporary,” Elliot said. “The study is a big disappointment, both for airline passengers, and also for me personally. I had really hoped the industry had begun to turn a corner.”

Airline tickets can come with big price tags, which can be especially rage-inducing if you’re bumped or experience customer service issues. You can eliminate some of the cost by using airline rewards credit cards to earn free flights, free checked bags and even upgrades (here are a few of the best airline miles credit cards on the market). But be sure you don’t spend your way into debt just to score a freebie — rewards cards are best used by cardholders who pay their balances in full every month.

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This article originally appeared on Credit.com.

This article by Bob Sullivan was distributed by the Personal Finance Syndication Network.


Are Credit Union Credit Cards Better?

There are so many kinds of credit cards, it can be hard to sort through them and determine the pros and cons of the kinds of plastic you have (or want to have) in your wallet. Chances are the institution you use to manage your finances has some sort of credit card offering, but that doesn’t mean you’re limited to their products. It’s always a good idea to shop around for the best deal you can get, whether you’re looking for a new credit card, an auto loan, a mortgage or anything else.

If you’re weighing credit card options from a large bank or a credit union, there’s not really a difference, as far as product function goes — applying for a credit card results in a hard inquiry on your credit report (which causes a minor, temporary hit to your credit score), and your balances and payment history on the card will be reported to the major credit reporting agencies. The fundamentals are the same, so you’ll only want to spend a small portion of your credit limit before paying it down (keeping your balance at less than 30% of your limit is a good benchmark), and you should always make payments on time, even if you’re not paying in full.

The difference between a credit card from a credit union and one from a retailer or bank is often the interest rate, according to Jason Steele, a frequent contributor to Credit.com on credit card issues.

“Credit unions can have lower rates and fees in some cases,” Steele said via email.

Based on Informa Research Services data pulled on April 14, platinum credit cards from credit unions have an average APR of 8.87%, compared to the 10.36% average APR of platinum cards issued by banks. The Credit Union National Association provided Credit.com those figures.

“On a $10,000 balance, for example, a consumer would save $150 per year for having a card at a credit union,” said Mike Schenk, vice president of Economics and Statistics at CUNA.

Average annual fees and maximum late fees were also lower than the averages from bank-issued credit cards.

The biggest obstacle most consumers face in getting a credit union credit card is that you have to be a member of that credit union, which requires you to meet certain qualifications laid out by that union. Schenk said many of these cooperatives have eased their restrictions for membership in the past 30 years.

If you’re the type of credit card user who carries a balance or occasionally uses cards to finance big purchases, looking at cards from a credit union may offer you the best options for saving money. At the same time, if you’re looking at rewards, you need to compare more than just interest rates and fees. It really depends what you’re looking for in a credit product. (You can get a sense of what a good credit card looks like by checking out the winners of our Best Credit Cards in America series.)

“I think the main thing is if you’re in the market for a credit card, do a little shopping,” Schenk said, “[and] include a credit union in those shopping plans.”

Opening up a credit account isn’t a decision to make without doing a bit of research first. When applying for new credit, you should make sure your credit is in good shape to maximize your chances for approval. While lenders may use different credit scoring models, reviewing a single score over time will give you an idea of how your behaviors affect your credit standing and roughly where you fall in the spectrum of credit-worthiness. You can see two of your credit scores for free every month on Credit.com.

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This article originally appeared on Credit.com.

This article by Christine DiGangi was distributed by the Personal Finance Syndication Network.