Why Your Gadgets Don’t Last

I should have known it was a bad sign when I called the customer service line for a tech gadget I was thinking of buying, and the CEO answered.

It can be a good sign when a CEO answers customers’ calls — it could mean he’s highly involved in the company. But looking back on it now, I see it as a possible sign that the company doesn’t have enough workers and that its gadgets aren’t worth hiring people to promote it. I wish I would have figured that out before I bought one of the devices at Ambient, only to see the company stop offering support for it less than three years later.

It was 2011 and I was doing research for a story I was writing about energy saving gadgets when I saw the wireless devices Ambient was selling. One was called an Energy Orb that changed color when your household energy use changed.

gadgetsI called because I had some questions about its products, and was surprised when the CEO and co-founder answered. We talked for a bit, and I moved on with my story, eventually buying the Ambient Baseball ScoreCast for $43.82 on Amazon. About 2-1/2 years later, Ambient stopped supporting the device.

The ScoreCast was introduced in 2008 for $125, providing baseball scores through radio signals. A wireless plan isn’t needed.

My wife and I are big baseball fans, so I thought it would be fun to have the gadget on the fireplace mantle so we could see updated scores. Believe it or not, we didn’t have smartphones in 2011, so we didn’t have the immediate access that we now do on many devices in our home.

Just for the fun of it, I decided in early April to put four new AA batteries to see if it still worked. It didn’t. While $43 wasn’t much of a loss on something that worked for two baseball seasons, I wondered why it didn’t work and I again contacted customer service. Guess who got back to me? The same guy I talked to in 2011:

“On March 1, 2014, Ambient discontinued support for the Ambient Baseball, Ambient Football & Ambient Centerfield products. As of that date, customers with these devices in their homes stopped receiving game and standings data. The Ambient ScoreCast products were introduced in 2006 and manufacturing ceased in 2009. Sincerely, Pritesh Gandhi CEO | Ambient Devices”

I emailed him back, asking him what a consumer’s expectation should be when buying a tech device. I haven’t heard back yet.

How long should a gadget last?

Ambient’s pulling the plug got me wondering what consumers should expect when buying a tech gadget. Will the startup company that you were so fond of be around seven years from now when your device dies or needs tech support?

Is it just part of the expectation of a disposable society that when a relatively inexpensive gadget stops working, you’ll trade it in for a new one, recycle it, or worst-case, throw it away? Continue reading Why Your Gadgets Don’t Last

How Many FICO Scores Are There?

There are hundreds of algorithms companies use to score consumers, and even the most common credit scoring company has dozens of models. Fair Isaac Corp., more commonly known as FICO, has about 50 scores (a 2012 report from the Consumer Financial Protection Bureau puts that number at 49).

How can there be so many variations on a single score? It’s a confusing issue to consumers, particularly because “the FICO score” sounds like a single score. For starters, the information on each of your credit reports from the three major credit reporting agencies — Equifax, Experian and TransUnion — may vary, so that alone can give you three different numbers from one credit score model.

However, one of the biggest reasons there are multiple FICO scores is because lenders assess borrowers differently, depending on the loan product. For example, a lender considering you for an auto loan will be much more interested in your history of auto loan payments than a lender considering you for a personal loan.

FICO has different models tailored to the loan product the consumer applies for. On top of that, FICO creates custom scores for its clients, and FICO has updated its general formulas over the years. In 2014, the company announced FICO 9, its newest version of the basic algorithm, which does not include paid collection accounts in its scoring system and counts medical debt differently than other debts, because medical debt is often an unplanned expense beyond the consumer’s control.

Perhaps the most puzzling part when it comes to understanding FICO scores (or any credit score, really) is not knowing which model your potential lender uses. You might check one of your FICO scores religiously, but you still might not know exactly what a future creditor sees when it processes your application. While it’s important to check your credit scores — you should do so regularly, and there are many ways you can see your scores for free — keep in mind that scores fluctuate and you also can’t be certain what your lenders look at. The best thing you can do is focus on the fundamentals of good credit: Make payments on time, keep your debt levels low, avoid closing old accounts if possible, maintain a good mix of accounts and apply sparingly for new credit.

FICO has a program called FICO Open Access that allows customers of some partner institutions — like Discover and Barclaycard — to see their FICO scores for free. You can also get two free credit scores from Credit.com every 30 days, with a progress report of how your credit has changed over time.

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This article originally appeared on Credit.com.

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


Woman Allegedly Lived Under 74 Aliases, Targeted Hollywood

Living a double life seems like it would be challenging enough, but that’s child’s play compared to what one California identity theft suspect is believed to have accomplished. Cathryn Parker, 72, was arrested in March when she was stopped for a traffic violation and gave a law enforcement officer a fake name. Turns out, Parker is under investigation for stealing multiple identities and living under at least 74 aliases, according to the Associated Press.

Parker is accused of stealing seven identities, most of whom are Hollywood film production staffers. Investigators discovered that Parker’s home and utilities services were registered under false names, and Parker had also opened fraudulent credit card accounts with victims’ information. Investigators say she is suspected of committing crimes dating back to 2010.

As of April 17, Parker was in federal custody in Northern California, where she was wanted for violating probation, the AP reported. She had been convicted of mail fraud in 2000.

While Parker’s high number of identities is uncommon, her alleged crime is not. Identity theft affects millions of Americans each year. Victims of identity theft often suffer damage to their credit standings and finances, and the longer it goes undetected, the more costly and time-consuming the recovery can become.

Preventing identity theft is a huge part of this problem — it’s practically impossible to do. Even consumers who take the best preventative measures, like never storing sensitive data online and rarely sharing personally identifiable information, may still have their data stolen in a cyberattack on a company that rightfully has that information (for example, the Anthem data breach).

Credit monitoring can be extremely helpful in stopping a situation like a thief opening a fraudulent credit card account in your name. You can get your credit report summary for free, updated every month on Credit.com, to watch for changes that you didn’t authorize. In addition to that, the most effective form of protection is monitoring your identity from as many angles as possible, including public records and information on the Internet. Whether you do it yourself or pay for an identity theft protection service, the most important thing is to act quickly when you notice something is wrong, in order to prevent extensive damage to your credit and financial well-being.

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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 5 Biggest Reasons My Clients Fall Into Debt

In the more than 15 years of experience working in the debt industry, I’ve heard every story under the sun about how someone fell into debt. While there are times when people fall into debt for unavoidable reasons, I do notice a lot of people fall into debt for the same reasons. So in order to help keep you from making the same mistakes, here are the five biggest reasons I’ve seen people fall into debt.

1. Treating Credit Like Cash

Many of my clients have a tendency to treat their credit cards like an extension of their bank account. They max out their credit cards without taking into consideration the impact it’s having on their credit scores and how much more they’re paying over time in interest. This sort of behavior could really put you in a jam!

My solution? Stick to a debit card or keep yourself honest with only one or two low-limit credit cards. I also advise them to assign specific “jobs” to their cards, to keep them from overspending. Budgeting for “fun” purchases that you pay for with cash or a debit card could help keep you from overspending, while reserving your credit cards to handle recurring bills and online subscriptions — in amounts you can pay in full each month — is a better way to manage them. Keep in mind, carrying a balance that is more than 30% of your credit limit can have a negative impact on your credit scores. If you want to see how your debt levels are influencing your credit, you can get two free credit scores on Credit.com, plus an overview of what factors are affecting them.

2. Trying to Keep Up With the Joneses

True wealth is having a high net worth, not having a lot of stuff. A lot of my clients fall into debt because they believe in order to seem financially successful they need to SPEND their money on elaborate, luxurious and unnecessary things to simply keep up with neighbors. Trying to keep up with appearances and maintain a lifestyle you can’t afford is one of the quickest ways to fall into debt.

So what do I tell my clients? I explain to them that the neighbors they’re so concerned with, the ones with the fancy cars, are most likely in debt themselves! You can never know who owes money and how much, so it’s important to not judge by appearances. Spend only on things you can afford, put money away and you’ll be the one people want to keep up with.

3. Not Separating Needs From Wants

You want to have your priorities straight, especially when it comes to money. Not having a clear understanding of the things you need as opposed to the things you want could result in a lot of unnecessary spending and, in turn, debt.

Whenever my clients seem to be having difficulty understanding the difference between needs and wants, I tell them to write everything down. Making a simple list of needs, wants and even a category for both can help you identify and prioritize your spending goals. Keeping a tight list can help you attend to the things you need while also setting aside enough money to get the things you want.

4. Financial Illiteracy

Some people just don’t know how money works, how to budget or how to manage personal finances. Whether it’s because they were never properly educated or simply hated economics in school, financial illiteracy can lead anyone into debt.

That said, it’s never too late to learn! I always suggest that my clients take some time and educate themselves on basic personal finance. With the vast number of great books, blogs, podcasts and websites out there dedicated to personal finance and financial literacy, you’re sure to find a way to learn about money and, subsequently, keep yourself out of debt.

5. Hoping for the Best, But Not Preparing for the Worst

Without an emergency fund, you’re leaving yourself exposed to all sorts of financial woes. I understand that you cannot prepare for every situation, but having a safety net of funds in the bank can help you sleep better and keep you from getting into debt when the unexpected happens.

A lot of my clients find themselves falling into debt when disaster strikes because they simply didn’t save enough. I suggest they build a budget so they can see how to save to their maximum potential. Once they’ve set aside enough money, they start to understand the benefits of keeping money in the bank. I constantly have clients telling me that budgeting has given them financial peace of mind.

When it comes to staying out of debt, it really boils down to paying attention. More often than not, people find themselves up to their ears in debt because they ignore their statements, are overspending because they don’t budget, and getting caught with unmanageable expenses because they didn’t save. Take the time to sit down and review your finances. Learn how much you need to save for emergencies and long-term goals and make it a habit of continually setting money aside. The more frequently you do a checkup on your finances, and the more frequently you hold yourself accountable, the less chance you’ll have of falling into debt.

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This article originally appeared on Credit.com.

This article by Leslie Tayne was distributed by the Personal Finance Syndication Network.


Beth’s Story: Is Debt Settlement the Answer?

This is the third part in a four-part series about Beth, who’s struggling to make monthly payments on her debt. I encourage people struggling with unaffordable debt to use this as a debt relief information guide. The focus of this series assumes your situation is past being able to apply conventional wisdom, like lowering monthly expenses and paying extra toward high-interest credit card debts.

In the first two parts of my email exchanges with Beth (a reader who submitted her questions to me offline, and who has given permission for me to publish our exchange as a learning tool, but with her name changed; we have also removed the names of her creditors), I focused more on eliminating options to manage her debt based on her lower income, which is also unstable because her current employment is temporary. If you are just starting out with researching your own path to manage problem debt, you may benefit from reading this series from the beginning.

In this part, her questions for me are keenly focused on negotiating lower payoff settlements with her credit card lenders.

Beth wrote:

Tomorrow I’m going to look for a bankruptcy attorney, however I’m more inclined to do a settlement at this point, that being said I have these questions:

  1. I have a checking acct with [one bank] where I currently have 2k [saved] and will have a little over 3k in 2 weeks; do I have to withdraw the money before trying a settlement with them? (I’m afraid they would freeze my checking and keep the money), if so should I open a checking acct with another bank? I’m assuming [a different bank] wouldn’t touch my money.
  2. If I’m successful, the settlement would save me $20k, will that be taxed? If so can you estimate the amount (roughly).
  3. What is the best way to negotiate the settlement with [one bank] and the others? For instance: I would offer 25% and they counteroffer 40% then I give my last offer 30% and if they don’t take it, I would then not make the payment for the first time ever and hopefully they will call  me and take my 30% offer, would they call my bluff? And if they divide it into 3 payments can I try and negotiate 4-5?
  4. Can I be honest and tell them my plan to pay them: what I already have saved, plus what I’m going to make/or borrow from my parents?
  5. This may sound very dumb, but I have a $20k in my 401k, what if I withdraw about $5k, I know it would be heavily taxed, but is it something possible? I understand I’m not supposed to touch my 401k ever but in my situation it would save me interest and would be debt-free. What do you think?

If you could please take the time once again and I think I will be all set.

My Response to Beth

Those were really targeted questions Beth sent back. Here is how I responded:

1. I typically encourage moving to another bank if you have a checking or savings account with a bank that you will also be negotiating a credit card settlement with.

2.You can indeed be taxed on forgiven or canceled debt in excess of $600. Many people I have worked with over the years were able to meet the insolvency test, which meant they were fully or partially able to avoid any tax implications from debt forgiveness. I cannot hazard a guess at what your taxes would be. This is an issue you want to consult with a tax professional about. But if you determine you will owe any tax after settling, be sure that is part of your budget and planning.

3. The way you make calls to your creditors in the early stages of communication is one thing. You will typically not be offering to settle, or perhaps even be bringing up the subject until you are three to five months late with payments (unless they bring it up). I would not call my creditors and ask about settling for less than what I owe when still current, or not yet several months behind. It is a waste of energy, as the person answering the phone in these early stages may not be trained or authorized to even talk about it. In fact, and somewhat amusingly, you can call large credit card banks to talk about settling too early, and hear from the customer service rep that “we do not settle debts.” Read through the entire section about negotiating credit cards in the first stage of collection. You will be ready to talk with your creditors and negotiate your settlements when you finish.

You will typically not get your credit card banks to extend out payments — on the settlement amounts they agree to — for more than 94 days if they have not charged off the debt (taken the loss in their accounting books). Many banks might like to be able to offer their account holders that option (longer payment arrangements on settlements). But federal regulators have set guidance and policy that prevents them from doing that unless the account is charged off. Charge-off is one big determining factor banks use when they send accounts to outside third-party debt collectors and debt buyers, which is why settlements with monthly payments longer than a few months are often going to be achieved with debt collectors. There are often many opportunities to negotiate with debt collectors when your credit cards have just been charged off.

4. I find laying out your entire plan to negotiate and settle your debts with your bank or debt collectors to be counterproductive. They only care about the debt in front of them. Keep your focus to just the account at issue during any communications. If you mention other accounts, it is often just to say you are struggling with more than just paying them. They can see that because they typically have real-time access to your credit reports. When it comes time to have meaningful dialogue about what you can afford to pay as a settlement (which for you is not for many months), that is when you can bring up the fact that you are borrowing money from family to pay the deal if they agree to it.

5. Conventional wisdom says do not touch your 401(k) in this situation. That money is protected from creditors even if they sue you and get a judgment, and is also kept intact if you filed Chapter 7 bankruptcy. I am not all about conventional wisdom at all times. I have worked many cases over the years that were a great fit for borrowing against their 401(k)s. Yours is not one of those situations, in my opinion. That is something I would look closer at when there are complex assets, security clearances (work in finances, military contracting, etc.), or similar circumstances. Your path to successfully settling your credit cards looks straightforward to me.

Over the years of doing these types of consultations with people (primarily on the phone), and when encouraging people to understand they can negotiate settlements with creditors and collectors on their own, I have often repeated this: Debt settlement is not rocket science, but there is a formula to follow. That formula is 90% investing the time to become informed about what debt negotiation is, and how and when to get things accomplished. It took Beth and me three days and several emails to get to this point. But Beth also invested more time into reading up on her options in more detail.

In the next, and final, part of the series, you can see how Beth became more serious about doing something that I teach every person in the midst of a debt triage situation to do. Stay tuned.

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This article originally appeared on Credit.com.

This article by Michael Bovee was distributed by the Personal Finance Syndication Network.


Could Acquired Needs Theory Save You Money?

In one of the Tightwad Gazette books published over 20 years ago, a contributor wrote to author Amy Dacyczyn that she thought baby formula was an "acquired need." Since there was a more natural, and free, way to nurse an infant, this young mother considered commercial baby formula an unnecessary "want."

Often, people are convinced that some convenience, product or service is a necessity when it actually isn’t. Called an "acquired need," it is actually a want and not something we can’t live without. By paying for such conveniences, we waste money for things that are optional.

I recently was reminded of the wants versus needs debate. A friend asked how I can do without a cell phone. I have phones at work and home. The latter is a landline in a special pricing deal; I pay almost nothing for the phone, bundled with my internet. To me, the huge monthly bill with a cellular contract is an "acquired need."

Many high school students can’t read as well as most eight year olds could a generation ago. They rarely crack a book. All their lives, they’ve been given video games and almost-unlimited access to cable TV and smart phones, which are all rather expensive. With such items, is the young person’s education (and his eventual ability to earn a living) helped or hindered? I believe the latter is true. Such items are "acquired needs" and very expensive wants. The cost is not just monetary: Consider what a huge struggle it will be for a poor reader to obtain a higher education or high-paying job.

I pay nothing to view television. With a converter box and rabbit ears antenna, my old TV can pick up six or eight over-the-air stations. (I live in a smaller community, so that number is no doubt much less than what’s available in big cities.) There are enough programs to fill up an hour or two each night. I can check out a free DVD at the library should I want to view a movie. Paying for cable or satellite is an acquired need. My TV entertainment is free!

Acquired needs are not just electronic. When I worked downtown, the landowners charged us all to park. Most employees went along with this, not realizing on-site parking was an "acquired need." There was an unused plot of land a block away, and Leo, an older worker, told me he’d parked there for years. I did likewise, thus saving hundreds of dollars over a decade. Hey, I needed the money a lot more than the parking lot owners did!

Ronnie and Michelle like to go out on date nights. Long ago, they realized that wine with their dinner was an acquired need, one which made the restaurant a huge profit. They pay for many more evenings out by drinking something non-alcoholic. Tea is cheap, and water is free.

A professor required his students to buy an expensive book, studied for a short time. Realizing it was an "acquired need," Anne checked the book out from her hometown library. Before returning it, Anne took good notes and scanned some pages onto her flash drive to study for finals.

Living in the country, Frank and Nell found that they’d have to pay extra to obtain trash pickup outside the city limits. This was an acquired need they could skip. How? They reduced the amount of garbage by recycling and composting most of it. A trash compactor did the rest. They occasionally took filled compactor bags to their other property in the city, where they were required to pay for garbage collection whether or not they regularly used it.

It pays to understand the difference between an "acquired need" and an actual necessity. People don’t need to shell out money for a "want" disguised as a "need." Do you have expensive "acquired needs" that you could easily do without?

Lynn Bulmahn is a frequent contributor to TheDollarStretcher.com. Visit TheDollarStretcher.com today to discover how delayed gratification could make you a millionaire.

This article by Lynn Bulmahn first appeared on The Dollar Stretcher and was distributed by the Personal Finance Syndication Network.


Will Social Security Numbers Finally Be Taken Off Medicare Cards?

In four years, Medicare cards will no longer have Social Security numbers on them. This change is a provision under the Medicare Access and CHIP Reauthorization Act of 2015, which President Barack Obama signed into law April 16. It’s a noteworthy change: A Social Security number is an identity thief’s holy grail, allowing them to commit numerous kinds of fraud and severely damage the victim’s credit and finances.

The law gives Medicare officials up to four years from the date the law was enacted to issue Medicare cards with a new, randomly generated identification number. Congress allocated $320 million to pay for the change.

About 52.3 million people are enrolled in Medicare, according to July 2013 data from the Centers for Medicare & Medicaid Services, the most recent available. More than 4,500 people enroll in Medicare daily, and enrollment is expected to grow to 74 million by 2025, The New York Times reports. To put that in perspective, that’s 74 million people whose Social Security numbers won’t be displayed on the cards they need to secure health care services under Medicare.

Social Security numbers have been at the center of Americans’ increasing concern over identity theft in the past few years, as numerous databases containing sensitive consumer information are infiltrated by hackers or discovered to have been exposed to the public for a period of time. This leaves people unsure of who has access to their personal data and what they could be doing with it.

Checking your credit reports and credit scores can help you spot credit fraud, but there’s also the potential a thief could be using your identity to access health care or as an alias under which they commit various crimes. Consumer advocates have underscored the importance for organizations to secure this information as best as possible and for consumers to watch out for signs of fraud. You can get your credit report summary, updated every month on Credit.com, to look for any problems that you need to address.

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This article originally appeared on Credit.com.

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


10 Things Everyone Should Know About Credit Scores

The last time I got up in front of a group to talk about my job, no one had questions for me. It was a high school career day a few weeks ago, and the students stared at me blankly as I dropped words like “personal finance,” “credit scores” and “debt.” I could tell they thought my work wasn’t exciting, that the topics I write about are boring. Everyone was happy when the bell rang to end my session.

This week, I spoke to a group of college students and community members, and the atmosphere couldn’t have been more different. I went into the talk with a list of things I thought they’d want to hear about — the event was called “10 Things Everyone Should Know About Credit Scores” — but as people trickled into the auditorium, I thought I’d gauge their interest in certain topics. The idea was to make people feel comfortable talking to me about credit.

I tried to be casual: “Does anyone have anything specific they’d like me to talk about?” I asked with a smile, hoping maybe one person might say something.

The reaction surprised me: People immediately started blurting out questions, and I hadn’t even introduced myself yet.

  • “How do you build credit? I mean, how does it work?”
  • “Is it ever too late to build credit?”
  • “How do student loans impact your credit?”
  • “How do you get credit when no one wants to give it to you?”

I was happy to hear their questions, but I thought back to those high schoolers and got a little sad: My group at the college asked a lot of questions about the basics of personal finance and recovering from bad credit — perhaps if they’d had conversations about these things earlier, things would be different.

There are way more than just 10 things you should know about credit scores, but here’s what I told that group.

christine credit1. Credit Reports Are Different From Credit Scores

Credit scores are calculated using the information on your credit reports, which includes details of your credit accounts, how often you apply for credit, debt collection accounts and some public records, among other things.

2. Your Scores Are Based on 5 Core Factors

Those factors are (in order of importance) payment history, credit utilization, average credit age, account mix and inquiries. You can find a more detailed explanation of each of those factors here.

3. You Can Get Your Scores & Reports for Free

You’re legally entitled to a free copy of your annual credit report from each of the three major credit reporting agencies: Equifax, Experian and TransUnion. You can get your credit scores for free from various places, including two scores from Credit.com.

4. Checking Your Own Score Won’t Hurt It

Only hard inquiries (aka when a lender looks at your credit when you apply for a loan or credit card) have a negative impact on your scores, and the effect is small and temporary.

5. There Are Many Different Scores & There Are Different Credit Score Ranges, Too

When you’re trying to figure out where you stand or if your credit is improving, make sure you are comparing the exact same score and that you know the range — wherever you’re getting the score from should tell you that information. For example, a 750 FICO score is not necessarily equivalent to a 750 in another scoring model.

6. Your Credit Can Help You Spot Fraud

If someone runs up a large credit card bill or takes out credit in your name, it will show up on your credit report and affect your credit score. Watch your score for changes you did not anticipate.

7. Your Credit Score Can Cost You Thousands Over a Lifetime

A low credit score means you’ll probably have to pay higher interest rates on things like credit card balances and mortgages. You can see an estimate of how much your credit will cost you using the Lifetime Cost of Debt Calculator.

8. Joint Accounts Affect Your Credit Scores, But There Aren’t Joint Scores

If you open a loan or credit card with a partner, the account activity will be reflected on both your credit reports. Joint accounts are different than authorized users, but whenever you share credit, make sure you’re aware of who will be responsible and who will be affected if a payment is missed.

9. Negative Information Eventually Ages Off

Different kinds of negative information will remain on your credit report for different periods of time (bankruptcy is an exception to this, for example), but generally, negative information ages off your report and no longer affects your score after seven years.

10. Credit Scores Aren’t the Only Things That Matter for Lending Decisions

A credit score isn’t the only thing lenders consider when reviewing applicants. If you have no credit or poor credit, you may be able to secure a loan through an alternative lender, and in some situations, making a personal appeal or giving a lender more context to your credit report can help you access financial products.

The Questions I Was Asked

As far as the other things the group wanted to know about, here are some answers.

“How do you build credit? I mean, how does it work?”

Focus on those five fundamentals that determine your credit score; mostly, use credit sparingly and make payments on time. It takes years to build good credit, but it’s worthwhile to be patient.

“Is it ever too late to build credit?”

No. Your credit score can affect you for a lifetime, so it’s always worth trying to improve.

“How do student loans impact your credit?”

Making payments on time is good. Not doing that is very bad.

“How do you get credit when no one wants to give it to you?”

There are a few options: See if you can get a secured card or other credit card designed for people with bad or no credit. Then, spend very little money on it and make the payments on time. You can try piggybacking on someone else’s credit by becoming an authorized user, but that’s a lot to ask of a friend or family member since they’ll be ultimately responsible for any debts you incur. There are also some companies that will help you get loans based on your payment history of rent or utility bills, if that shows a pattern of responsibility.

What questions about credit or credit scores do you have? Share them in the comments and I may write an article to answer them.

Image courtesy of Christine DiGangi

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This article originally appeared on Credit.com.

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


Should I Get a Loan for a Used Car?

One of the many decisions consumers must make when buying a car is whether to get a new vehicle or a used one. Even though a used car is generally cheaper than a new one, it makes the car-buying process much more complicated, especially if you need to finance it.

Some people argue that taking out a loan for a used car isn’t worth it, because the loans are more expensive, and by the time you pay off the loan, the car you own isn’t going to be worth much. There’s truth to that argument: Interest rates on used auto loans are higher, because the vehicle is collateral for that loan, but if it’s not worth as much as a new car, the lender will charge a higher rate.

“If you default on the loan, they can take it back, and they want to have something of value to that,” said Philip Reed, senior consumer advice editor for car-buying marketplace Edmunds.com.

On top of that, the borrower’s credit score will affect the interest rate, so financing a used car can get pricey.

Reed said the keys to taking out an affordable used car loan are the condition of the car and the length of the loan. For new-vehicle loans, a five-year term is common, but for used cars, a three-year term makes more financial sense.

“There’s also a psychological component that you will find it easier to pay for something that you think of as valuable,” Reed said. In other words: You’re not going to enjoy making loan payments on a vehicle with little value, so consider how that will feel when deciding on a car to buy and how long you’ll be paying for it.

If you can buy the car with cash, that’s likely the best financial decision (assuming you’re not depleting an emergency fund or jeopardizing your financial stability). Oftentimes, people don’t have that kind of money lying around, so if you must finance a used car, shop around for the best deal.

Reed said one of the biggest mistakes a buyer can make is to walk into a dealership and take the first thing they’re offered — dealers call them “get me done” customers, he said. They’re usually people who think their credit will prevent them from getting a good deal and think their best option is to approach a dealer and say, “I’ll take whatever you can get me.”

“There are options for that person, even if they feel that here are no options,” Reed said. “The solution is to find out where you stand — it may not be as bad as you think.”

You can get two free credit scores, updated every 30 days, on Credit.com. Once you know where you stand, you’ll be in a better position to comparison-shop for financing.

“You don’t want to go into a dealer not knowing what your credit score is, or what your situation is, because there are situations in which the loan could be marked up,” Reed said. Getting pre-approved by other lenders will give you negotiating power, as well. “There is a human factor to financing, so if you have the opportunity to meet face-to-face with somebody … it will make a difference. Bring records, and make a presentation.”

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This article originally appeared on Credit.com.

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


3 Ways to Increase Your Chance of Receiving a College Scholarship

The cost of attending college increases every year, and that probably isn’t going to change anytime soon. The best way for students to reduce what they’ll be spending is to apply for college scholarships. Everyone knows that good grades and test scores will help, but there are a few other ways to increase the chances of receiving free financial aid.

1. Start Researching Early

Some students start researching scholarships during their junior or senior years of high school, but starting a few years earlier can be beneficial. Beginning the research phase in their freshman year gives applicants the advantage of designing their high school experiences to match the desired attributes of a scholarship. For example, if a scholarship requires three years of volunteer work in a certain sector, there’s still plenty of time to get involved. While many scholarships require involvement in an extracurricular activity, others prefer to see students take on leadership roles. It can be difficult to acquire those types of experiences during the last year of high school.

2. Keep Looking

One of the biggest mistakes families can make is to stop looking for scholarships after the first year of college. The price can still go up, so keep looking for ways to fill that gap so you can minimize – or even eliminate – the need to take out student loans.

Aside from the fact that new scholarships are created each year, students might also have new interests or skills that might make them eligible for scholarships that they weren’t eligible for in the past. There’s also so much information out there; it would be easy to miss something. Lori Kleppe, who is a military widow, didn’t learn about our organization until her second son was halfway through college. The scholarship she obtained through our organization helped her pay off loans she had to take on as well as reimburse her for previous costs for both children.

(If you’re paying down your student loans, you can see how that’s affecting your credit by checking your free credit scores on Credit.com.)

3. Friends & Family Connection

Family and friends can be very powerful resources when it comes to scholarships. They don’t always advertise, but some companies offer college scholarships to employees’ family members. These types of scholarships can be a great opportunity, and the field of applicants is usually much narrower than those found online.

A family member or friend might also be able to provide the opportunity for an internship that might make an applicant more appealing. Many scholarships also require letters of recommendation and this is a great place for friends or family to step in. Who better to make a personal recommendation than someone who has known the applicant for a long time? Family and friends are much more likely to make a heartfelt effort in helping an applicant achieve their goals.

Patience Is Key

One thing is certain, applying for scholarships takes time and patience. Finding the right scholarship isn’t easy and definitely won’t happen overnight. Taking the above into consideration can help increase your chances of success in receiving scholarship money to support your education.

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This article originally appeared on Credit.com.

This article by John Coogan was distributed by the Personal Finance Syndication Network.