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Tips That Keep Your Credit Score High

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Credit Score 300x200 Tips That Keep Your Credit Score High

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With all of the ways available to damage your credit score, it can be difficult to prevent your credit score from dropping occasionally. Fortunately, there are a number of methods that you can use that will help you keep your credit score as high as you can. A higher credit score can benefit you in many ways, including reducing the rate that you pay for many financial products and improving your chances of securing the loans, employment and housing that you desire. Paying your bills on time and following these tips will keep your credit score high.

Use Different Types Of Credit

To maximize your credit score, diversify the type of credit you are holding at any given time. Some people mistakenly believe that all types of credit are treated the same under the calculations used to determine their credit score. The truth is that people that have several types of revolving and non-revolving credit reflected in their credit history tend to have higher credit scores than people than only have a single type of credit, even if both have a spotless payment history. This is because companies want to see if you can handle all types of credit responsibly and are more likely to extend credit to the people that can demonstrate this responsibility.

Only Charge What You Can Pay Off

Carrying a balance on your credit cards will cost you a lot of money in interest payments and lower your credit score. Part of the calculation of your credit score is the ratio of the amount of credit you have available versus the amount of credit you have used. The less credit used, the higher your credit score will be. Paying off the balance of your credit cards each month will increase your credit score and prevent you from having to pay interest on the purchases you have made.

Leave Dormant Credit Accounts Open

Another thing that can unexpectedly harm your credit score is closing dormant credit accounts that you are not using anymore. Closing these accounts removes these amounts from your available credit, reducing your ratio of credit used to credit available. Instead of closing these accounts, allow them to remain open but remove the cards from your wallet so you are not tempted to use them. They can be placed in a safe spot in your home so they can be easily access in the event of a financial emergency.


Obtaining Extra Money Through A 401(k) Plan Hardship Withdrawal

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ten thousand dollars Obtaining Extra Money Through A 401(k) Plan Hardship Withdrawal

Photograph Courtesy Of Stan Dalone

While you were employed, you diligently put away money into your employer sponsored 401(k) plan so that the money would be there for you to use when you retired. Now, that you are unemployed, you wonder “Can I could use some of that money for my immediate needs, like mortgage payments and purchasing groceries?” The answer is yes, but unless you meet certain criteria and follow particular rules, withdrawing money from your 401(k) account can be costly. If you are facing an immediate financial need, you may qualify for a 401(k) plan hardship withdrawal that will allow you to obtain the money that you need without significant fees and penalties.

Qualifying Expenses

A 401(k) hardship withdrawal is a distribution from a 401(k) plan based on an immediate, costly financial need by the account holder, their spouse, or their dependent and you can only obtain the amount of money needed to satisfy that financial need. Qualifying expenses typically include certain types of medical expenses; burial or funeral expenses; costs related to the purchase of a principal residence; costs related to preventing foreclosure on a principal residence; and tuition or other related educational fees. Not all plans allow hardship withdrawals and they are not required by the federal government, so you will need to read the information for your plan to see if what types of withdrawals will be allowed.

Additional Details

While not as expensive as just withdrawing all of your funds from your 401(k) account, the amount that you obtain under a hardship withdrawal will be subject to a 10% withdrawal penalty, taken directly from the amount disbursed by the plan. You may also face a tax penalty when you file your income taxes for the year. After obtaining a hardship withdrawal, you cannot make any contributions into the plan for the following six months. All of these things must be taken into consideration when deciding whether to obtain a hardship withdrawal from your 401(k) plan.

Obtaining The Hardship Withdrawal

If you have decided that obtaining a hardship withdrawal is your best course of action, then you will need to provide documentation to the plan administrator detailing your need and demonstrating hardship. The specific documentation needed will vary from plan to plan and based on the type of need, but the account holder must generally demonstrate that they have an immediate and costly financial need that cannot be relieved with other resources. If a review of the information provided determines that you qualify for a hardship disbursement from your 401(k) plan, you will be notified by the plan administrator and the funds will be released to you by check or by a deposit into your bank account.


Selling a Structured Settlement

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2903513401 d367bb3836 z 300x199 Selling a Structured Settlement

Photo courtesy of J R

You’re seventeen years old.  Driving around in your first car, not a care in the world.  Then, BAM!  You’re in a car accident.  It’s the other guy’s fault.  You and the insurance company settle on a structured settlement, or annuity, which are payments received on a scheduled basis.

As a kid, and then a college student, it’s a pretty good deal.  A certain amount of money drops in your lap every so often, you’re not blowing the rest of the amount on the stuff that kids blow their money settlements on, and you’re not paying a whole lot of taxes on the amount.  But now you’re out of college.  Priorities run to starting a family, a business, buying a home.  What can you do?

There are companies in business that buy annuities, or even portions of annuities.  You do not have to sell the whole thing.  These companies offer the insurance companies a percentage of the remaining balance of the structured settlement and then offer the original annuitant a large lump sum.  The factors involved with deciding the worth of the annuity include inflation rates and the amount of expenses the transfer will incur, so it’s always a good idea to keep an eye on current market rates when looking to sell your annuity.

The process for selling an annuity involves getting quotes from financial institutions that buy annuities, filling out the legal paperwork involved, and appearing before a judge, who will then decide if selling the annuity is in the best interests of the annuitant.  The financial institution will factor in any costs brought on through the filing into their offer to the annuitant.

There is no question that a guaranteed amount of money over time is a good thing. Especially if   this money is tax free. But a structured settlement doesn’t allow for the freedom that a large sum of money can.  Everyone needs to fix a car sometime.  And when you’re ready to buy a home, the amount received from selling a structured settlement can be just what the doctor ordered.

Selling all or a portion of your structured settlement can be a good idea.  There are many legitimate companies out there that buy annuities from insurance companies and then provide the original annuity holder with a lump sum.  This can be a process that takes anywhere from 45-90 days and is for the security and safety of the annuity seller in most jurisdictions, but could end up worth it in the long run.  A small monthly payment could do less good than a down payment on a house could or the money used to start a business that ends up being more lucrative then the previous payments received.


Common Mistakes That Can Make You Poor

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money credit card 300x200 Common Mistakes That Can Make You Poor

Photograph Courtesy Of Chris Potter

Managing your finances properly is very important to ensuring your financial security in the future, but there are several common mistakes that can undo all of your hard work at managing your finances quicker than you can imagine. Making one of these common mistakes can consume a large part of your income, ruin your credit score and cause you to be denied financial products like mortgages and loans in the future. Fortunately, it is easy to avoid these common mistakes once you have learned what they are. Here are some frequently made mistakes that can make you poor.

Living Without Health Insurance

Medical bills are one of the biggest reasons for declaring personal bankruptcy. If you do not have health insurance and you have an illness or injury serious enough to send you to the hospital, you could be on the hook for thousands of dollars in medical bills. Even if you are young and healthy, you could still become the victim of a car accident or injure yourself playing a sport. A single incident without health insurance can wipe out your savings and still leave you with a huge debt load. With health insurance becoming more affordable for many people due to new regulations, paying for health insurance coverage is increasingly seen as the better choice.

Having No Savings

People that live paycheck to paycheck and have no savings available are headed towards a financial disaster. It only takes one significant expense that is outside of the norm to cause an avalanche of debt accumulation, often at very high interest rates. Regardless of the amount of money you make each month, you can put a little bit away for a rainy day. An emergency fund of $1,000 can be enough to handle many common issues, so aim to save at least that much in a savings account that is easy for you to access at need.

Funding Your Lifestyle With Credit Cards

Many people make the mistake of treating their credit cards as if they are additional money and use them to fund their everyday lifestyle. These people generally carry a balance and rarely see their balance go down by any significant amount. Using your credit cards to pay bills and not having any savings available to fall back on can result in huge debt problems down the road. A much better option would be to only charge what you are able to pay off each month or to save your credit card swipes for emergency cases and pay off the balance as quickly as possible.