Money Topics & Tips
At Bank of Blue Valley
Establishing and maintaining good credit is an important component of overall financial wellness. Understanding how spending habits and behavior affect your credit is key to building positive credit history and maintaining a favorable credit score. The following information is helpful for anyone interested in learning more about building good credit, or repairing damaged credit.
- The importance of good credit
Most people will need to purchase something with credit someday. Large purchases such as a home, car, or various emergency expenses may require obtaining a loan. When that time comes, credit is more affordable and more readily available for those who have established a strong credit history. Your credit rating can also impact other areas of your life. Potential employers, landlords, insurance companies, and other utility providers may refer to an individual’s credit history to determine if they are eligible to be hired or obtain services.
- Understanding Your Credit Report
Your credit report contains information about loans and credit cards you have currently, and those you have obtained in the past. This information is used to determine a credit score. Lenders evaluate this information when considering a new applicant, so it is important to make sure the information in your credit report is accurate, and that your borrowing and payment history is satisfactory. The following information is included in your credit report:
Identifying Information – your name address, and social security number
Credit Account Information – type of account, date the account was opened, amount of the loan or credit limit, and payment history
Inquiries – anyone who has requested your credit history in the last two years
Public Records and Collection Items – bankruptcies, foreclosures, wage attachments, and collection actions
Credit reporting agencies use the information contained in your credit report to assign a score. The chart below illustrates the factors that determine that score. It is not intended to show approximate percentages or formulas.
- Repairing Damaged Credit
Damage to credit can happen very quickly, while repairing credit takes time. Just one missed payment can have a significant detrimental impact on your overall score. Avoid making late payments, and be proactive if you are having repayment difficulties. It is best to contact your creditors immediately to work on a plan before negative information is reported to the credit bureaus. Work on consolidating your debts, and seek the advice of a non-profit credit counselor such as Consumer Credit Counseling Services if you need help. Make all payments on time and don’t borrow more than you can afford to repay. Over time, your credit score will improve if you build it slowly, and responsibly.
If you discover an error on your credit report Federal Law requires the lender to correct it, but you must prove it’s an error. Contact the lender immediately and work with them to resolve the error. If someone else is using your identity or credit contact the Fraud Department at any of the three major credit bureaus to place a fraud alert on your accounts.
- Monitoring Your Credit
Awareness is key to ensure that your credit history is accurate. You are entitled to a free copy of your credit report every 12 months, although a fee may be charged if you request a score. You can visit www.annualcreditreport.com to request a copy online. Or you may contact the three credit bureaus directly.
Consumer Credit Counseling – 1-800-431-8157
Equifax – 1-800-685-1111
Experian – 1-888-397-3742
TransUnion – 1-800-916-8800
Whether you are saving for a vacation or to build an emergency fund, here are some practices you can use to get started.
- “Pay” yourself as part of your monthly expenses. Put the money into a savings account. You can determine the amount that you feel is needed or available each month.
- Put unexpected money you receive into your savings account. Money received as a gift, tax refunds, an employment bonus, or inheritances are all unexpected funds that are not part of your normal monthly income. Why not put these funds in your savings account?
- Save something every month. Beginning with $10.00 a month gets you started. You can add and build over time when you have more money.
Setting a goal can be helpful. For example, an average family vacation costs around $4,000.00 depending on the travel method and number of days you will be staying in a hotel. If you plan to save $200.00 per month, you will achieve the $4,000.00 goal in 20 months. Here’s a sample savings plan form to help get you on track!
You can also use this Monthly Savings Calculator to help you determine how much you need to save to reach your goal.
If you don’t already have a savings account, see Bank of Blue Valley’s Savings Accounts page!
Following these basic steps will help you create a budget that is realistic and keep you on track with your spending and saving.
- Put your budget in writing.
- List all of your income. Common income sources are your paycheck from your employer; social security benefits; child/spousal support.
- Below that, list all of your expenses. Common expense categories are housing; utilities; car payment, insurance, and gas; food; clothing; child care expenses; credit card or loan payments; medical/dental payments; entertainment.
- Add up what you spend on entertainment and dining out for an entire month. Include these as expenses.
- Do you have a savings account? This would be a great time to open one, if not. “Paying” yourself in a savings account can help you establish an emergency fund, and accomplish short or long term savings goals. If you decide to open an account, add this to your expenses. Click here for information on our Savings Accounts.
- Think about any additional expenses you might have that may not occur each month (non-emergency expenses). Designate some money for these expenses so it is available when you do need it. For example: a gift for family/friends; a co-pay for a doctor’s visit; a fundraiser or one time donation.
- Review all of your expenses. Determine if what you are spending seems reasonable. If not, reduce costs in the categories you can change. For example, if you are dining out 5 times per week and spending $100.00, plan to dine out 3 times per week and spend $60.00. Now you have $40.00 to use for another expense category or save.
- Review your budget regularly to make sure it is still realistic to your current situation. Did your expenses change? Do you need to adjust some of your expense categories to include a new expense? Have you eliminated one of your credit card balances?
Keep all of your income and expense records. Details such as the date a bill was paid, how much and the method it was paid may be needed. Organize your records so they are easy for you to maintain and access when needed. Here’s a sample budget form to get you started!