Tying the Knot on Credit Scores

July 18, 2018

Credit scores show institutions that may lend to you, if you’re a responsible borrower. It takes time to build credit and once you have, it’s important to keep it. If you aren’t sure how to build credit, check out our building credit blog here. When dating or in any type of romantic relationship, there are certain things about each other we learn pretty quickly. What our partner may like to eat, their favorite type of music, who their friends are, what’s their best angle for a selfie. We’re willing to bet that learning your partner’s credit score isn’t usually at the top of that list.

As your relationship progresses and you look to the future with your partner, your credit scores must be discussed. It’s important to understand where you both stand with your credit and how, or if you both can improve your scores. The importance of good credit cannot be underestimated. Credit is key to determining your ability to borrow money or to take out a loan, so having good credit, both you and your partner, will leave you both with better options. You both will have the ability to select a loan such as a mortgage for a home or a credit line to pay for your wedding that may even benefit you both in return! So how can you work with your significant other to raise their credit score and secure your financial futures?

Education & Open Communication is EVERYTHING

If you have great credit, you must be doing something right! Take the opportunity and show your partner what they can be done regularly to improve their credit score. It’s important to keep in mind you shouldn’t shame your partner for their finances in the past. Remember, it’s likely that your partner did not even realize how important a credit score was!

Your partner needs to feel like they can openly address financial questions and you can both have an open and honest conversation. Try to be encouraging and share your knowledge with them. Educate them on how reviewing a credit report annually to make sure there are no mistakes is important. Sit down together and walk through the first one together.

Be sure to find the problems that caused the poor credit in the first place. Was it missed payments, maxing out of credit cards, or just a lack of any credit history? Together you both can work to find a solution to this problem. There are tons of resources on the web where people can go to learn more and become more financially literate.

Build Trust

If you have good credit and you trust your partner, we mean really trust your significant other, then add them as an authorized user on your credit card. If this is something you’ve really thought about, be sure to use protection. By “protection” we mean, you’re still the primary cardholder and all responsibility of the card is all still yours.

One small slip-up can leave you with an unfortunate looking future … well at least as far as your credit score is concerned. If your partner decides to cheat on you financially and use the card to make purchases that they can’t afford and you don’t have the funds to pay for them either – it can negatively affect your credit score.

Now back to the positive of adding your partner onto your credit card. As the primary cardholder, your credit will not be affected if you add an authorized user. Your partner’s credit report will show the account history. Therefore, if you haven’t missed a payment on the card and haven’t maxed out the available credit, your significant other will get to reap those benefits. This is especially beneficial for partners who lack credit history.

Work for it

Another way in which your SO can build or repair their credit would be to open up a secured credit card. As NerdWallet explains, it is a secured credit card based on a cash deposit that you make when you open the account. They also explain that people who choose this option generally see their credit score improve in about a year if done responsibly. The deposit is usually the credit limit to which you are permitted. For example, if you put down a deposit of $500.00, you would have a credit limit of $500.

Now, don’t think because you put a deposit down you won’t accrue interest. Every other aspect of a secured credit card works the same as an unsecured credit card meaning if there’s a balance you’ll be paying interest. Secured credit cards are also accepted wherever unsecured cards are accepted.

Here are some additional tips to using a secured credit card responsibly as per Nerdwallet:

Make only 1 or 2 purchases per month
Only use for small purchases
Pay the full balance every month – to not collect interest
Pay the balance before it’s due.

If you keep the account open and pay your bills on time, you’ll eventually get back your deposit. With a good payment record on the account, most secure card providers will offer the account holder an unsecured card. If you don’t make your payments, then the cardholder will take the deposit, hence why it is a secured card because it is secure for the lender.

The Future

As every couple is unique so too are their credit histories. Whether it’s you or your significant other looking to repair or build credit. We just reviewed three proven methods. It’s important to keep in mind that not all credit is approved. You’ll still need to qualify for most of these options except for the authorized user on a credit card. Remember, this is your financial security as a couple. Your financial security will lay the foundation for the decisions you choose to make regarding finances. Keep working together to reach your goals and we are sure you’ll be so glad that you did!

Learn How to Talk With Your Partner About Finances

Student Loans Have Advantages

Varying types of debt are governed by different laws and regulations. Banks often base interest rates for consumer credit loans on your established credit rating. Interest rates for auto loans or credit card debt tend to be higher than a mortgage or student loan interest. As you review your debt load and make a plan, remember: student loan debt comes with a few "advantages" that other types of debt don’t offer.

Preferential tax treatment: With a new job, you will be paying taxes on your income. Student loan interest is deductible up to $2,500 and can be deducted from pre-tax income.
Lower interest rates & perks: Federal student loans have lower interest rates and are sometimes subsidized by the government.
Lender incentives: Private student loans may come with incentives from the lender that make them a better deal than other credit types. These include fee waivers, lower interest rates, and deferment options.
Flexible payment plans: Options for lower payments and longer terms are available for both federal and private student debt.
Build your credit score: You can build your credit score with student loan debt. Now, depending on whether you’re making on-time payments or not, you could negatively or positively affect your credit. If you chose to make small payments during deferments, or a grace period, and regular on-time payments you will be more likely to establish a favorable credit record and reduce the amount of interest you pay overall.

Programs to Help You With Student Loan Payments

There are few options for loan forgiveness with regular debt, but student loans offer opportunities to reduce or eliminate your debt. These may come with commitments and tax implications, so be sure you fully understand them if you decide to take advantage of these programs.

Loan forgiveness: Federal student loans may be forgiven, but you'll want to be sure that you're following all of the requirements needed of the program. Be sure before choosing this option that the federal loans you have qualify for the program. Also, keep in mind there could be taxes due on the amount that is forgiven. Some student loan forgiveness programs include PAYE (Pay as You Earn) and REPAYE (Revised Pay as You Earn), Public Service Loan Forgiveness, and Teacher Loan Forgiveness.
Loan Consolidation: Multiple student loans can be consolidated into one payment with the interest rate determined by a weighted average of your current loans - interest rates. Combining multiple loans may be easier to manage on a modest starting salary. Consolidating federal loans usually doesn’t require a good credit score, either.
Refinance, and you could achieve a lower interest rate: Lenders like Education Loan Finance specialize in student loan refinancing, and have options like variable interest rates and flexible terms. Refinancing your debt could make student loan debt easier to manage than other types of credit.

Pay Off High-Interest Debt First

Before you decide to pay off your student loans, think about the financial obligations you’ll be taking on. Instead of carrying a credit card balance or making low payments for an auto loan, it makes sense to continue your low student loan payments and pay off more expensive debt first or debt with a higher interest rate. In the long run, you’ll save money and build your credit score. If you still have doubts about not paying off student debt first, consult a professional financial advisor for help prioritizing your goals and setting up a budget that lets you achieve them.

Click Here to Learn More About Student Loan Repayment

2019-06-07

How Do You Know When It’s Time to Get a Graduate Degree?

The most recent data from the Digest of Education Statistics show that over 54% of those completing graduate studies take on student loans, and the average loan amount for grad school is over $70,000. With so much at stake, isn’t it worth a serious analysis of the value?

Develop a Decision Matrix to Help You Decide

A decision matrix is an analytical tool that helps you compare different factors when making a choice. If you are about to take on more student debt to continue your education, a personal decision matrix that weighs the following questions can help you clarify your values and decide what makes both personal and financial sense.

Why do you want a graduate degree? Motivation is a complex process, and you may not know what is driving you to continue your education. A little self-analysis is in order. Do you think graduate work will elevate your prestige, make you an industry authority, or help you find a more challenging job? Or are you afraid of leaving your college comfort zone and entering the workforce?

Do the jobs in your field of study match your talents and disposition? Do you thrive in a fast-paced environment or enjoy working with the public? Perhaps a predictable or solitary workplace suits you more. If you’ve never been employed in your chosen field, it might be wise to work for a while after completing your bachelor’s degree. You’ll get a better understanding of employment opportunities and personal satisfaction levels before investing more time and money toward an advanced degree. Working before pursuing a graduate program has two other distinct advantages:

You can make progress toward paying off undergrad student loans.
You will have time to solidify your life and career goals.

Will a graduate degree improve your employment and earning potential? Before committing to graduate school, do your research. Monitor the job market on sites like Indeed, Monster or Study job requirements, salaries, and the number of job openings. Talk to individuals in your field—both those with graduate degrees and those with four-year degrees. Will an advanced degree make enough difference in job availability, career stability, and earning potential to offset the time and money required to obtain it?

Are there alternatives for enhancing your employment value? Explore professional or specialized certifications that could make you more valuable to an employer. Obtaining certificates is usually less expensive than continuing with graduate studies, and added training indicates to employers that you take the initiative and possess advanced skills.

How will you pay for your advanced degree? If you already have student loans, adding more debt for graduate school could further delay your ability to achieve many financial milestones: marriage, purchasing a home, traveling, or starting a family. Often, grad school loans come with a higher interest rate and greater accumulated balance than undergraduate loans. You’ll need to determine whether the added earning potential of an advanced degree justifies the payments and payback period. It may also be worthwhile to explore alternatives like part-time studies and employer educational benefits to lessen the student loan burden.

Refinance Student Debt in Three Easy Steps With ELFI

You’ve graduated with a college degree and increased your earning power. Now, get the most for your money by refinancing your student loans with Education Loan Finance. Our competitive interest rates, personalized service, and nationwide availability give you the power to manage your debt and achieve your goals. With ELFI, you could be just three steps away from a brighter future!

Click Here to Learn More About Refinancing Student Loans

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2019-06-03

How to Build Your Child’s Credit Score When They Don’t Have One Yet

From the 2007 Housing Crisis, 2008 Stock Market Crash, and now the student debt crisis there is no surprise parents nationwide are looking to educate and protect their children on finances. Many people during these national events lacked basic financial know-how and self-discipline. Gen-Xers and millennials, starting to have children of their own, worry that a new generation could be seduced by the allure of instant gratification and the digital disconnect between earning and spending money. What as a parent can you do for a young child to teach them finances and help them learn the basics? Here are some basic tips to help your children build healthy credit and learn to use it responsibly.

Start With Basic Financial Life Lessons

Whether your child is 2 or 22, financial education is the key to building good credit and financial independence. Erin Lowry, business blogger and author of Broke Millennial: Stop Scraping By and Get Your Financial Life Together, explained in a recent podcast that her parents taught her about delayed gratification early in life. “I was really encouraged from a very young age to start making money, especially if I wanted something," Lowry said. Saving for discretionary purchases is a lesson many young children can miss. A growing number of young adults also don’t have realistic expectations of their future earning power. Lowry grew up in a different reality. She explains that her first successful enterprise was at age 7, selling doughnuts at a family garage sale. Before she could feel too excited about her earnings, her father adjusted the amount she made by taking out the cost of the doughnuts and wages for her sister. He explained that the money left was her profit. “He actually took the money," she remembers. "That is something that has stuck with me forever." It’s never too late to teach lessons like these. Resources for financial education are abundant in print and online, and parents can refer adult children to Lowry’s book and her blog, brokemillennial.com. For younger children, check out this post by Dave Baldwin, “The Five Best Apps for Teaching Kids How to Manage Their Money.”

Three Tips for Establishing Good Credit for Your Children

Parents with good credit and a clear vision of their children’s financial future can take these three actions to ensure a sound credit score for children reaching adulthood.

TIP 1: Make your child an authorized credit card user.

There is no minimum age to most credit cards, so you can add your child as an authorized user as early as you like. The best part is you do not have to give the child access to the card, just keep it in a safe place. It’s imperative that you use the credit card wisely and are able to pay the minimum monthly balance on the card. If you are unable to make payments on the card that could negatively affect your child’s credit history too. Try to only use the card for reoccurring balances like gas or food shopping. When your child comes of age to have their first credit card in adulthood, they will benefit from your history of timely payments and reasonable use of credit. It will also benefit them if they need a loan to attend college and you as a parent may not need to be a cosigner.

TIP 2: Add a FREE credit freeze to your child’s credit report until they reach age 18.

Contact each of the three reporting agencies, Equifax, Experian, and TransUnion, to request a freeze in your child’s name. In some states, the freeze may need to be renewed every seven years. A credit freeze is fairly simple to implement and will protect your child from identity theft, which in turn will protect their credit history and credit score. You can also lift credit freezes when your child is ready to apply for credit. It may seem like an extreme to put a credit freeze on your two months old credit but it will only protect them in the long run. Identity theft to children is an unfortunate reality in the United States. According to CNBC, more than 1 million minors were victims of identity theft or fraud in 2017. What may be even more surprising is that data breaches are just as much a problem for minors as for adults, if not more. According to CNBC, only 19% of adults were fraud victims compared to a staggering 39% of minors due to data breaches. This can happen to your child, but it can be prevented. You have the power to protect your children from falling victim to fraud. Not to mention a credit freeze is free thanks to recent laws passed by the federal government, so it won’t even cost you or your family a dime. To learn more about protecting your child’s credit and preventing identity theft, visit the Federal Trade Commission’s Consumer Information site.

TIP 3: Set up a secure credit card account for your child to use.

A secure credit card is similar to an unsecured or the “normal” type of credit card. The only major difference is that a deposit is used to open a secured credit card account. The amount of secured credit card deposit is usually the credit limit of that secured credit card. Now, as long as all payments are made on time and in full at the end of the designated period you’ll receive your deposit back. Additionally, that fact that all payments were made on time and in full means that you should see that reflected in your credit report and you may even see that reflected in your credit score. If your child fails to make on-time payments or fails to pay the full amount of the card this could hurt your child’s credit instead of helping it. If you choose to give your teenager a secured credit card you should be certain that you discuss the responsibilities of card with them. Make sure your child is committed to paying on time, staying within the credit limit, and using the card for only appropriate expenses you have discussed in advance. This is a great responsibility to provide a teenager because it really gives them the ability to start developing good financial habits. Whether that is putting an alert in their cell phone when the payment is due or if that is handwriting it on a calendar. Additionally, your child will have the opportunity to really learn to budget and live within their means. These are fundamental finance lessons and habits that will help to lay the groundwork of what could be a very financially responsible young person.

Financial Outlook

Regardless of what ways you choose to teach your child about credit or build their credit, know that your outlook on finances can easily become your child’s. If you find yourself scared of money, it’s likely your child will too. So often children learn relationships based on what they see their parents doing, so be sure that you’re laying the right framework for them to be successful. It doesn’t have to be an overly complex and if you aren’t sure that what you are teaching them is correct try looking locally for classes or programs. You should be able to find some financial literacy courses either online or within your local community. These can really help your child to familiarize themselves with common financial terms and create good financial habits. Good financial habits include how to save money, charitable giving, and even what taxes are. No one knows your child better than you and no one wants them to succeed more than you, so be sure to give them the right tools and resources to do so.