Fraud Alerts, Hacks, and Insider Trading

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You’d have to be under a rock to not have heard of the Equifax hack that exposed the personal information of millions of customers (143 millions to be exact) that amount to essentially 1/2 of the entire U.S. population. It’s alarming and frustrating because the nature of their organization does not allow us to opt out of their business model. If a hack of that magnitude occurred at my financial institution, I would simply take my business elsewhere. But, the way our credit system works, we do not get a say as consumers. If you have a pulse and you have any credit history, at least one, if not all three credit bureaus, will have a lot of personal information about you.

If you ever looked at your credit report, you’ll see that almost everything except your medical history is included (past and current addresses, employers, account balances, payment history, phone numbers, etc.) If you think that’s alarming, I’ve got news for you that should make it worse: honestly, there is nothing you can do about those organizations having your information other than living off the grid like those crazy cult people (who may be on to something) who shun the use of credit, social security numbers, and civilization altogether.

While you can’t keep the information from getting out, you can prevent someone from using it for nefarious purposes. After thinking it over, I decided that the 7 year credit freeze was overkill and instead opted for a 90-day fraud alert. The fraud alert allows me to block any attempt at applying for credit without the potential lender first calling me on the phone to verify that I am indeed the one applying. It is free, fast and convenient to do, and best of all, you only have to contact one of the three agencies as they are required to notify the other three. The alert lasts 90 days and you can keep renewing it every 3 months. You can do it over the phone or on any of the three reporting bureaus’ website (phone numbers and links below).

See below for their contact information and good luck! If you’re concerned about your information being in the hands of criminals, just think of it that way, at least you have it better than the three Equifax executives who will probably end up in jail for insider trading. I hear prison food is terrible.

TransUnion
1-800-680-7289

Experian
1-888-397-3742

Equifax
1-888-766-0008

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I Create my own Sales

While I have a 9-5 where someone else tells me what to do and how to do it, I like to see myself as a “boss” in every other aspect of my life. I make my own schedule with my real estate work, I set my own prices for my rental properties, I determine what stocks I want to invest in, and sometimes, I create my own sales. I can’t always wait for a retailer to decide they want to unload a product. And while I’m at the prime of my life, I am past the stage of my life where it is acceptable for me to get trampled at black Friday sales. Yet, I refuse to pay full price for anything. So how do I reconcile the two? Here’s a story…

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My husband is an Oakley fan. I don’t know if he was always partial to their sunglasses or if it’s a by-product of his military service, but Oakleys are to him what Hondas are to me: when it’s time to upgrade, you just get a better model of the exact same make and style. So when the lenses of his sunglasses were scratched beyond recognition after 3-4 years of use, we went on the hunt for a pair of lenses (since the glasses are custom built, you can just replace whatever parts are damaged without purchasing a new pair). Unfortunately, the model that he has was no longer manufactured by the company and thus, parts were not available. They had a 2.0 version that was very similar but the newer parts were too big to fit into the old glasses.

I don’t know if most people know this but Oakley offers a trade-in program where you give them your old pair and they give you 25% off any new pair you purchase. So he built a new pair of sunglasses that are very similar to the ones he wished to replaced, albeit a little bit bigger, and the total price came out to $200. With the trade-in discount of 25% off, we got $50 off the price for a total $150. We then charged that $150 to our American Express card which had a $30 cash back for Oakley in the form of a statement credit. That statement credit hit almost immediately (I got a phone alert that it had been processed as soon as the transaction posted), so we ended up paying a total of $120 for a pair of $200 sunglasses, and to top it all off, we got 150 rewards points towards our points balance that we will use as we see fit going forward. Just in case you were not keeping up with the math, that’s the equivalent of 40% off. We did not have to wait in line or get pepper sprayed like Walmart unruly shoppers.

Nothing we wanted at the store was on sale, but we got a great deal anyway because every decision we make and every time we pull out our wallet, it’s a very deliberate move. There are no impulse buys or last minute decisions. Everything is well-planned.  Do you ever hear the phrase: “If you fail to plan, you plan to fail?” It’s not just a cliche.

Loyalty: How We Treat Ourselves for Less

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One of the most common overspending traps that we fall into is the idea that we deserve that (expensive) purse, that (overpriced) gadget, or that trip to Hawaii. While that is a slippery slope to getting off track financially, we should still seek to have balance in our lives. Budgeting can quickly become a chore if we find ourselves giving it all up without receiving anything in return. That’s why it’s important to treat ourselves. But what is the best way to do it?

In our case, we make it a point to maximize our loyalty rewards program. We find a service provider we are happy with in a couple of categories and study their rewards program to see how we could best benefit. In our case, we have the trifecta of travel. My husband is an avid traveler. Personally, I’m not a fan of airplanes so my fear of flying often overrides my curiosity to see the world. However, we find the balance between satisfying his wanderlust and my desire for firm ground. Even with moderation, travel still remains our most expensive hobby. As a result, we have found creative ways to manage costs.

Flights: We stick with one airline as much as possible. That allows us to rack up miles and a certain number of trips in order to gain a certain status with the airlines. We also have the option of buying tickets with our miles or transferring them to partner loyalty programs. We have racked up thousands of miles with JetBlue and are saving them towards a future trip.

Lodging: Although we spend very little time there, a hotel is one of the most important part of any trip. Not only is it the most expensive, but it is a matter of comfort. We are fans of everything Marriott. They aren’t always the cheapest but as Gold members two years running, we enjoy having high speed internet at no additional charge, early check in, late checkout, bonus points towards future stays, complementary breakfast, welcome snack, discounted rates etc. We also like the general consistency that the brand provides all over the world. Sure, we have gone to Marriott brands or properties where the rooms have been smaller, but the service has always been impeccable and there have been no concerns about the cleanliness. And since both my husband and I travel for work, we make sure that we earn points with every business trip by staying at Marriott properties; points we use to subsidize our pleasure trips.

Credit Card: As American Express members who use the Premier Gold Rewards card, we benefit from no foreign fees on overseas purchases and can take advantage of statement credits ($75) for certain hotel spending and in-flight purchases and checked baggage ($100) that all but wipe away the $195 annual fee. That is in addition to bonus points in certain spending category. Using our AmEx for every purchase allows us to earn points an accelerated pace that we can later redeem for statement credits to offset our spending or AmEx gift cards.

This combination of loyalty programs, including our willingness to actively bargain hut, has been our ticket to cheap travel.

Have you thought about how you can treat yourself for less?

10 things everyone should do before 30 to improve their financial lives

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Whether it’s due to helicopter parenting, growing up in rough economic times, or some combination of both, millennials are not thriving economically. It is becoming such a problem from older millennials like myself who have been out on their own for a number of years, that people are actually cashing in on our generation’s lack of preparation. I was listening to an NPR piece about an “adulting school” where young adults can enroll in classes to learn basic skills like folding fitted sheets (seriously!), creating a budget, cooking basic meals, understanding banking, etc. People enroll in those courses because they don’t know where to start. So today, I’m offering you a starting point: a list of what you should have a handle on to ensure a smoother ride. At least, if you do decide to enroll in adulting school, you’ll know exactly what classes will fit your needs.

  1. Have emergency savings of at least $1,000
  2. Be free of credit card debt
  3. Have concrete goals for the short, intermediate and long term
  4. Start saving for retirement
  5. Learn to cook 5 nutritious meals
  6. Learn investment basics
  7. Have a budget and stick to it
  8. Be adequately insured
  9. Give up instant gratification
  10. Improve your credit score

 

American Express Platinum Members Rejoice!

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As a frugal, personal finance junkie who is in a serious pursuit of financial freedom, I want to preface this post by saying: this is not for amateurs. The average american has thousands in debt, little in the ways of savings and barely any control over their personal finances. Therefore, if you are just starting to learn how to do a budget, this is not for you. I am not advocating that you sign up for a card as the new price will now cost you nearly $50/month. Those struggling to make ends meet have more important priorities. But if you have things figured out, have the funds and/or are already a member, this is very good news.

Platinum card holders will now be paying $550 a year, up from $450 (that’s not the good news).  However, with that $100 increase comes $200 in annual Uber credits, as well as 5x the points at select hotels booked through their website. Previously, the 5x points were only available for plane tickets booked directly with the airlines. So now, members have the options of getting 5x the points twice with their travel. Also, for people like myself who hate planes and drive to any location that is a reasonable ride, I always found it unfair that we don’t always get the bonus points because we are reasonable enough to hate getting into a bird-shaped aluminium foil thing 30,000 feet in the air.

As far as we know, they will continue to maintain all their other benefits which include access to airport lounges all around the world, $200 airline credits (baggage, in-flight entertainment, etc.), car rental coverage and more. They are also increasing their sign on bonus but have not yet disclosed how many points they will be giving to new members.

The 7-Step Guide to Healing Your Credit

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Before you read this post, I encourage you to take a look at the previous blog that talks about what makes up a credit score. You will have a better understanding of how the steps that I am recommending will impact your score every step of the way.

Welcome back! Now that you know what makes up a credit score, I hope you’re ready to fix yours.

A capitalist society is a consumer driven society. Few people are as consumption driven as Americans. Unfortunately, many of us aren’t patient enough to wait until we can afford the luxuries of life before we decide to indulge. As a result, we overextend ourselves, borrowing our lives away to keep up with the Jones’. However, as various entities we do business with begin to put increasing value on credit history, we are starting to wake up to the fact that things need to change.

But before they change, we must right the wrongs of the past. So it is no surprise that credit repair has become big business. The other fact about the credit repair industry is that they are preying on low-income consumers. What if I told you that with a little bit of guidance, patience and a whole lot of discipline you could repair your own credit score for free? Well you can and I will outline all the steps below.

The following list is a guide for how you can repair your credit or keep your credit score high if you already have good credit.

  1. Pay on time – Pay all of your bills on time, every time. Verizon, T-Mobile, Comcast can all send you to collection and ruin your credit. While you want to prioritize things like your mortgage so you aren’t homeless, don’t think there is a company out there that you owe money to that doesn’t have the ability to report you to all 3 credit bureaus.
  2. Pay down your balances aggressively – Your outstanding debt balance, especially on revolving lines of credit (i.e. credit cards) negatively impact your debt usage ratio (how much of your available credit line that you are using). Therefore, your score will benefit  greatly from you paying off your balance due and not just the minimum payment.
  3. Do not apply for credit – If you read the previous article that I linked above, you will know that hard inquiries (shopping for credit vs. “soft” inquiries marketing/promotional inquiries) on your report adversely affect your score. Additionally, those inquiries remain on your report for about 2 years.
  4. Pay, don’t shift– Do not move your debt around. I know someone who spent nearly 3 years moving their credit card balances to 0% interest promotional cards until she was no longer getting those offers. This does not eliminate your debt. It just helps you avoid interest for a period of time while you’re paying a balance transfer fee as a percentage of your owed amount. It is costing you money to still carry the debt. Ignore those promotional offers as they only benefit the company that you’re moving to, while you continue to be in debt and your score continues to suffer.
  5. Don’t close good accounts – If you have accounts in good standing with little or no balances, especially if they are aged, keep them open. They help establish your history and offset negative information on your credit. However, you have to be able to resist the urge of using the card or credit line. You are NOT required to use your account to have good credit.
  6. Be patient – Time heals all wounds. Inquiry “wounds” 2 years. Delinquency “wounds” 7 years. Bankruptcy “wounds” 10 years. As you work your tail off to show improve the data that shows up on your credit report going forward, there is not much you can do about ACCURATE adverse information. However, all information, good or bad goes away eventually. This is why it is important to remain consistent once you decide to make a change. Once the bad information falls off, you want to make sure that new bad information doesn’t rear its ugly head as it has a 7 year shelf-life.
  7. Fight – Remember how I said you can’t do anything about accurate information? That is not the case for incorrect information. If someone has the same name as you, or their social security number is 1 digit off from yours, or if you were the victim of identity theft, you don’t have to be punished for an error or a thief. The law says that you have the right to fix errors on your credit report and you should absolutely exercise that right.

These are all steps you can take on your own, for free. I hope you find the information useful and that the credit repair business has just lost another customer.

The Anatomy of a Credit Score

What makes up a credit score?

Credit scores are the most popular mysteries. We know they’re important and we know that we all have one. Furthermore, people and organizations who are not lenders that we interact with (landlords, insurance companies, employers) are placing increase value on the credit score as they evaluate us in all aspect of our lives, making it some type of character evaluation tool. But most of the time, we don’t know the most important thing we should know about our credit score: what it consists of, what influences it. Below, you’ll see a graph of your credit score and a written breakdown of the various components.

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  1. Payment History – 35%: For obvious reasons, this is the most important and largest component of your credit score. It tells anyone who reviews your credit report how likely you are to pay your debts based on your payment history. Are you chronically late? Do you have 7 accounts in collection? Are you consistently on time? Lenders want their payments on time every time. That is the most important thing when anyone gives you a loan. Both parties agree on a payment date and the lender is counting on getting that money on the date specified.
    • How it affects your score: If you don’t have a good history of making payments, that is the biggest risk for a lender and report reflects that poor history, your score will suffer.
  2. Amount of Debts – 30%: This one is a little tricky. While it tells the story of how much debt you have outstanding, all debts are not equally weighted in this category. Revolving lines of credit impact that area more than an installment loan would. This is because the principal balance of an installment loan can only go down while a revolving line tells them how likely you are to borrow up to or close to your limit. To a lender, anyone who continually maxes out a card or gets close to doing so is someone who is not able to manage their debt responsibly.
    • How it affects your score: Maxing out your cards or even using more than 30% of your credit line will negatively affect you.
  3. Length of Credit History – 15%: This one is pretty intuitive. It’s much harder to “fake the funk” over a long period of time. If you’ve had a credit card for 10 months, it’s much easier to have a positive history. However, if you’ve had it for 10 years, chances are you have gone through some major changes both positive and negative and you have managed your finances a certain way throughout it all. Creditors can best evaluate your long-term financial behavior when you’re past the honeymoon phase.
    • How it affects your score:  The older your accounts are, the better your score.
  4. New Credit – 10%: This component tells creditors if you’re out here seeking to borrow money from anyone who will lend it to you. It also give them an idea if you’ve been denied by other lenders as they can see when you had an inquiry but no new account has been reported opened.
    • How it affects your score: The more new inquiries you have on your report, the lower your score.
  5. Other Factors/Types of Credit – 10%: This is the variety or diversity of credit you use and how well you manage them all. If you only have student loans, it doesn’t mean that you won’t have a good score but your score may not be as high as someone with a variety of credit types, all else being equal. However, it is not very heavily weighted and there are enough points in the other categories to allow younger borrowers to still have an excellent score.
    • How it affects your score: The most varied your credit types, the more experience it shows you have managing different types of lenders and credits.

Now that you know the anatomy of a credit score, hopefully you have all the necessary tools to heal it.