Comprehensive Advisor

The Best Rates Start with Scores Above 740!

You’ll often hear that credit scores of 700 and up will get you best customer status with lenders. You should aim higher.   For the lowest rates and best terms, you need to get your credit score above 740 (the top FICO credit score, by the way, is 850), so keep that target in mind.

 

Each of the big three agencies, TransUnion, Equifax and Experian have their own credit score.  For example, TransUnion offers a score that reaches up to 990.  Further, lenders often tweak the scores provided to them by these companies.  So an absolute number may not be the most relevant piece of data a lender is using to determine credit worthiness.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

New FICO Score Coming to a Purse or Wallet Near You!

It’s always a good idea to be vigilant about your credit score, but even if borrowing loosens up a bit in 2009, you still need to do everything necessary to keep your credit score high.

 

Fair Isaac, the company that created the FICO score, has instituted a new version of its landmark credit scoring method that might have serious consequences for you if you’re planning on borrowing for a home or establishing any other new credit in 2009.  Another change for the company is it changed its name to FICO, just the acronym, thank you!

 

The new version of FICO is going to be particularly focused on your balances.  The primary focus seems to be shifting away from looking so closely at your on-time payment records.

 

Your top priority under this new system should be to get your balances down.

 

Reports say the new FICO revision will actually allow a bit of lenience on late payment.  This might benefit more than a few consumers with the downturn in the economy. Obviously, this won’t mean someone can be a chronically late payer, but once or twice won’t have the same impact as in earlier FICO versions.

 

Under this new regime, credit utilization, essentially the amount of credit you’re actually using relative to your credit limit is a much bigger deal simply because high balances are so prevalent right now.  From the lender’s perspective, high balances mixed with a tough economy means a higher risk of default among customers.

 

So what’s a good target utilization rate for all your revolving credit accounts? No more than 50 percent of your credit limit, and if you can get it significantly lower than that over time, that’s a good plan.  So, as you use less and less credit on a particular card or other line of credit, the better your score.

 

What does that mean for ordinary Americans who don’t meet the under-50 percent goal? It means you should be careful when applying for new credit or refinancing. Because most lending institutions may continue their strict lending requirements, you might defer borrowing goals in favor of reforming your credit behavior.

 

For credit cards, one way to improve your credit utilization number may be to transfer the balance on a maxed out card to another card that has a much higher credit limit so the credit utilization percentage on each card falls below 50%.  Also, when it comes to refinancing your house, you might live in an area where home values have risen, instead of falling.  In those few areas, refinancing may help.

 

So instead of bemoaning your tougher chances of getting a loan for a home or a car, why not use the current environment to launch a credit makeover that will position you for a better shot six months to a year from now?  We’ll examine a number of areas for you to improve your credit scores over the next several posts.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

 

 

Credit, Tracking It For Free!

First, forget the singing pirate!  If you haven’t set a schedule for receiving your three credit reports throughout the year, do so right now. You can get all three of your credit reports from each major credit reporting agency (Experian, TransUnion and Equifax) once every calendar year for free. You can do so by ordering them at www.annualcreditreport.com.

 

One approach to maximize your free credit monitoring is to stagger receipt of each of your credit reports at different points in the year.  You can do this quite easily by putting down a reminder I your calendar to check one credit report every 4 months.  You’ll get a near-continuous picture of how your credit picture looks. Also, you’ll have the opportunity to focus on possible errors in a single report, which will give the other two credit agencies time to update their files before you check again in 4 months.

 

Also, we almost always suggest people pay to get their credit score.  The nominal fee of around $10 is well worth it for the piece of mind of knowing what the lenders know.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Special Items: Priorities Are Critical!

How do you handle those everyday occurrences such as saving for a well-deserved vacation, a new car, or needed home repairs?  Well, the first item on your list is to, well, create a list!

 

Once you have your list, you should prioritize every item on the list.  There might be some clear priorities such as a new furnace, or paying off credit card debt.  Since few people have enough money to do everything they want, consider creating some sub-lists with a time period attached to those items.

 

You might have three time periods, for example.  You could have immediate needs, some things to take care of over the next season, and then you might look at priorities for the following year.  In the short term you could address the need to replace your aging auto.  For the next season, there might be holiday expenses, or school supplies to be bought.  Over the next year, you might have to replace your home’s windows or fix the gutters.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

College Savings, Are you on Track?

If you are saving for your child’s education or your own, check to see if you’re on track with the goals you made for the year. It’s also a good idea to read the latest news on financial aid since schools change their financial aid policies annually.  Even if your child’s still in grade school, it’s a good idea to learn as much about college financial aid while you’ve got plenty of time to learn.

 

Check your state’s pre-paid tuition plans, too.  With the economic downturn, some states have been looking at requiring additional contributions, even after participants were (supposedly) fully paid.

 

Also, if you have monies in a mutual fund company-run plan such as American Funds, Vanguard, TIAA-CREF or other plan, check the asset allocation.  In 2008, many of these companies revamped their model allocations to account for the economic downturn while looking to rein in possible undue amounts of risk.  Remember, as your child gets closer to using these funds your asset allocation should be moving toward more fixed income and cash, and lessening the exposure to equities.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Emergency Funds, Get One NOW!

Most financial experts encourage you to have between three and six months of living expenses in an emergency fund.  If you don’t have that minimum, go back to your spending review and see where you can start socking money away.

 

The amount of living expenses to accumulate in your reserve fund can be tied to the type of job you’re searching for.  Most emergency funds are used when income is lost, or unexpected expenses show up on your doorstep.  If you’re looking to replace your old job with a similar one, then 3 months of expenses should be covered.  If you’re in sales, though, 6 months is more like it.  A rule-of-thumb for white collar workers is to expect to job hunt one month for every $10k of income you desire.

 

In addition to the usual savings for an emergency fund, there are a few alternatives.  The alternatives may include life insurance, if you’re looking to replace income when the main breadwinner passes away unexpectedly.  Other replacement income sources might include disability insurance, distributions in the form of Substantially Equal Periodic Payments from an IRA or a qualified plan (known as a 72t distribution).  Annuitization of an annuity contract might suit your needs.  Finally, if possible, you could consider early retirement if you have access to a pension plan with commensurate benefits.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Have You Checked Your Spending?

Either on your computer or on paper, take the time to figure out where you’re money’s going.  Are you paying yourself first?  Are you sure every expense is a “must have,” and right now?  I prefer using a tailor-made program such as Quicken or Microsoft Money, but a simple spreadsheet can work well, too.  The paper approach is a difficult one for me.  It usually requires lots of erasing!

 

A look at the last six to twelve months of spending may reveal opportunities to reduce spending and redirect money toward more necessary goals. Take a close and critical look at such things as gym memberships, magazines piled up, and beverage/snack expenses.  Be honest with yourself.  Did you know a good walk can burn as many calories as a working out at the local gym?  Do you really read all those magazines?  Is the over-caloried coffee drink the reason you need to go the gym?

 

Doing this thorough review of your expenses can identify a surprisingly large amount that’s unaccounted for.  The money you’ve identified can be redirected to debt payment, savings and investments.  You’ll probably be surprised at how much you can save or re-direct while giving up so very little.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Taxes, Plan Now for Next Year's Refunds & Payments

If you got a sizable refund in April or found it necessary to empty savings to pay Uncle Sam, it’s definitely time to reassess what you’ll owe at tax time next year.

 

If you think you’ll have some losing stocks in your taxable investment accounts, keep an eye on those in case you’ll need to offset gains in your portfolio at the end of the year.  This is often referred to as “harvesting your losses.”  Be careful before going ahead with this idea, though.  What you may sell for a loss this year could turnout to be a potentially big gainer later.  Further, the offset for ordinary income is limited to $3,000 per year, with unlimited carry-forward years.

 

With very low to negative inflation for 2009, tax brackets for 2009 may remain essentially unchanged.  This means if you received a raise or larger than usual bonus in 2009, your tax bill will be a little higher because more of your income will be taxed at higher rates.

 

On the other hand, some wealthier taxpayers may benefit, if Congress makes no changes.  The phase-outs for personal exemptions and itemized deductions will be going away.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Health Insurance: Stay Tuned for Possible Changes

Increasingly, what we pay for health insurance will be tied to the state of our health. While the weather is good, commit to a plan to walk or hit the gym a specific number of hours a week. Many insurers reset premiums at mid-year in a rising cost environment, so make sure you’re ready to switch plans or negotiate different coverage if necessary during open enrollment in the fall.

 

Also, stay tuned for the healthcare changes coming from Congress.  A bill was introduced this week that does not offer a government option.  It is always possible a government option may be added, or the president could veto whatever plan Congress passes.

 

If you’re already retired and receiving Medicare, your Part B premium may go up.  So long as your income is below $170,000 for couples, or $85,000 for singles, you won’t see any of the increase passed along to you.  Ignore the media telling you your Social Security payment is going down due to Medicare increases.  For most recipients, you will see no change in 2010.

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.

Retirement Savings, Are You Maxing Your Contributions?

Given the state of the economy, it’s not a bad time to review your retirement funds and your current investment allocation. If you are on schedule to max out your contributions to your company retirement plan this year, great.

 

Don’t forget to check your existing IRAs and other retirement accounts to see if you’ll have enough cash on hand to contribute the maximum in each account by their respective deadlines next year.  Your 2009 IRA contribution can be $5,000 fro those under 50.  For people 50 and older, they can contribute an additional $1,000.

 

Further, if you have a second job, or are self-employed, check to see if you can have multiple plans.  If so, you may be able to contribute up to $49,000 to some of these other plans, such as a SEP IRA, profit sharing plan, or solo 401(k).

 

As always, please visit our website www.weslingfinancial.com or email us at info@weslingfinancial.com for further info and to discuss your personal situation.