7 Unexpected Benefits of a Good Credit Score

Do people understand the benefits of a good credit score? Everyone knows your credit score is important, but what exactly are the benefits?

In the United States, 28% of its citizens rely on credit when running out of money. While it’s good to use your credit, it’s not always wise to carry over a balance from month to month. If you can’t pay it back, your credit score will take a hit.

Most Americans know that your credit score is a golden ticket to a more manageable financial life. Whether you’re looking to maintain your credit score or increase it, the right motivation is essential.

That’s why we’re going to talk about the benefits of a good credit score. To keep you motivated to strive for more and let you know what’s waiting on the other side.

7 Unexpected Benefits of a Good Credit Score

We all know that having a good credit score is something everyone should want. If you need some extra motivation to increase your credit score or are curious what a high credit score will mean for you, here are the unexpected benefits of a good credit score.

1. Starting and Owning a Business

According to Forbes, consumers owed $323 billion on personal loans in 2020. The banks limited loan opportunities because of the increasing risk of default.

On a different note, loan applicants with good credit scores will have a much better chance of receiving an approval for the funds needed to set up a business or start a side hustle. Though some lenders may consider people with lower credit ratings, lenders have a habit of charging them with a higher APR (Annual Percentage Rate).

2. Less Hassle Getting Approvals

Imagine being denied something as common as a network provider subscription. Applications for basic household utilities and other post-paid subscriptions usually require credit reports. It also applies when you’re going to rent a space and need to pass a rental credit check, where the approval will depend on your ability to meet monthly payments on time.

While having a good credit score doesn’t mean you’ll get approved for every loan, it can increase the chances of approval. You can ask for new credit or new loans, and they will be quicker to grant it to you when you have a good credit score.

3. Better Risk Means Lower Interest Rates

Aside from having a better shot when applying for loans, you won’t have to worry about being charged exuberant amounts of interest with a good credit score.

Poor credit scores can lead to having the loan denied or charged at a much higher rate. Lenders assume a low credit score means it’s probably harder to settle the credit on time. It brings a higher risk that they need to offset with higher charges.

High credit scores imply that you have settled outstanding credit on time in the past. That’s why you’re charged lower interest rates on credit card balances you carry or loans you have.

It doesn’t matter if you’re looking for a personal loan, mortgage, student loan, or are carrying a balance on your credit card. Your credit score influences the interest rates at most places.

When you’re charged with a lower interest rate, you could pay off your debt faster and use the money toward other things.

4. Lower Insurance Rates

When you’re getting your mortgage or your car loan for a lower interest rate, you can also save on the insurance when you have a high credit score.

Insurance companies have their way of calculating the probability that you will make a claim, their so-called “insurance score.” The input comes from your credit report, and the variations between the two are minimal.

Insurance companies believe that when you have a lower credit score, you will file more claims. Whether that’s true or not, they base their decisions on it.

If you have a good credit score, be sure to compare insurance companies before you settle for one.

5. Great Credit Card Deals

If you have a good credit history and want to continue increasing it, know that you can get excellent credit card deals when you have a strong credit score.

These credit cards can have lower interest, offer credit card rewards, airline miles, or cash back on your purchases. It will make sure that you keep using your credit card, which will help you keep your credit score up. Plus, it will help you save money with cash back rewards.

The important thing here is that you make payments when they’re due and try to close as much balance as you can at the end of the month.

6. Room To Negotiate

It’s always better to negotiate. That’s also the case with your credit score.

When you’re looking for something specific, be sure to ask around and see if anyone can offer you a competitive rate. If you have a high credit score, you can ask companies for a price decrease or an interest rate decrease because you always pay on time and have a good credit history.

Companies have less room for negotiation when you have a lower credit score because specific standards and procedures need to follow.

7. That Special Requirement When Landing A Job

According to CNBC, 72% of employers still do background checks, and 29% of those employers check credit reports. If a poor credit report reveals bad financial habits, it may influence the decision to hire someone.

Of course, this depends entirely on the position. When you’re handling other people’s money or holding a public function, it’s more relevant than when you’re behind a computer doing web development.

Some Consumer Facts:

  • Around 21% of the American population has a good FICO® credit score.
  • In 2020, the average credit score in the US was 710. This is a record high, despite the pandemic.
  • Between 2019 and 2020, the average credit card debt decreased by 14%, from $6,194 to $5,315.
  • 35% of your credit score is based on Payment History. This may include payment information on credit cards, mortgages, installment loans (auto loans or student loans), retail accounts, and consumer finance company accounts.

Conclusion

There are a lot of ways to keep ourselves within the boundaries of our spending capabilities. Set a goal, spend less than you earn by creating a budget, and maintain a good credit score.

A good credit score can mean unexpected benefits like quicker approvals for credit or loans, utilities, phone plans, and even renting a place. You will get better credit card deals, pay lower interest, get lower insurance rates, and can get a loan quicker to start your own business. When you have a high credit score, make sure you negotiate your rates down, as that can save you even more. Employers will also value a good credit report, which may get you the job quicker.

If you want all of these benefits and aren’t sure how to get there, here’s tips on how to improve your credit score.

Source: credit.com

Will Becoming an Authorized User Help You Build Credit?

Authorized users are secondary account holders on another’s credit account. It usually benefits those that have little credit history and are looking to build it. 

Being an authorized user means the account is yours to use, but you won’t be listed as the primary account holder. And therefore, you’re not responsible for bill payments. However, you get all credit benefits of the account, which, if done right, can help boost your credit score and credit in general.

Let’s delve into the world of authorized users to learn how and when it’s done. 

How Does an Authorized User Work?

It denotes having someone share their account with you. So, you can get the credit benefits of the account.

Why would you need someone else’s credit benefits? The reason people do this is when they need their credit score boosted, or raised, in a way they’re unable to do on their own.

For example, Danny needs a high credit score within the month to be approved for a mortgage loan. Danny has zero credit cards open so his credit score is very low, in the 500’s. 

Here’s where Danny would be added onto his brother Leo’s credit. Leo, who has a Capital One credit card open for the past 12 years and pays it on time every month, is going to ask Capital One to add Danny as an authorized user to this card. Within the next few days or couple of weeks at most, Danny will see the Capital One card on his own report, with himself reported as an authorized user of the account. 

Danny will notice his score shoot up. How? Because Leo’s card has been open for 12 years and is in good status, which are excellent factors for a credit score. Because Danny was added as an AU to this card, his credit report now boasts a 12 year old account. FICO sees that and calculates it into his score, bringing Danny’s score up.

Danny is now eligible to apply for a loan because his score is high enough.

Those are the major benefits of being an authorized user.

How Is It Done?

Whoever is adding you to their account, be it a relative, friend, or acquaintance, will call up his/her bank with your personal information on hand. This includes your legal name, home address, date of birth, social security number. And they’ll ask the bank to add your name to his/her credit card.

Once the request has been processed and the info is reported to the credit bureaus, which can take up to 30 days, the credit card account will show up on your credit report. You’ll be labeled an authorized user of the account.

The responsibility of the account is not yours, only the primary account holder’s. Moreover, the actual credit card will be delivered to the primary account holder’s house, and not to yours. Your relationship to the account is really just that your name is being labeled on the account as an authorized user. That’s enough for you to get the account details onto your own report.

Your credit history will automatically update according to the account. If the account’s been open for 10 years, your credit history will now include a 10 year old account. Even if the account has been added to your report just a few days earlier, you still get the full credit history of the account.

To get maximum benefit, the card you’re being added to should be open for at least 2 years and have absolutely no delinquency or late payment marks. Otherwise, that would just pull your credit down.

Why Is This Really Done?

Authorized users were created to offer a parent, spouse or child a chance to start building credit. By adding a parent, spouse or child to your credit card, you give them a head start on their credit. That’s because they get your credit card reported to their credit report, adding that credit history to be considered in their score.

When Is the Appropriate TIme to Add a Child to a Credit Account?

Some banks have a minimum age from when you can add your child to your account.

Minimum Age
Amex 13 years old
Barclay 13 years old
Bank of America No minimum age
Chase No minimum age
Citi No minimum age
Capital One No minimum age
Discover 15 years old
US Bank 16 years old

Authorized User Services

When this idea was popular, way back then, it was making waves for consumers in the credit world. People were adding authorized users not just for a spouse, parent or child, but also for acquaintances who needed their scores boosted. It got so popular that some companies even started making money. They would charge a fee to officially match up individuals to account holders of good status and credit, and have them added to the third party’s card. These companies’ clients would see instant score boosts of 100 plus points.

What’s about Authorized Users Now?

FICO were feeling that any consumer was able to boost his or her credit, regardless of their creditworthiness. FICO decided to therefore stop including authorized user accounts as part of a borrower’s credit file. The change was implemented as of the FICO 8 model.

But, the Equal Lending Act (12 CFR § 1002.6 (b) (6)) states: “In evaluating the creditworthiness of an applicant, a creditor shall consider the history, when available of accounts designated as accounts that the applicant and the applicant’s spouse are permitted to use or for which both are contractually liable.”

What that means, scoring models must include authorized user accounts as part of the account history if they’re the primary account holder’s spouse. 

To this, FICO claims they can differentiate a legitimate authorized user account from a random party, and are allowed to decide per account.

Still, that cuts down on borrowers’ chances to boost their credit through authorized use.

When Is It Still In Use?

Now that authorized users were no longer an option for many, it slowed down, almost stopping completely. The only time it’s still being used is when applying for mortgages. Mortgage loans use FICO scoring models older than FICO 8. That means authorized user accounts all still get included, just like the older models always were. So, if you’re applying for a mortgage loan and you need a score boost, you may be able to be on someone’s credit and potentially boost your score, saving yourself lots of dollars in interest once the mortgage goes through.

Does Every Bank Allow Authorized Users?

As exciting as it’s made to be, for home buyers going for mortgages, even so, not every bank accepts authorized user accounts as if the account belongs to you. And they don’t count authorized user accounts as yours. Therefore, they often don’t report it to the credit bureaus. In addition, not all banks will report the complete account history. They will report the account history as of when it’s been added to your report, and not the back dated history.

Back to Danny, knowing this, he would have to make sure that the credit card Leo is adding him to, is issued by a bank that reports authorized user accounts to the credit bureaus, with the accounts complete history. Otherwise, if it was a bank that wouldn’t count authorized user accounts into the borrowers report, Danny would get nothing out of being added to the card. The bank would not report it to the credit bureaus, FICO would never see such an account on his report, and they would not include it when calculating his credit score.

It’s therefore important to know which banks report authorized user accounts to the credit bureaus. Here’s a list of those that do:

Card Issuers Who Report to Credit Bureaus

Credit card provider Reporting to credit bureaus
American Express Yes, if the authorized user is at least 18
Chase Yes
Wells Fargo Yes, if the authorized user is at least 18
Bank of America Yes
Discover Yes, if the authorized user is at least 15
Capital One Yes
Citi Yes
Barclaycard US Yes, if the authorized user is at least 16
US Bank Yes, if the authorized user is at least 16
TD Bank Yes

Source: https://www.finder.com/which-credit-card-companies-report-authorized-users

Source: credit.com

Using Rebuilding Credit Cards to Rebuild Your Credit Score

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How do you start to rebuild your credit when you can’t get approved for a line of credit in the first place?

Let’s use this as a scenario: A consumer takes out a reasonably-sized loan. Maybe it’s for school, maybe for a house, maybe to start a small business. They make their payments on time and their debt slowly starts to dissolve.

Then, something bad happens.

Whether it’s a medical emergency or some other personal disaster, the borrower is no longer in a position to make their payments. They scrape and scramble to pay what they can, but their credit score continues to tank. When the dust settles, they can’t even get approved for a credit card.

This story is all too common, and the way forward isn’t always clear.

But a secured credit card might be able to help.

Whether you have a rocky credit history or have yet to establish one, a secured credit card is a great way to safely raise your score over time. Here’s what you need to know about how they work and how to use them.

Use the links below to skip ahead or read end-to-end for a comprehensive take on secured credit cards.

What Is a Secured Credit Card?

A secured credit card is halfway between a traditional unsecured credit card and a prepaid debit card. The main difference between the two is that issuers who provide secured credit cards require a cash deposit to act as collateral before giving out the card.

The deposit must usually be the same amount as the credit limit. For instance, if you get a card with a $200 credit limit you’ll have to deposit $200 of your own money. Sometimes you might qualify for a card with a deposit less than the credit limit, but it’s not very common.

Just like a security deposit pays for any damages you might incur while renting an apartment, a secured credit card deposit reassures the credit card company that you won’t run up a balance and then default on your payments.

Borrowers typically take out secured credit cards because their credit isn’t good enough to qualify for “normal” credit cards, or because they don’t have any credit history. A normal or unsecured credit card generally requires a score of 600 or more, and a score of 700 or higher is usually necessary for a first-rate cash back or travel rewards card.

Keep in mind, there are many options you can take advantage of if you’re still building your credit (in addition to secured credit cards). Student credit cards for example, are credit cards offered to current college students generally at lower credit limits and interest rates than a regular credit card.

How Can I Make the Best Use of a Secured Credit Card to Build My Credit Rating?

Building a credit score can be a bit of a catch-22. To build your credit, you need to apply and be approved for credit—but to be approved, you need good credit already.

That’s where secured credit cards come in. They report your activity to all three credit bureaus, allowing your credit to improve as you use the card. Since card providers ask for a deposit, they’re protected in case you stop making payments. It’s a win-win for everyone.

Many consumers get prepaid cards and secured credit cards confused with one another, but they act very differently. Prepaid cards are more like gift cards or debit cards than credit cards, and using them won’t help you establish a solid credit history like secured cards do. Prepaid cards also tend to charge excessive fees when you reload the card, withdraw cash, or pay your bills online.

Building credit with a secured credit card isn’t difficult. All you need to do is make one or two transactions on it every month, pay off the balance when the bill comes, and watch your credit score rise.

Here’s an easy way to use a secured card responsibly: pick a recurring monthly bill that doesn’t make up more than 30% of your credit limit and put it on the secured card. As long as you don’t use the card for anything else, this will keep you consistently under the 30% credit utilization limit needed to improve your credit score.

For example, if you have a $200 credit limit and your monthly cell phone bill is $50 a month, that’s below the 30% mark. Pay your cell phone bill with the secured card every month and wait for the billing statement to be issued. Then, pay the secured card bill.

After a few months of paying your bills on time, the credit card issuer may automatically offer you a traditional credit card and return your deposit to you. You can also call and ask them to convert the card to a normal one. Depending on your previous credit history, this may only take a few months.

Once you get a normal credit card, continue the same pattern. Pay a few bills with it, wait for the statement to come, and then pay off the total balance.

To see if the secured card is working, check your credit score once a month. You can find your credit score for free through your Mint account, and you can request a free copy of your credit report from each of the three credit bureaus – Equifax, Experian, and TransUnion – through AnnualCreditReport.com. You’re entitled to a free copy of your credit report once a year, so most experts recommend checking your credit report every quarter with one of the three credit bureaus.

Some secured credit cards provide a free credit score as a special feature, including Capital One and First National Bank.

Where Can I Get a Secured Credit Card?

If a secured credit card seems like a viable option for your financial situation, you’ll be glad to know you have plenty of choices when it comes to finding credit cards for rebuilding credit. Many major banks offer secured credit card programs including:

  • Bank of America
  • Capital One
  • Citi
  • Discover
  • USAA
  • U.S. Bank
  • Wells Fargo 

Do all banks offer secured credit cards?

Not all banks offer secured credit cards, but those that do all have their own way of structuring their card agreements—so it’s important to know how to compare your options.

How to Compare Secured Credit Cards

Like normal credit cards, every secured credit card has its own fees, interest rates, and perks. Here are the criteria to use when comparing different secured cards.

What kind of charges will there be?

Interest rate or APR

Each card has a unique interest rate or APR that can vary depending on your credit history. Secured cards usually have higher APRs than traditional credit cards. The interest rate only matters if you don’t pay off the entire balance when it’s due, so ignore this if you’re a responsible borrower.

Annual fee

Some secured cards will charge you a nonrefundable annual fee, ranging from $29 to $99. Not every card has an annual fee, so if possible you should apply for ones that don’t.

Late fee

Each card has its own schedule, but most fees are between $25 and $35. You can avoid these easily by paying on time every month or setting up auto-pay.

Foreign transaction fees

If you love to travel, you probably know that using a credit card abroad can result in unnecessary fees. Before you sign up for a secured card, check their policy on foreign transaction fees. Most charge the standard 3% foreign transaction fee, but a few, like Discover it® Secured, don’t.

Other factors to consider

Cash-back or other rewards

Almost every credit card these days offers cash-back or points when you use the card. It’s less common for a secured card to provide perks, but a few offer cash-back, like Discover it® Secured. Most secured cards at least give free travel accident insurance, rental car coverage, and fraud protection.

Security deposit

The required security deposit is unique for each card. Most ask that you put down an amount equal to the credit limit, but some cards give you the option of putting down less. This special option is only available if you don’t have a terrible credit history. The security deposit will be returned when you close the account unless you’re behind on payments.

Credit limit

The credit limit on secured cards is generally low, usually with a max of $200 to $300. There are exceptions to the rule, such as the First National Bank Secured Visa® Card with a $5,000 credit cap.

Takeaways: Secured Credit Cards

Whether you’re looking for credit cards for rebuilding credit or cards that will help you establish a credit history in the first place, secured credit cards are a great option to consider. When comparing secured credit card offers, be sure to review each credit agreement to ensure you’re making a decision that makes the most sense for you.

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Source: mint.intuit.com

7 Questions to Ask a Life Insurance Agent

  • Life Insurance

A life insurance agent can make the process of buying life insurance much easier. They can find you the best deals and ensure you’re completely covered. This is important, as close to a third of all Americans admit to lacking confidence about the insurance application process and can’t answer many basic questions about their needs and the coverage they seek.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

But what sort of questions should you be asking your life insurance agent and what answers can you expect in reply?

Who is Offering the Insurance?

Does your life insurance agent work on behalf of a single company or multiple companies? What are the names of those companies, and can you verify their legitimacy using a simple Google search?

No two insurance companies are the same. Many policyholders focus their attention solely on the price of the policy and the coverage it provides. But the company’s history of payouts and its reputation also comes into it. A cheap life insurance policy is pointless if the company has a reputation for not paying out.

Fortunately, it has never been easier to determine the legitimacy of an insurance company and a simple online search is all you need.

What Are the Guarantees?

The numbers you need to focus on the most are the guaranteed ones. This tells you how much a permanent policy will pay regardless of market changes. The projected figures are subject to change, but the guaranteed figures will provide you with some stability and assurances over the term of the policy.

Will It Adjust for Inflation?

It’s important to make sure the grant you receive will be paid after adjusting for inflation, because what seems like a lot of cash today may be worth much less in the future after years or decades of inflation.

$250,000 can seem like a huge sum of money today. If anything happens to your spouse and they are the breadwinner, this money can help to clear the mortgage and bolster your savings, securing you for years to come and allowing you to prepare for a future without them.

In forty years, however, $250,000 may count for very little. As an example, let’s imagine that you took out an insurance policy for your spouse in 1980 and they have just passed away. That policy was $100,000 at the time and this was a huge sum, enough to buy you two houses or 13 cars based on the national average rate.

Today, after accounting for inflation, that sum would be over $315,000, which is also a lot of money (although not quite enough for two houses). However, if the policy didn’t adjust for inflation, you’d get $100,000, which simply isn’t enough to cover an individual for life, especially if they have just lost most of their household income and still have a big mortgage to repay.

What Happens in the Future?

What happens to your policy as you age, can you switch your term policy to a permanent one, what options do you have, and can you save any more doing this? The older you are, the more you will pay, and by quite a considerable amount.

What costs you $100 a year when you’re in your forties could cost you $500 a month when you’re in your seventies. You’re a higher risk, and because life insurance is based on probability, you will be expected to pay a lot more.

Are You Covered if You Become Ill or Disabled?

Life insurance is designed to support your family in the event of your demise. However, you have your own wellbeing to think about as well. What happens if you become disabled or fall ill—what happens if you can no longer work and have growing medical bills to worry about?

This could place a big financial burden on your household and it’s something that you need to prepare for. Ask your life insurance agent if you will be covered in the event that you fall ill or become disabled. And, if so, what will that cover provide?

Many life insurance policies offer some kind of disability or illness cover, but this can vary greatly from policy to policy. More importantly, life insurance companies have their own definitions of what constitutes “disabled”. For some, it’s the inability to perform specific actions; for others, it’s about being unable to perform any actions at all.

What Happens if I Can’t Pay the Premium?

Life insurance providers are not as forgiving as banks and creditors when it comes to missed payments. They won’t chase you down, give you multiple chances, and then offer payment plans and other assistance programs to get those payments started again. In many ways, the ideal outcome for a life insurance company is if you meet the payments for twenty years and then stop. 

That way, they have secured a sizeable profit without the risk of a payout. And if you need to resign, you’re now much older and will, therefore, have higher premiums to repay. 

Discuss this potential issue with your life insurance agent in advance. Ask about grace periods and automatic premium loans; the former will give you a break to allow you to find your feet again, the latter will allow you to borrow against the policy.

What if Your Health Improves?

If your health gets gradually worse, your policy shouldn’t change and that’s a good thing, otherwise, life insurance would be pretty pointless. However, if you’re not in the best of health when you take out the policy, but this soon improves, there’s a chance you could get a discount.

Ask your life insurance agent what your options are in the future if your health or your situation changes. You could get a new underwriting if you lose weight, stop smoking, stop drinking or remove some other negative trait that initially increased your premiums.

Summary: Keep the Questions Coming

Life insurance agents are there to answer questions and support you in whatever way they can. Obviously, they benefit more if you don’t take up too much of their time, agree with the first policy they offer you and quickly sign on the dotted line. But you’re not there to make their life easier, you’re there to make a commitment that will impact you for years to come, one that will continue to provide for your family after you’re gone.

It’s important, therefore, to take your time and get everything off your mind. Don’t worry about sounding stupid and asking a question you feel you should know the answer to. You’d be surprised at how little the general population knows about life insurance and how common the most basic of questions are.

The most important thing is that you get the answers you seek and the policy you need. If that means asking a string of questions and making a life insurance agent wish they’d never met you, so be it!

Source: pocketyourdollars.com

Life Insurance for Seniors: Tips on Getting the Best

  • Life Insurance

Life insurance is essential if you want to provide for your family after your death and don’t have substantial assets to leave them. It’s something that everyone should consider when they have dependents, but if you’re over the age of 60 those insurance premiums could cost more than you can afford and more than they’re worth.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

If you need seniors life insurance that doesn’t cost the earth and provides the benefits you need, keep these tips in mind.

Why is Seniors Life Insurance So Expensive?

Insurance is an industry built on statistics and probability. You’ve probably heard detractors refer to it as gambling, using this as a reason to refuse any form of life, travel or home insurance. To an extent, they’re right.

Just like a casino, an insurance company studies the numbers and tweaks the outcomes to ensure they always fall in their favor. A policy may award an individual $200,000 when they’ve only paid $20,000, but for every big loss there are many big gains, just as a jackpot win is offset by the countless players who walk away with nothing.

Insurance premiums are fixed based on a series of probabilities. Where life insurance is concerned, the underwriters will look at previous health conditions, genetic disorders, mental health history, drug/alcohol abuse and more, before determining how likely that individual is to cash-out the policy.

For instance, they know that smokers live 10 years less on average, and that heavy drinking and a sedentary lifestyle are two leading causes of preventable death. The average life expectancy in the US is around 78 to 79 years. If you’re purchasing a 30-year policy aged 40, and you’re a heavy smoker, recovering alcoholic who works as a writer, designer, or IT technician, and doesn’t exercise, you fall into all those demographics. 

There is a high probability that you will not make it to the end of the term, in which case you’re a high risk and may be charged higher premiums, offered a reduced term or denied a policy altogether.

As a senior, you’re high risk because you’re more likely to cash in the policy than someone aged 20, 30 or 40. As a result, many insurance companies may refuse to work with you while others will simply offer you expensive policies and limited terms. To get around this, you may need to work with specialist senior life insurance companies. 

Do you Need Seniors Life Insurance?

At the outset of this guide, we noted that life insurance was essential if you have dependents and no assets. That “if” is key here, because with those things, it becomes less of a concern. It would certainly benefit your family more to have a cash payout on your death, but there is no guarantee and without that guarantee you could be paying into a policy that never pays out, thus taking valuable money from your pocket and your estate.

Life insurance should be considered for seniors who:

  • Have a mortgage to repay
  • Don’t have sizeable cash reserves or assets
  • Are the main breadwinner
  • Have debts

That final point is important, because if you have lots of debt then it won’t matter if you have assets because the debt could take them away. As discussed in our guide to what happens to your money when you die, your debt will be passed onto your estate (and if you live in a Community Property Estate, it could be passed onto your spouse). 

Prioritization will be declared, and tax debt will be placed at the top of the pile, after which all unsecured creditors can collect their pound of flesh.

If your debts are greater than the value of your estate, you could lose everything, assuming those debts are not forgiven upon your demise (as is the case with most student loan debt). At that point, your family will have nothing.

In this scenario, life insurance is essential. It’s also important to assign beneficiaries, ensuring that the money goes to them and not to the estate.

If your mortgage hasn’t been repaid in full and is passed onto your estate, your heirs will either need to continue making those payments or repay in full (either in cash or by selling the house). If there are additional debts that do not exceed the sum of the estate, these will be repaid, and your heirs will get what’s left.

Therefore, when calculating whether you need seniors life insurance, you need to ask yourself the following questions:

  • Do I live in a Community Property State? (includes Louisiana, California, Washington, Idaho, Nevada, Wisconsin, New Mexico, and Arizona).
  • Do I owe a lot on my mortgage?
  • Will my heirs struggle to pay for my funeral?
  • Are my debts greater than my assets?
  • Will I leave my heirs with substantial debts and obligations?

If your answers are negative, life insurance is an optional extra. It’s something that we recommend looking into, but not something you should commit to if you can’t find a suitable deal. 

If you answered yes to most of these questions and you don’t have an existing policy, it’s worth doing all you can to acquire life insurance or to find another means of supporting your family after you’re gone.

Options for Senior Life Insurance

Unlike whole life policies, which are designed to pay out substantial sums of money in the event the policyholder dies, senior’s life insurance is often designed to payout relatively small sums. 

There are typically two options for seniors seeking the protection of life insurance:

Funeral and Burial Insurance

Funerals are expensive and can cost upwards of $10,000 if you want a burial with a premium casket and all the trimmings. That’s a lot of money for your heirs to handle, but it’s something that funeral and burial insurance can cover.

Funeral and burial insurance can either be purchased through an agent or through an insurance company. In the first instance, you can make the funeral home your beneficiary, which allows you to arrange and plan your own funeral in advance, knowing that the costs will be covered and your loved ones won’t have to deal with the stress of planning and paying for a funeral while grieving.

In the second instance, everything is arranged through an insurance company and the money goes to your heirs. There is no prerequisite stating that this money must be used to pay for your funeral, but you can prepare instructions for when you pass.

Generally, these policies cost anywhere from $10 to $100 a month, depending on how much coverage you want. We recommend looking at some catalogs and discussing with funeral homes to discover how much your desired funeral will cost before applying for this insurance.

Term Life Insurance

Whole life insurance is rare for seniors due to the high risk involved. As the name suggests, whole life insurance is designed to be paid for the whole of your life, at the end of which there will be a payout. The alternative is known as term life insurance and is fixed over a specific period.

This way, there is a chance that you won’t die during the term, which means the insurance company doesn’t have to payout, reducing the risk and the costs and allowing them to offer you some favorable terms.

Term life insurance for seniors typically begins at age 60 (if you’re younger, you can apply for traditional term life insurance). Many insurance companies will stop providing these plans when you hit 75, at which point the liability is too high. 

You pay a fixed sum of money every month for a predefined term, often 10 or 20 years. The insurance company will then pay out an amount if you die during that term. As an example, a healthy 60-year-old applicant on a 10-year term can expect to pay anywhere from $50 to $150 a month with a $250,000 payout. 

As soon as you include previous and existing health conditions into the mix, those premiums increase. You’ll also pay a lot more for a 20-year term as that will take you to 80 years old.

The Best Life Insurance Policies for Seniors

Here for a few options to consider for seniors life insurance. But don’t just take our word for it. Do some research of your own, get as many quotes as you can, and choose the best one only when you’re absolutely satisfied that you’re getting the best deal.

Haven Life

With Haven Life, you can begin your cover up to your 65th birthday. The application process is quick and simple and it’s one of the cheapest options around for seniors, with term policies costing between $50 and $100 a month on average. If you’re 59 or younger, you don’t even need a medical exam for your cover to be finalized.

Haven Life policies are underwritten by MassMutual, an insurer that has existed for over 160 years.

AIG Life

One of the biggest insurers in the United States is also one of the cheapest for seniors. You can get up to $25,000 without the need for a medical exam. This is offered to all applicants aged between 50 and 85, with payouts that begin at just $5,000.

Transamerica

Transamerica offers a final expense policy, which provides a cash sum to be used for funeral expenses and other costs. This ranges from $5,000 to $50,000 and there are multiple policy options aimed at applicants up to the age of 85.

Mutual of Omaha

Although the costs can be a little higher and the options fewer, Mutual of Omaha offers coverage up to $100,000 without the need for a medical. This is rare and will come as a welcome relief to countless applicants who don’t want the additional stress and worry of a medical exam. 

What’s more, Mutual of Omaha will release part of your benefit in the event of a terminal or chronic illness.

New York Life

Apply for a policy that lasts for between 5 and 20 years and get a death benefit paid to your family when you die. There are many policy options to add and remove and very respectable premiums and payouts.

Summary: When to Apply for Seniors Life Insurance

The sooner you apply, the greater your options will be. Whether you’re 29 or 59, if you need life insurance then now is a good time to apply. A single year can make a massive difference the older you get, potentially adding tens of dollars to your monthly premiums and reducing your chances of getting the payout you seek.

As soon as you have dependents, bills, and responsibilities, look into getting a whole life or extended-term life insurance.

Source: pocketyourdollars.com

How to Build Credit Without Student Loans

June 6, 2016 &• min read by Jeanine Skowronski Comments 0 Comments

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College graduates saddled with student loans may find this hard to believe, but there is one upside to having to pay back all that debt: It helps you build credit.

That may seem like a small consolation — particularly if the balances you owe are even average — but credit can be hard to come by. Of course, all hope isn’t lost for those who don’t have student loans.

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  • I just watched a documentary on the dark web, and I will never feel safe using my credit card again!
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  • I need that peace of mind in my life. What else do you get with ExtraCredit?
  • It’s basically everything my credit needs. I get 28 FICO® scores, rent and utility reporting, cash rewards and even a discount to one of the leaders in credit repair.
  • It’s settled; I’m getting ExtraCredit tonight. Totally unrelated, but any suggestions for my new fear of sharks? I watched that documentary too.
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Here are some ways to build credit without that kind of debt.

1. Get a Secured Credit Card

The Credit Card Accountability Responsibility and Disclosure (CARD) Act prohibits lenders from giving credit cards to anyone under 21 who doesn’t have a willing co-signer or a demonstrated ability to repay, but if you’re over that age or you have a source of income, you can apply for some entry-level plastic.

Secured credit cards — which require you to put down a deposit that serves as your credit line — are specifically designed to help people repair or build credit. These cards generally require a deposit to “secure” the limit of the credit card. (You can go here to learn more about the best secured credit cards in America.)

There are also student credit cards geared to young borrowers that could be worth considering. The better ones have low credit limits that can keep new borrowers out of trouble and tout rewards or alerts designed to build smart-spending habits.

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2. Become an Authorized User

If you can’t qualify for a credit card, you may want to see if a parent, guardian or family friend is willing to add you as an authorized user to one of their credit cards. Authorized users aren’t responsible for paying off an account, but will get credit (pun intended) for any good activity associated with it. Just be sure to have the primary cardholder check if the issuer reports authorized users to the major credit bureaus, since not all of them do so.

3. Take Out a Credit-Builder Loan

An alternative to starter credit cards, credit-builder loans, offered by some credit unions and banks to help people improve their credit, allow you to borrow a nominal amount (often $1,000 or less) and make payments for 12 to 24 months. The payments are deposited in an interest-bearing CD or savings account. These loans typically have relatively low interest rates and can help people with a thin credit history develop a more solid credit profile as long as on-time payments are reported to the three major credit reporting agencies. (Again, you may want to check this ahead of time.)

4. Apply for a Personal Loan

You may be able to qualify for a personal loan. These installment loans do not require collateral and typically have slightly higher interest rates than secured loans. A bank or credit union that you have a relationship with may be willing to extend financing, though you may be asked to get a co-signer.

5. Establish Good Habits

Of course, you’ll only build good credit if you use any financing you are able to obtain wisely. You can establish a good credit score over the long term by making all your payments on time, keeping debt levels lower than 30% (ideally 10%) of your total available credit limit(s), and adding a mix of credit accounts (revolving lines, like credit cards, and installment loans, like an auto loan) as your score and wallet can handle them.

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You can track your progress by viewing your two free credit scores each month on Credit.com. If you make a misstep, you may be able to fix your credit by disputing errors on your credit report, identifying your particular credit score killers and coming up with a game plan to address them.

More on Credit Reports & Credit Scores:

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Source: credit.com

How to Use Your Wanderlust to Build Credit

June 15, 2016 &• min read by Jill Krasny Comments 0 Comments

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Love to travel? Good news: There are ways to put that wanderlust to use with a travel rewards credit card.

Though travel rewards cards aren’t the easiest to get approved for as they require an excellent or good credit score, those who are able to snag one can use it to build better credit. (Just remember, before you apply it’s important to know where you stand so you don’t get turned down only to see your score suffer as a result of the inquiry.)

Travel Rewards Cards & Credit

A travel rewards credit card lets accountholders earn points or miles that can be put towards hotel stays, airfare and other travel expenses. These rewards can help travelers lower the cost of vacations, and the card itself can be a good tool for building credit.

If you make payments on time, eventually your score will begin to rise because this behavior creates a positive payment history, an important factor in credit scoring models. The card’s credit limit will also count toward your credit utilization rate, which is another big factor in scoring models. Your credit utilization rate is how much debt you carry versus your total available credit. For best credit scoring results, it’s recommended that you keep your debt below 10% and at least 30% of your credit limit(s). So if you charge a vacation and then pay most or all of the purchases off right away, your score could benefit.

You can keep track of how your usage and payments are affecting your credit by signing up for Credit.com’s free credit report summary. Beyond seeing your credit scores, you’ll be able to check how you’re doing in five key areas of your credit report that determine your credit score, including payment history, debt usage, inquiries, credit age and account mix.

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Since interest rates for travel rewards cards tend to vary depending on creditworthiness, you’ll want to be mindful about carrying a balance. Doing so could hamper your credit goals, and the interest you pay could exceed whatever you’ve managed to glean from rewards. Many travel rewards cards carry annual fees, too, so you’ll want to make sure your spending habits justify the potential cost. (You can read about the best travel credit cards in America here.) Of course, making purchases on your card and paying them off quickly (and on time) will generally boost your credit.

Remember, if your credit is looking a little lackluster and you’re having a hard time qualifying for any type of credit card, you may be able to improve your scores by disputing errors on your credit report, paying down high credit card balances and limiting new credit inquiries until your score bounces back.

More on Credit Cards:

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Source: credit.com

How to Start Building Credit Once You Turn 18

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Good credit is crucial to unlocking many financial opportunities in life. When you have a great credit score, you can get lower interest rates on car loans, credit cards and mortgages. Some employers and landlords even check credit reports before they make a job offer or approve a resident application. While developing a solid credit history takes time, follow some of these tips on how to establish credit once you turn 18 to get started as soon as possible.

1. Understand the Basics of Credit

Make sure you understand the basics of how credit works. Your credit reports are maintained by three major credit bureaus—Experian, TransUnion and Equifax. It contains data on your current and past debts, payment history, residential history and other facts. This data is supplied by lenders, creditors and businesses where you have accounts.

The information contained in your credit report determines your credit score. Higher credit scores are more attractive to lenders and creditors. The factors that influence your score include:

As a new adult, some of these factors may not currently apply to you. However, they can all negatively or positively affect your score, depending on your behavior as a consumer. Educating yourself on credit now helps you avoid costly mistakes in the future.

2. Monitor Your Credit Report and Credit Score

Now that you understand the basics of building credit, you need to start monitoring your report and credit score. Monitoring your credit is one of the best ways to learn what will positively or negatively impact your scores. It also helps you catch inaccuracies or signs of identity theft sooner.

#animation-wrapper max-width: 450px; margin: 0 auto; width: auto; height: 600px; font-family: ProximaNova-Regular, Arial, sans-serif; #animation-wrapper .box background: linear-gradient(#0095D8, #1D4BB6); color: #fff; text-align: center; font-family: ProximaNova-Regular, Arial, sans-serif; height: 130px; padding-top: 10px; .content .box p margin: 0 0; .box .btn-primary color: #fff; background-color: #ff7f00; margin: 10px 0; .chat ul margin: 0; padding: 0; list-style: none; .message-left .message-time display: block; font-size: 12px; text-align: left; padding-left: 30px; padding-top: 4px; color: #ccc; font-family: Courier; .message-right .message-time display: block; font-size: 12px; text-align: right; padding-right: 20px; padding-top: 4px; color: #ccc; font-family: Courier; .message-left text-align: left; margin-bottom: 5px; .message-left .message-text max-width: 80%; display: inline-block; background: #0095D8; padding: 10px 13px; font-size: 14px; color: #fff; border-radius: 30px; font-weight: 100; line-height: 1.5em; .message-right text-align: right; margin-bottom: 5px; .message-right .message-text line-height: 1.5em; display: inline-block; background: #1D4BB6; padding: 10px 13px; font-size: 14px; color: #fff; border-radius: 30px; line-height: 1.5em; font-weight: 100; text-align: left; .chat background: #fff; margin: 0; border-radius: 0; .chat-container height: 450px; padding: 5px 15px; overflow: hidden; .spinme-right display: inline-block; padding: 15px 20px; font-size: 14px; border-radius: 30px; line-height: 1.25em; font-weight: 100; opacity: .2; .spinme-left display: inline-block; padding: 15px 20px; font-size: 14px; color: #ccc; border-radius: 30px; line-height: 1.25em; font-weight: 100; opacity: .2; .spinner margin: 0; width: 30px; text-align: center; .spinner>div width: 10px; height: 10px; border-radius: 100%; display: inline-block; -webkit-animation: sk-bouncedelay 1.4s infinite ease-in-out both; animation: sk-bouncedelay 1.4s infinite ease-in-out both; background: #000; .spinner .bounce1 -webkit-animation-delay: -.32s; animation-delay: -.32s; .spinner .bounce2 -webkit-animation-delay: -.16s; animation-delay: -.16s; @-webkit-keyframes sk-bouncedelay 0%, 100%, 80% -webkit-transform: scale(0); 40% -webkit-transform: scale(1); @keyframes sk-bouncedelay 0%, 100%, 80% -webkit-transform: scale(0); transform: scale(0); 40% -webkit-transform: scale(1); transform: scale(1); .ad-container padding: 15px 30px; background-color: #fff; max-width: 690px; box-shadow: 1px 1px 4px #888; margin: 20px auto; .ad padding: 10px 6px; max-width: 630px; .ad-title font-size: 20px; color: #07b; line-height: 22px; margin-bottom: 6px; letter-spacing: -.32px; .ad-link line-height: 18px; padding-left: 26px; position: relative; .ad-link::before content: ‘Ad’; color: #006621; font-size: 10px; width: 21px; line-height: 12px; padding: 2px 0; text-align: center; border: 1px solid #006621; border-radius: 4px; box-sizing: border-box; display: inline-block; position: absolute; left: 0; .ad-link a color: #006621; text-decoration: none; font-size: 14px; line-height: 14px; .ad-copy color: #000; font-size: 14px; line-height: 18px; letter-spacing: -.34px; margin-top: 6px; display: inline-block; .ad .breaker font-size: 0; .box .box-desc font-family: ProximaNova-Bold, Arial, sans-serif; font-size: 17px; font-weight: 600; width: 225px; margin: 0 auto; .btn display: inline-block; margin-bottom: 0; font-weight: 400; text-align: center; vertical-align: middle; touch-action: manipulation; cursor: pointer; background-image: none; border: 1px solid transparent; white-space: nowrap; padding: 6px 12px; font-size: 14px; line-height: 1.428571429; border-radius: 4px; -webkit-user-select: none; -moz-user-select: none; -ms-user-select: none; user-select: none; font-family: ProximaNova-Semibold, Arial, sans-serif; text-decoration: none; .btn-group-lg>.btn, .btn-lg padding: 10px 16px; font-size: 18px; line-height: 1.3333333; border-radius: 6px; #ad-4 font-family: Arial, sans-serif; background-color: #fff; #ad-4 .ad-title color: #2130ab; #animation-wrapper .cta-ec background: #79af3e; color: #fff; width: 155px; height: 41px; font-family: ProximaNova-Semibold, Arial, sans-serif; font-size: 14px; margin: 10px auto 4px auto; #animation-wrapper .ec-logo display: block; margin: 0 auto; width: 140px; @media (max-width:500px) .ad padding: 20px 18px; max-width: 630px;

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You can check your credit report for free annually with each major credit bureau. As you review your report, look for any negative or inaccurate information that could be screwing up your credit. You can also check your credit score, updated every 14 days, for free at Credit.com.

If you’re really serious about understanding your credit reports and scores, sign up for ExtraCredit. With Track It, you can see 28 of your FICO scores and credit reports from all three credit bureaus.

3. Sign Up for ExtraCredit

ExtraCredit does more than just show you your credit scores. Have you recently started paying rent or utilities? BuildIt will add them as new tradelines with all three credit bureaus. That means you’ll get credit for bills you’re already paying—building your credit profile each month.

4. Become an Authorized User

If you have a friend or family member willing to add you as an authorized user on their credit card, you can piggyback off their credit card activity to help establish your credit. Even if you don’t use the card, the account can still land on your credit report and potentially positively impact your score.

This method poses some risks to the primary cardholder and you, the authorized user. If you or the primary cardholder rack up too much debt or miss payments, that activity could end up damaging the credit of both parties.

You should also verify that the credit card company in question reports card activity to the credit file of authorized users. If they don’t, your credit won’t see any benefit.

5. Get a Starter Credit Card

Credit cards are one of the best tools around for building credit, but you might have trouble qualifying for one when you have no credit history. Luckily, there are a few credit card options for young people with little or no credit.

Unsecured Credit Cards: If you don’t have the money to make a security deposit, consider an unsecured credit card such as the Avant Credit Card. This card offers a process that presents you with a credit line based on your creditworthiness before you apply. It also has no penalty or hidden fees—a perfect fit for any young adult’s starter card. You do need at least some fair credit history to be approved, though.

Avant Credit Card

Card Details
Intro Apr:

Ongoing Apr:
25.99% (variable)

Balance Transfer:

Annual Fee:

Credit Needed:

Snapshot of Card Features
  • No deposit required
  • No penalty APR
  • No hidden fees
  • Fast and easy application process
  • Help strengthen your credit history with responsible use
  • Disclosure: If you are charged interest, the charge will be no less than $1.00. Cash Advance Fee: The greater of $10 or 3% of the amount of the cash advance
  • Avant branded credit products are issued by WebBank, member FDIC

Card Details +

Secured Credit Cards: A secured credit card requires an upfront security deposit to open. Your deposit will typically equal your initial credit limit. For example, a $500 security deposit would get you a $500 credit limit. These cards are easier to qualify for, and you can use them to make purchases, just like traditional credit cards, while also establishing some credit history.

OpenSky® Secured Visa® Credit Card

Card Details
Intro Apr:

Ongoing Apr:
17.39% (variable)

Balance Transfer:

Annual Fee:

Credit Needed:
Fair-Poor-Bad-No Credit

Snapshot of Card Features
  • No credit check necessary to apply. OpenSky believes in giving an opportunity to everyone.
  • The refundable* deposit you provide becomes your credit line limit on your Visa card. Choose it yourself, from as low as $200.
  • Build credit quickly. OpenSky reports to all 3 major credit bureaus.
  • 99% of our customers who started without a credit score earned a credit score record with the credit bureaus in as little as 6 months.
  • We have a Facebook community of people just like you; there is a forum for shared experiences, and insights from others on our Facebook Fan page. (Search “OpenSky Card” in Facebook.)
  • OpenSky provides credit tips and a dedicated credit education page on our website to support you along the way.
  • *View our Cardholder Agreement located at the bottom of the application page for details of the card

Card Details +

6. Make Payments on Time

Making timely payments is the most important thing you can do to build credit, as payment history makes up 35% of your credit score. This applies to credit cards, loans, utilities such as cell phone services and any other account that requires a monthly payment. No matter the account type, a late or missed payment that lands on your credit report can do significant damage to your credit score.

7. Maintain a Low Credit Card Balance

Your credit utilization ratio, or the amount of available credit you have tied up in debt, is another major contributor to your credit score. Most experts recommend keeping your credit card balances below 30% of the available credit limit. Ideally, you should pay your balance off in full each month to avoid interest and keep your utilization low.

8. Get a Loan

Getting a loan just to build credit is generally not a good idea, as you shouldn’t take on debt only for the sake of your credit score. But if you have a valid reason, such as needing a car or money for college, a small loan in your name can help you build credit.

As with credit cards, loans only build a good credit history if you pay them on time every month. You also want to ensure your creditor reports payments to the credit bureau. If you also have a credit card, getting a loan can help improve your account mix, which makes up around 10% of your credit score.

9. Keep It Simple for Now

The more credit cards and loans you open, the higher your chances are of falling into debt. When you’re just starting out, you should probably play it safe and manage one basic credit card and/or small loan until you get the hang of things. Trying to manage too many debts at once could get you in over your head.

Over time, you can start to add other credit cards or loans to the mix, diversifying your credit profile and adding more opportunities to build credit. And because the age of your accounts affects your credit score, just keeping accounts open will help you build credit history in the long run. When you’re starting to figure out how to build your credit, do it slowly, carefully and with a constant eye on your statements and credit reports.

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Source: credit.com

How to Use Your Cable Bill to Build Credit

June 2, 2016 &• min read by Jeanine Skowronski Comments 0 Comments

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Disclaimer

Cable companies aren’t in the habit of reporting your payments to the credit bureaus, at least when it comes to your traditional credit reports. But if that’s something you want, there is a way to get those monthly bills to help your credit score.

Simply put, consider paying for cable with your credit card.

Unlike cable providers, credit card issuers do generally report to the major credit reporting agencies, so using your plastic to pay for a bill that you’re already in the habit of covering from month to month can help you build a payment history, the single biggest factor in establishing credit scores.

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Of course, for this strategy to work, you have to pay that credit card off on time and, ideally, in full. Otherwise, it will have the opposite effect on your score and you’ll wind up paying interest just to watch your favorite television shows.

To make sure you don’t miss a payment, sign up for alerts or, even, set your credit card bill to auto-pay. You could also pay the charge off via a linked debit card account as soon as it’s processed if you’re worried about winding up with a big balance (which could affect your credit utilization, another major factor of credit scores) at the end of the month.

A Few More Tips & Tricks

There’s a chance that your provider will charge a fee for paying by credit card, so be sure to check that there’s no extra charge before using this method. And, if you do set that credit card to auto-pay, monitor your monthly cable statements. You don’t want to miss a new fee or billing error and wind up paying more than you owe or intended.

Rewards credit cards can earn you some points, miles or cash back, so if you have one in your wallet, you might want to use that particular piece of plastic to pay your cable bill. If your credit is on the brink and you don’t have any credit cards, you can consider applying for (and then using) a secured credit card, which is designed specifically to help people build credit. (You can learn more about the best secured credit cards in America here.)

[embedded content]

A Quick Reminder

Unpaid cable bills can damage your credit, even when they’re not being covered by a credit card. Accounts that go unpaid long enough can wind up in collections, which will hurt your scores. (You can see how any collections accounts may be affecting your credit by viewing your free credit score, updated every 14 days, on Credit.com.)

If your credit is in rough shape, due to an collection account or other payment history troubles, you may be able to improve your scores by paying delinquent accounts, addressing high credit card balances and disputing any errors that may be weighing them down. And remember, you can build good credit in the long term by making all loan payments on time, keeping debt levels low and adding to the mix of accounts you have, as your score and wallet can handle it.

More on Credit Reports & Credit Scores:

Image: Ivanko_Brnjakovic

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How to Get Cheaper Life Insurance Policies

  • Life Insurance

Life insurance is essential if you have debts, a mortgage or lots of dependents. However, the older you are, the more expensive it becomes. If you add medical issues and other health concerns to the mix then you might be refused altogether or quoted astronomical premiums that make you question whether it’s worth the protection.

Find the Right Life Insurance for You!

Attention: Still Open During the Financial Crisis…

Tip: Act now to see if you qualify for lower rates!

Compare free personalized quotes from the nation’s top providers.

Fortunately, there are a few things you can do, ways you can improve your chances of securing favorable terms and getting cheap protection for your family.

Choose a Term Policy

Life insurance comes in many shapes and sizes, but all policies are variants of a whole life policy and a term life policy. The former lasts for the policyholder’s “whole life”, but can also be cashed out sooner; the latter is limited to a fixed term of between 10 and 30 years.

To the insurance company, it’s all about balancing expected profit and loss. With a whole life insurance policy, the risks are higher because they will pay out regardless of how long the policyholder lives and can only profit if the payments lapse or the policy is cashed. With a term life policy, the odds are always weighted in their favor because the policies are set to a fixed-term that the policyholder is likely to survive.

For instance, if you’re a healthy 20-year-old, you shouldn’t have an issue getting a full 30-year term because there’s a greater than 1 in 20 chance you will survive it. If you’re 60, your term may be limited to 10 or 20 years, because anything above that begins to tip the balance back the other way.

By opting for a term life insurance, you can place probability in the underwriter’s favor, thus ensuring you are offered the best rates. The shorter the term, the better those rates will be.

Lose Weight

Height and weight are two major factors in determining the likelihood of a policyholder making it to the end of their term. The simple calculations will tell them whether you fall into an “overweight” or “obese” category, in which case your risk increases significantly.

If you’re in these categories, try to lose weight before you apply. Life insurance companies consider obesity to be as much of a risk factor as smoking and every pound you lose will reduce that risk and thus decrease your premiums.

If you have a lot of muscle and an average amount of fat, you may also face some issues as your weight won’t tell the whole story. This is one of the few times when a medical exam is preferred, as that way you can prove you are not overweight and should be considered a low-risk as opposed to a high one.

Quit Tobacco

It’s a no-brainer—smoking massively increases your mortality risk and smokers live ten years less on average. The life expectancy in the United States is just under 80 years. To an insurance company, a smoker is uninsurable beyond that 70th year, making a thirty-year term highly unlikely for anyone aged 40 or more.

Smoking also increases your risk of heart disease, cancer, and a host of other conditions. It’s a huge red flag and one that will increase your life insurance premiums, decrease your payout, and reduce your chances of being accepted altogether.

Saying no to the cancer-sticks will save you a small fortune on your insurance premiums and will also reduce your monthly bills, with the average smoker spending just under $2,300 every month.

It’s not just smoking that life insurance companies focus on. They’ll also penalize you if you chew, sniff or vape tobacco.

Be Careful How You Select Your Hobbies

Underwriters pay very careful attention to what you do in your downtime. If you spend your days shopping, chatting with friends and playing basketball, they’re not going to bat an eyelid. But if your days are spent playing extreme sports, bungee jumping and skydiving, you will be considered high risk.

Some activities are riskier than others and, in some cases, they can make you as much of a liability as obesity and smoking. It’s worth reconsidering your more extreme hobbies if you’re struggling to find cheap life insurance. All the following will make life insurance companies think twice:

  • Boxing/Fighting (if you actually partake in combat and don’t simply train)
  • Skiing and Snowboarding
  • Rock Climbing
  • Deep Sea Diving
  • Base Jumping
  • Skydiving
  • Bungee Jumping
  • Surfing
  • Automobile Racing

Think Twice about Bankruptcy

Bankruptcy can increase your premiums because it is a known contributor to stress, which in turn can increase your risk of heart disease and many other chronic conditions. What’s more, someone who files for bankruptcy is also more likely to commit suicide.

Bankruptcy is never something you should rush into as it can leave a derogatory mark on your credit report that remains for up to 10 years. However, this aspect is rarely considered, even though it could seriously inflate your premiums.

Stay Honest

Honesty isn’t going to reduce your premiums, far from it, but it will make life much easier for your family if anything happens to you. If you lie on your insurance policy and you die during the contestability period, which begins as soon as the policy is active and ends after a year or two, the claim will be refused.

This can happen even if the contestability period is over, as long as the life insurance company can prove that you filed a fraudulent application. Life insurance is something you purchase to protect your family against the unexpected. It’s not something you can predict with any degree of certainty, so lying and hoping that you will swerve the contestability period and avoid any issues is reckless at best and criminal at worst.

Stay honest, keep it simple, and try the other tips in this article to reduce your premiums legitimately.

Summary: Quote and Compare

Some of the things that you might expect to have a big impact on your life insurance premiums actually count for very little. For instance, riding a motorbike will not impact your eligibility unless you ride professionally. By the same token, it doesn’t matter much if you spend a lot of time in the car, providing you’re not racing at high speeds every weekend.

The things you need to focus on the most to get a cheaper life insurance policy are your weight and smoking status. These are the things you can control, the things you can fix with time and perseverance. If you want to see just how much if a difference they can make, get a life insurance quote before you lose weight and/or quit smoking and then get a quote from the same company afterward.

You will be in a much more favorable position and should be offered lower premiums, even though you have aged an additional year or two since you last applied.

Source: pocketyourdollars.com