Household credit use is at historic levels. Not since 2007 have credit use and home equity lines been higher, and homeowners are once again starting to feel the pinch. These days my work has been focused on issues related to this crazy real estate market; I am starting to see the signs of credit stress among Michigan homeowners and consumers. My office is becoming busier with credit issues once again.
Here are six suggestions that can make handling household finances easier — today.
- Know the “score”. Everyone has the right to a free credit report annually. Obtain a credit report online. Some banks have been providing clients with a free credit report. Review each trade line on the report for accuracy. Look for any items that report negatively. Investigate any collections, late pays, or unfamiliar items. Dispute or explain any erroneous reporting by writing to the credit bureau. Retain copies.
- Review all important bank and monthly statements. Check statements for errors, including unnecessary bank fees. Do it regularly and do it soon. As time passes, the harder it is to rectify an error. Research may have a cost, or information may no longer be available. Certain providers will not waive fees for errors found after 60 or 90 days.
- Enroll in a bank’s automatic online payment service or use a third-party service. Making timely payments is important to maintaining a good credit score. Technology makes paying bills online efficient. Most banks and third-party providers make payments at no cost, and most bill payment platforms integrate into financial software such as Quicken or Mint.com. Securely enroll utility, car and mortgage payments online, now.
- Switch retail cards for one debit card. Carrying a credit card balance with high interest is a waste of money. For many, it is easier said than done. It can be difficult to go “cold turkey” by cutting up every credit card. Keep the main credit card, but replace the gas and retail cards with one debit card. Most retail credit cards carry very high rates of interest and can only be used at the corresponding store. Retail cards are not useful in a financial emergency. It takes some discipline, but edging out these minor gas and retail cards is a great place to start.
- Account for your past years monthly mortgage payments and compare the interest paid for the previous year to the amount the lender reports on tax form 1098. As a loan amortizes, the interest paid per year should be reduced in comparison to the amount going towards principal. Use an online amortization calculator to double-check what the bank reports and what you have actually paid. Also, every year, your 1098 should state the amount of principal left on your mortgage. If not, contact the lender immediately. If there is no response, contact the state regulatory agency that regulates mortgage lenders.
- Reduce unnecessary expenses. Review a list of monthly expenses and determine where changes can be made. Cable and cell phone plans are a good place to start. View favorite shows without costs by going to a network website. Don’t buy books or movies that can otherwise be borrowed from the local library. Many libraries now have free, on-line lending. Also, cancel magazine subscriptions. Use the library’s periodicals. Look at gym dues, sell unused home gym equipment. With online technology, visit YouTube for a variety of free exercise videos. Communities often offer exercise programs for free. Get physically fit while getting fiscally fit.
Making one of the preceding recommended changes will have a positive impact on your personal economy.