Want to Raise Your Credit Score by 50 Points? Here Are 4 Great Tips

Raise Your Credit Score by 50 Points

These aren’t overnight solutions. But with a little planning and a lot of dedication, following this expert advice can help you rebuild your credit score.

Having a bad credit score is kind of like having a serious nut allergy. People wouldn’t know it to look at you, but there are a whole bunch of things that this condition is holding you back from doing.

With a nut allergy, it might be eating certain types of candy bars or a nice PB&J sandwich. With a bad credit score, it’s taking out a personal loan or a credit card that doesn’t require a cash deposit.

Either way, both these things put real limits on the kinds of decisions you can make. Luckily, while a nut allergy is something you’re pretty much stuck with, a bad credit score is something you can fix.

For someone who has a mediocre credit score—say it’s in the 670 range—raising their credit score is pretty easy. But if you have bad credit, like a score that’s 630 or below, rebuilding your credit is going to take a lot more effort.

But just because it’s hard, doesn’t mean it isn’t worth doing. Your financial well-being is worth it. If you’re looking to raise your credit score by 50 points or more, here’s what you should do.


1. Check your credit report and dispute any errors you find

This step is a lot like filling up your gas tank before going on a long car trip. It’s kind of a no-brainer, but it’s also absolutely necessary. Skip this step, and you’re not going to get very far at all.

Jeff Hunter is the Editor of Simple. Thrifty. Living., a personal finance site. He says that “More than 42 million people in this country have errors on their credit report, and 10 million of those have errors that affect their credit score.”

He recommends that you “Make sure you are regularly checking your credit report to make sure there are no mistakes and that you haven’t been a victim of identity theft.” You can read more about identity theft in our post 3 Identity Theft Warning Signs.

But who wants to spend money just to order a copy of your credit report? No one, that’s who. That’s why it’s so great that you won’t have to pay a dime!

“You are entitled to one free credit report per year from each of the three major credit reporting bureaus, so you should be able to order one every four months,” says Krystal Rogers-Nelson, a freelance writer and contributing Safety & Security Expert for ASecureLife.com (@ASecureLife).

“It won’t affect your score as long as you order your credit report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers.”

To order a free copy of your credit report, just visit www.AnnualCreditReport.com.

2) Make your payments on time

There are five different categories of information that the FICO corporation uses to create your credit score. Of those five, the most important one is your payment history. It makes up a whopping 35 percent of your total score.

The most important thing to remember is to keep your credit report clean from here on out,” says Hunter. And if you’re serious about a clean report, paying your bills late is not an option.

First, this will mean automating as many bills as you can. If you can outsource the hassle to an e-bill, then go ahead and do it. Just make sure that you check in at least once a month to make sure everything is going smoothly.

Second, this will mean budgeting your money properly so that you always have the funds in your account when a bill comes due. An e-bill doesn’t do you much good if it’s zeroing out your account and racking up overdraft fees.

(Just make sure that your zeal for on-time bill payment doesn’t lead you to take out a payday loan in order to make ends meet. The potential debt trap that awaits you just won’t be worth it.)

When it comes to your credit score, improving your payment history is a bit of a long game. Most information stays on your report for seven years, so it’ll take awhile for the old bad info to drop off.

Don’t worry. though. The wait will be worth it.

3) Pay down your debt, and do it as aggressively as you can

When it comes to fixing your credit score, “Your “Payment History” and the “Amount Owed” categories make up 65 percent of your FICO Score calculation, so those are the categories you should focus on first,” says Rogers-Nelson.

Paying down your debt is critical to improving your score, but it can also feel like one of the most overwhelming obstacles to good credit. That’s why you should start small. Going too big too fast is a surefire way to fail.

Make sure you are paying the minimum balances every month,” says Rodgers Nelson, “then make adjustments in your budget to increase your payments, even if it’s only $5 or $10 per month. If you can, start making two payments per month.”

Once you get comfortable with your debt repayment, you can start getting more aggressive. Remember, the faster you pay down your debt, the faster you’ll see your score start to rise.

A truly aggressive debt repayment plan is going to require three things: a strict budget, an extra source of income, and a plan. Luckily, these are all subjects we’ve written about before:

If you need help starting a budget, try these five great budget apps or check out the OppLoans App Directory.

To start earning some extra cash, read these six expert tips for getting your side hustle going, then peruse our list of 10 awesome side hustles for quick cash.

Lastly, the two best debt repayment strategies out there are the Debt Snowball and Debt Avalanche methods. You can read about the Debt Snowball and the Debt Avalanche.

4) Use your credit cards responsibly

As you pay down your debt, it’s important that you try and use your remaining credit cards in a smart and strategic manner.

“Credit cards can help you build your credit, but the key is to show that you can manage them responsibly,” says Rodgers Nelson. “Keep your balances low on credit cards–set a limit for yourself on spending to make sure you are not going over budget–and pay your balance in full every month.”

The unique thing about credit cards is that they carry a one-month grace period before interest starts to accrue on any purchases that have been made.  Paying off your credit card balance in full every month ensures that you’ll get all the card benefits–like points and rewards–without paying any extra money.

Basically, never spend money on your card that you don’t already have in your bank account. So long as you always have the money to pay off your balance you’ll never be in danger of racking up additional debt.  

Rodgers-Nelson has some other great credit card tips:

“Make sure you’re not maxing out your credit limit every month; shoot for no more than 30% credit utilization ratio. 10% is even better. This means that if your credit limit is $2000, your spending would ideally be between $200 and $600 per month.”

The great thing about your credit utilization ratio is that, as old credit card debt is paid off, you should start to see those old cards slip to levels where your score will be positively affected.

Two last quick tips for raising your score

  • “This may seem counterintuitive,” says Hunter, “but canceling credit cards actually lowers your credit score. Part of your credit score is based on how much credit you utilize (your credit utilization score), so the more credit you have available, the higher your credit score.
  • Hunter has one last seemingly counter-intuitive tip: raising your credit limits. This is another way to try and improve your credit utilization ratio. Instead of only paying down the balances you already have, you could contact your credit card company and request that they raise your total credit limit. If you have a good history with the company, they’ll be pretty likely to agree!

Don’t let your bad credit get you down. Instead, get serious about fixing it. Raising your credit score 50 points is totally doable–even if won’t happen overnight.

Do you have a story about how you raised your credit score by 50 points or more? We’d love to hear about it! You can email us by clicking here or you can let us know on Twitter at @OppLoans.

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Contributors
KR_NelsonJeff Hunter is the Editor of Simple. Thrifty. Living. (@simplethrifty) and is an avid believer in personal finance education, especially for children and young adults. He started his career as a business journalist, where he decided to focus on personal finance. Since then, he has focused his overall personal finance education on all things credit and savings. As Editor of Simple. Thrifty. Living, he feels he can reach everyday readers who have questions about smarter ways to handle their money.
PIG
Krystal Rogers-Nelson is a freelance writer living in Salt Lake City, Utah. She is a contributing Safety & Security Expert for ASecureLife.com
(@ASecureLife), specializing in financial security, home security, and family safety. As a homeowner and mother, she is committed to empowering others with the knowledge and tools needed to live secure and comfortable lives at home and abroad.

How to Money, Episode Three: Credit Scores

how to money video

Your credit score is just a simple, three-digit number, but it has a super powerful effect on your financial health. It determines what kind of loans and credit cards you can apply for, what sorts of interest rates you can get, and could even decide where you live or work.

For more on how these scores work—and what you can do to improve your own score—check out the video below.

Enjoy!

What is a credit score?

Your credit score is a three-digit number that expresses your “creditworthiness”, or how likely you are to repay a loan based on your past borrowing behavior. Lenders use them to help judge whether or not to accept a person’s loan application and what kind of interest rates to charge them.

When it comes to your credit score, you don’t actually have just one. You have several. The most commonly used kind of score is the FICO score, which was created by Fair, Isaac and Company in 1989. (The company has since changed its name to FICO.) But even with your FICO score, you don’t have just one. You have three!

That’s because your credit score is based off information from your credit reports. The reports are compiled by the three major credit bureaus: TransUnion, Experian, and Equifax. The information on the reports can vary from bureau to bureau, which means that your FICO score can change depending on which credit report is being used to create it!

What do credit scores mean?

FICO scores exist on a scale from 300 to 850. The higher the score the better your credit.

The exact criteria for what makes a “good” credit score versus a “fair” or even a “bad” credit score will vary from lender to lender (check out our other resources for more information on bad credit loans). That being said, there are six basic ranges of credit scores:

  • 720-850 = Great Credit
  • 680-719 = Good Credit
  • 630-679 = Fair Credit
  • 550-629 = Subprime Credit
  • 300-549 = Poor Credit

If you have a great credit score, you are going to get approved for pretty much any loan you apply for–especially if you have a score of 750 or above. Not only that, but you’ll also receive the very lowest interest rates and the best credit cards perks and rewards.

The lower your score goes, the more likely you are to be turned down for a loan–especially if it’s an “unsecured” loan that isn’t backed by collateral, like a car or a house. You’ll also see your interest rates go up and the kinds of credit card rewards you’re being offered start to dwindle.

If you have a score below 630, that’s when you’re going to find real difficulty getting a loan from a traditional lender. In this range, you’re much more likely to fall prey to a predatory payday loan or title loan. Predatory lenders offer no credit check loans that can seem like a great solution for folks with bad credit–when in reality they can trap those borrowers in an unending cycle of debt.  

How are credit scores created?

In order to create your credit score, FICO first has to get a look at what’s in your credit reports. These reports are basically a history of how you’ve used credit (aka how you’ve borrowed money) over the past seven years.

After that period of time, information on your score usually drops off. This means that poor decisions you’ve made—ones that have lowered your score–will eventually drop off your report and stop hurting your credit. However, some information, like bankruptcies, can stay on your report for 10 years.

Your credit report contains information like how much money you’ve borrowed, how much of your total credit limit you’ve used, what kinds of credit you’ve used (like credit cards, mortgages or personal loans), whether you pay your bills on time, how long you’ve been using credit, whether you’ve recently applied for more credit, and if you’ve ever filed for bankruptcy.

FICO takes all that information and uses it to create a snapshot of your creditworthiness. There are five general categories of information, some of which are weighted more heavily than others:

  • Payment History – 35% of your total score
  • Total Amounts Owed – 30% of your total score
  • Length of Credit History – 15% of your total score
  • Credit Mix – 10% of your total score
  • New Credit Inquiries – 10% of your total score

As you can see, your payment history and your total amounts owed are the two most important factors.

How can you fix your credit score?

If you’re trying to improve your credit score, the two best things you can do are:

  1. Pay your bills on time.
  2. Pay down your existing debt.

Taking care of them will have the biggest impact on your score.

It’s a good idea to take a look at your credit reports to see what information is on there. Sometimes, the credit bureaus make mistakes that can impact your score! Luckily, the credit bureaus are all legally obligated to provide you one free copy of your credit report per year. To get a free copy of your credit report, just visit www.annualcreditreport.com.

Is there a financial topic you’d like to see us cover in a future episode of How to Money? Let us know! You can email us by clicking here or you can find us on Twitter at @OppLoans.

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Can Bad Credit Prevent You from Opening a Bank Account?

Can Bad Credit Prevent You from Opening a Bank Account
Yes. Sort of. It’s complicated…

For lots of people, opening a checking or savings account at their local bank branch is seen as just another errand to run. You go in, you sign some papers, deposit a bit of cash, and then go on your way. Next stop: the grocery store.

But for people with bad credit, opening a bank account can be a slightly more nerve-wracking experience. Less running to the store and more going to the doctor to have that weird lump checked out. In both cases, the results they’re waiting for could have a serious affect on their lives.

So can a bad credit score prevent a person from opening a bank account? Well, not exactly. It won’t prevent them from opening a bank account in the same way that it prevents them from getting a loan or a credit card. However, the type of behavior that causes bad credit—overdue bills, missed or late payments, accruing more debt than you can handle—is also the kind of behavior that will prevent you from opening an account.

Here, let us explain…  


Remember what “bad credit” actually means

It can be all too easy for us to throw around the term “bad credit” without stopping to remember its true meaning.

If you have “bad” credit, it means that you have a low FICO score—usually, a score that’s somewhere below 630. FICO scores come in a range between 300 and 850. The lower your score, the worse your credit. (A FICO score of 680-719 is generally considered to be a “good” score, and anything above that is “great.”)

Your credit score is determined by the information contained in your credit report. These are documents compiled by the three major credit bureaus: Experian, TransUnion, and Equifax.

Credit reports keep a record of how you’ve used credit over the past seven years—although some info on your report can stick around even longer. There are five factors used in calculating your score:

Your payment history, which makes up 35 percent of your score.

The total amounts owed, which makes up 30 percent of your score.

The length of your credit history, which makes up 15 percent of your score.

Your credit mix, which makes up 10 percent of your score.

New credit inquiries, which makes up the last 10 percent.

The more poor credit decisions you make—the more bills you pay late or credit card balances you run up—the lower your credit score goes. When lenders see a low credit score, they see someone who has a history of using credit poorly, which makes them a much riskier customer to lend money and would probably offer them a bad credit loan.

How bad credit can lead to no bank account

The same is true for banks when you’re opening a checking account. If they see you as too big a risk, they aren’t going to let you open an account. As attorney Carmen Dellutri, founder of Dellutri Law Group (@DellutriLaw), puts it, “Banks don’t like to take risks, period.”

The only difference is that the bank won’t check your credit score or pull a copy of your credit report from one of the three major bureaus. Instead, they will run a bank-specific version of a credit check, using a slightly different system to evaluate your creditworthiness. Rather than look at your history of borrowing money, the bank looks at your history of, you guessed it, using bank accounts.

They will most often run the check through a company called ChexSystems. “If you have made mistakes with banks in the past, you might have been put on the ChexSystems list,” says Dellutri. “Those mistakes could include a closed bank account without paying fees, bad credit, or other banking mistakes.” Additionally, an overdrawn bank account that is never paid up will end up being sent to a collections agency—which will show up on both your normal credit report and your ChexSystems report.

If you have bad credit, there’s a good chance that you’ve overdrawn your checking account or bounced a check or two in the past. The bank running the check will see this in your report from ChexSystems and may deny you an account. So while bad credit won’t directly lead to your being denied for a checking or savings account, the kind of behavior that leads to bad credit certainly will.

What to do if you’re denied a bank account.

It can be hard for many people to imagine not having a bank account, but it’s a hard reality for millions of Americans. A 2015 survey from the Federal Deposit Insurance Corporation (FDIC) estimated that as many as nine million households in the US were entirely “unbanked.” Going without a bank account means relying on check cashing stores, which can charge pretty exorbitant fees—all so that a person can simply access the hard-earned money in their paycheck.

That report also lists an additional 24.5 million Americans as “underbanked.” Finance expert David Bakke (@yourfinances101) defines the underbanked as “people who have a bank account but rely on other methods of financing and payments, such as using money orders or payday loans.” Even if these people currently have a bank account, they likely have bad or “thin credit”—and are at a greater risk for losing the bank accounts they already have.

If you are denied a bank account, the first thing to do is to request a copy of your ChexSystems report. Here’s the good news: you can get a copy for free. Under federal law, you are entitled to request one free copy of your ChexSystems report every year. (The same holds true for your traditional credit reports.) All you need to do is visit their website.  If there are any errors on your report, you should dispute them with ChexSystems. Likewise, if you have any outstanding overdue accounts or collections notices, get them resolved pronto.

Fixing your ChexSystems report is just like fixing your credit score. The best thing you can do is start making responsible financial decisions today. “Pay your bills on time and in full,” says Bakke. “Make sure you never bounce a check again by keeping a little more in your bank account than your register reflects.”

Even with black marks on your report, Dellutri says there’s a type of bank account that you might still qualify for:

“Many banks and credit unions offer ‘second chance’ banking accounts. These accounts might come with fewer services and higher fees, but they do allow you to open a bank account – and often you can become eligible for a regular account after six months of paying banking fees regularly and establishing a solid reputation with a bank.”

While bad credit might mean getting turned down for a bank account, it’s not the end of the world. By correcting errors on your ChexSystems report, making better financial decisions, and looking for a second chance account, you can work your way back to a standard bank account.

Have you been turned down for a checking or savings account? We’d like to hear from you! You can email us by clicking here, or you can find us on Twitter at @OppLoans.

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Contributors
David Bakke (@YourFinances101) is a finance expert who started his own personal finance blog, YourFinances101, in June of 2009 and published his first book on ways to save more and spend less called ““Don’t Be A Mule…” Since then he has been a regular contributor at Money Crashers.
Carmen Dellutri is the Founder and President of the Dellutri Law Group, P.A. (@DellutriLaw). He is certified by the American Board of Certification Consumer in bankruptcy law. He is also a Florida Supreme Court Certified Circuit Court and Family Law Mediator and a Qualified Arbitrator.

How to Money, Episode Two: Credit Cards

how to money video

If you spent last week living under a rock that was buried under another, much larger rock, then you might have missed our big announcement: We’ve launched a new video series called “How to Money”!

Every episode we talk about a different financial topic. Some of these will be everyday terms, while others will be a little less common.

If you haven’t watched episode one, you can check it out here. It covers the basics of Annual Percentage Rates, also known as APR. Check back for new episodes every Monday.

Enjoy!

What are credit cards?

Okay. So we’re pretty sure you know what a credit card is. These days, they’re pretty much inescapable.

But they can also be pretty dangerous. According to a recent study, the average American household has over $16,000 dollars in credit card debt. Plus, credit cards come with an average annual percentage rate of 16.5%, which basically means that that the average household is paying over $2,500 in credit card interest alone every year.

Yikes, right?

How do credit cards work?

Credit cards operate as a revolving line of credit, which means that they’re a little bit different than a regular personal loan. With a regular loan, a lender gives you a set amount of money. You then pay that money back to the lender over a set period of time through a series of regularly scheduled payments.

With a credit card (or a revolving line of credit) the lender doesn’t give you a set amount of money. Instead, they give you a set amount that you can borrow up to. This is referred to as the card’s “credit limit.”

You can then borrow as much or as little money as you like–so long as what you borrow doesn’t exceed the credit limit. Your credit card balance is a “revolving” balance, which means that amount you have to spend against your credit limit replenishes as you pay your balance down.

With a credit card, you’ll still get charged interest–because that’s how the lender is making money on your loan. However, with a credit card, you’ll only get charged interest on the amount of money that you actually borrow, not on your total credit limit.

Once you’ve spent money on a credit card, you’ll have to make a minimum payment every month. It’s usually something like two to four percent of your total balance plus whatever interest has accrued.

These monthly minimum payments are pretty small, which means it could take you several years at least to pay the card off making only the minimum payment. And that’s by design. The longer it takes you to pay off your card, the more interest you get charged, and the more money the credit card company makes.

How to use credit cards properly.

One of the great things about credit cards is that a lot of them come with points and rewards. By spending money your card, you can rack up those points and use them for air travel, discounts, gift cards, etc.

But in order to use a credit card properly, you should be paying off your full balance every single month. Do you spend $500 on that card? You pay that $500 off immediately. That way, you get the rewards without accruing interest.

Wait. Why wouldn’t you accrue interest, again?

Well, that’s because credit cards come with a one-month grace period–which means that a purchase made on the card doesn’t start accruing interest until one month after that purchase is made. So paying your balance off in full every month basically means you get the rewards for free

Remember, a credit card isn’t an excuse to spend beyond your means. While they can be handy in the case of absolute emergencies, you should otherwise only be using your card to spend money that you already have.

What topics would like us to cover in future episodes of How To Money? You can email by clicking here or you can let us know on Twitter at @OppLoans.

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How Bad Credit Can Affect Your Kids’ Future

How Bad Credit Can Affect Your Kids' Future

Bad credit can feel like an anchor, bringing you down while you’re attempting to swim through the ocean of life. Even if you’re careful, there are things you might not even realize can harm your credit.

And as unfair as that is, things get even less fair, because your credit won’t just affect you. It can also affect your kids. But instead of taking this as a negative, try and take this expert advice as a warning and a motivation to rise to the challenge of improving your credit and building a better future for you and your children.


In your best interest

You probably know that a lower credit score means higher interest rates. And that can affect your children.

“Sadly, your credit doesn’t just affect you, it also affects your kids,” Michael Banks, founder of FortunateInvestor.com (@FortunateInvest), warned us. “One of the biggest ways it can affect your kids is via interest rates. With a lower credit score, every loan you take out ends up having a higher interest rate. It may not seem like a 4.65% interest rate on your mortgage is that much worse than a 4% one, but over the life of your children, that can add up to thousands of dollars- dollars that could be used to pay for college, cars, and other expenses you may encounter as your children grow up.”

Schoooool’s out for credit

You’ll notice one of the concerns Banks mentioned was college costs. Education was a recurring concern among the experts we talked to. And it makes sense: your kids’ education can have a big impact on the rest of their life. And sadly, if bad credit is going to influence it, it’s not going to influence it in a positive direction.

Accredited financial counselor and founder of Youth Smart Financial Education Services Roslyn Lash (@RosLash), painted us a picture of how things can go wrong: “If the child needs an expensive graphing calculator and you don’t have the cash, your bad credit could prevent you from buying it, contributing to your child’s classroom struggles. In addition, higher grade classes offer expensive field trips, often out of the country. Without good credit, your child may not be able to attend. If s/he does attend, it will be at a higher cost due to the higher interest rate. And lastly, when it’s time for college, your teen may need a co-signer (with good credit) for a student loan. Again, you won’t be able to help them. Bad credit hinders you from helping them get a better grip on life.”

Generalized credit anxieties

If you have bad credit, you probably find yourself worrying about it somewhat frequently. Sadly, children can catch some of that worry.

Marc Johnston-Roche, cofounder of Annuities HQ (@AnnuitiesHQ), echoed the concerns about education, in addition to bringing up financial anxiety: “Growing up in an environment of constant financial worry can cause your children to ‘inherit’ those same concerns and carry them into their adulthood.

“Bad credit could also impact their ability to receive student loans for college, and limit your ability to help them as a co-signer for their first car or home.”

Justin Lavelle (@Justin_Lavelle_), Chief Communications Officer for BeenVerified.com (@BeenVerified), covered some of the ways bad credit can generally affect children’s upbringing:

“Bad credit will limit options that you have to provide your kids opportunities. A lot of things your kids want and need cost money and unless you are flush with cash you may from time to time require credit to get through the lean times. Back to school shopping, camps, and extracurricular activities all cost money and good financial management and the availability of credit can help you provide these things for your children.

“Kids learn a lot from their parents and financial management is one of them. If you are constantly struggling with your finances or are denied credit for large purchases these events can rub off on your kids and they may be less likely to handle money of finances when they are of age to need to. Set a good example and mind your finances if for no other reason than to set a good example for your kids.

“Your children will need you at some point for financial help. They may need student loans or need you to co-sign a loan for their first car. These things are going to be dependent on your ability to obtain credit and this requires a strong credit history. Don’t waste away your financial future and your child’s hopes and dreams because you have sloppy money habits. Make sure that you don’t have more credit than you can handle. Pay your bills on time and act responsibly with money.”

Are you (in)sure?

Bad credit can even affect you and your kids in ways you might not have realized. Like your insurance coverage!

In some states, your credit based insurance score can be used to rate your insurance,” Scott W. Johnson, manager and founder of Marindependent Insurance Services LLC (@marindependent1), told us. “If your parents have a bad score and end up having to pay more for auto or home insurance, it could result in the parents opting for less insurance. This could obviously wreak havoc on a young adult that is still getting their auto insurance from their parents. Lucky for me, my home and auto clients are based in California where this practice is not allowed. There are a few more states where this practice is illegal.”

But don’t give up hope!

We know this can all sound like a huge bummer and you might think a bad credit loan is your only option when you need money. But as we said earlier, take it as an incentive to grow your credit. Get a secured credit card and pay it off in full every month. Catch up on all of your bills, asking friends or family if you need help. Before you know it, you’ll have a shiny new credit score and your children will have a shiny new future!  

Have you talked to your kids about the effect that bad credit can have on their futures? We’d love to hear about it! You can shoot us an email by clicking here or you can find us on Twitter at @OppLoans.

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Contributors
Michael Banks is a seasoned finance professional and founder of FortunateInvestor.com (@FortunateInvest). With 20 years of professional experience in the financial services industry, he uses his expertise to turn simple lessons on money into lifelong habits that form the basis for a successful financial future.
Marc Johnston-Roche, working steadily in the financial services, online marketing and lead generation industry for over eight years, Marc has had literally thousands of conversations concerning annuities with prospective buyers and advisors. Always looking forward to the time when he could develop a company network of retirement professionals based on three equally important but simple principles: respect, integrity, and professionalism. With his understanding of online marketing operations – he branched out with his partner and formed Annuities HQ (@AnnuitiesHQ).
Roslyn Lash (@RosLash) is an Accredited Financial Counselor. She specializes in financial education, adult coaching, and works virtually with adults helping them to navigate through their personal finances i.e. budgeting, debt, and credit repair. She is also the founder of Youth Smart Financial Education Services. Her advice has been featured in national publications such as USA Today, TIME, Huffington Post, NASDAQ, Los Angeles Times, and a host of other media outlets.
Justin Lavelle (@Justin_Lavelle_) is a Scams Prevention Expert and the Chief Communications Officer of BeenVerified.com (@BeenVerified). BeenVerified is a leading source of online background checks and contact information. It helps people discover, understand and use public data in their everyday lives and can provide peace of mind by offering a fast, easy and affordable way to do background checks on potential dates. BeenVerified allows individuals to find more information about people, phone numbers, email addresses and property records.
Scott W. Johnson is the owner of Marindependent Insurance Services LLC (@marindependent1), a hard to place and affluent home Insurance Agency based in Marin County California.  Scott enjoys reading, investing, and the outdoors.  He can often be seen on the trails in Northern California on his mountain bike or skis.

Know Money, Win Money! Episode One: Credit

opploans - know money, win money

We here at the OppLoans Financial Sense Blog want to make sure you have more money in your pockets by any means necessary. Normally that means giving you advice about saving money, but starting today, it also means running around on the street and asking you (or people like you) questions about money, and then giving you money if you get them right.

It’s called Know Money, Win Money, and it’s our hot new game show. The first episode is all about credit, and you can check it out right here:

The first question we asked was pretty simple: What’s the definition of a credit score?

Even though most people have some sense of why their credit score is important, they may not totally realize what it is. Simply put, it’s a measure of your “credit-worthiness,” or how good you are at taking on debt and paying it back. Your credit score determines what kind of interest rate you’ll get on your loans, or if you can qualify for a loan at all.

Our next question asked was what would be considered a “good credit score.”  If you’re wondering, it’s 680 to 719. Anything more than that and you’re golden but anything less than that… well, your interest rates aren’t going to be so hot. Or they’ll be too hot. The point is you’ll have high interest rates.

Finally, Most people are aware of the FICO company that creates the most common type of credit score. But we wondered if people knew what the company’s name actually stands for? For the most part, they did not. And we can’t blame them. Few people do! If you’re wondering, it stands for Fair, Isaac, and Company.

So we got to give away money, and teach people about credit. Hopefully next time we’ll run into you!

What financial topics would you like us to cover in future episodes of Know Money, Win Money? Let us know! You can email us by clicking here or you can find us on Twitter at @OppLoans.

 

Secured Credit Cards: 3 Ways to Use One to Rebuild Bad Credit

secured credit cards
Secured credit cards are available for folks with bad credit, and using one responsibly can help fix your credit score.

There’s a saying in sports that “the greatest ability is availability.” Basically, if you aren’t available to play—usually because you’re either injured or suspended for fighting/using PEDs/refusing to like your coach’s Instagram posts—then you’re not of much use to your team!

The same feeling can hold true for folks who have bad credit and are trying to apply for a loan or credit card. Who cares if this American Master Double Obsidian Super Card gives you 10,000 miles for every dollar spent? If your credit score won’t let you get approved for it, then it’s pretty much useless.


Meanwhile, being able to use credit responsibly is an important part of fixing your credit score. Making payments on time on a loan, credit card, or utility bill will show up on your credit report, which will, in turn, be reflected on your score. In fact, your payment history makes up 35 percent of your total score—more than any other factor!

That’s where secured credit cards come in! They are a much more limited product than your traditional credit card, but you’re much more likely to qualify for one—even with bad credit. The best ability is availability, and secured credit cards are available as all heck.

What is a Secured Credit Card?

A secured credit card is like a combination of a credit card and a debit card. Whereas unsecured credit cards approve you for a credit limit based on your creditworthiness, a secured card has you make a cash deposit to back up that limit. If you deposit $500, you get a $500 credit limit, etc. Many cards simply link to your savings account to use those funds as your deposit.

These cash deposits allow lenders to make these cards available to people with not-so-hot credit. Remember, a low credit score means that you have a history of using credit irresponsibly. By using your deposit as collateral, a lender is able to greatly reduce their risk in approving you. If you fail to make a payment, they can just take the payment out of your deposit.

“When you’re shopping around for a secured card, don’t expect to see lots of rewards or other benefits,” says John Ganotis, founder of CreditCardInsider.com (@CardInsider). “A secured card serves a very specific purpose: to help you build credit.”

“A secured card won’t help you build credit faster than an unsecured card or vice versa, but a secured card may be a good option if you can’t get an unsecured card.”

And if you want to use a secured card to improve your score, there are three things you need to do

1. Make your payments on time

Rod Griffin is the director of public education for Experian (@Experian), one of the three major credit bureaus. These are the companies that create and maintain your credit reports.

According to Griffin, “A secured credit card can help you improve your credit scores by giving you a chance to demonstrate that you can manage credit responsibly. By making all your payments on time, you will be able to start building a positive payment history.”

“In time,” says Griffin, “your lender may be willing to convert your secured card to a traditional credit card account.”

While a secured card can help you build up your credit score, Grifin says that the rate at which your score improves will depend on how much negative information is already on your report:

“Just how much a secured account will impact your credit rating depends in part on your unique credit history. If you are just starting out and this is your first credit account, it will be easier to establish a positive credit history than if you have had credit difficulties in the past.

“If your report shows negative credit history such as delinquencies, collection accounts, or bankruptcy, it could take longer to see substantial improvement in your credit scores.”

2. Keep your credit utilization low

Remember, when you get a credit limit on a card, it’s not an invitation to spend up to that limit. You don’t have to spend that much. In fact, it is highly encouraged that you do the opposite.

According to Ganotis, “The percentage of your credit limit that you’re currently using can have a big impact on your credit scores.”

In order to maximize your score, Ganotis recommends that you maintain a credit utilization no higher than 10 percent:

“For example, that means if you have a $1,000 credit limit and you want to maximize your credit scores, make sure you don’t have a balance of over $100 when your statement period closes. You could achieve that by either not spending more than $100 over the statement period or by paying down part of your balance early.”

People who practice strong financial discipline are able to spend a lot on their credit cards and then pay off the whole balance immediately before any interest is due. They never spend more on their card then they have in their bank account. They just use their card to rack up points and maintain their high credit rating.

Someday, you might be able to be like them. But until then, it’s best to focus on keeping your credit utilization ratio low—if not paying off the card entirely.

3. Make sure your payments are being reported

Your credit score is based on the information in your credit report. Any time you missed a payment, took out a new loan, or got sent to collections, those actions got reported. Similarly, every bill you paid on time and every credit card you paid off got reported as well.

If you have a secured card with a company that doesn’t report to the credit bureaus, then it won’t matter how many on-time payments you make and how low you keep your balance. None of that will end up on your credit report, so none of it will help your credit score.

“If you are considering opening a secured account,” says Griffin, “first make sure it will be reported to at least one of the national credit reporting companies. While most lenders do report secured accounts, you may come across some that do not. If the account is not reported, it won’t help you build a credit history.”

And before you get too clever, it doesn’t really work the other way around. While late payments might not be reported to the bureaus either, an extremely delinquent account will likely end up getting sold to a debt collector… a collector who will then report you to the credit bureaus, hurting your credit score even further.

Secured credit cards can be a great tool for fixing a bad credit score, and they’re a much better option than bad credit loans. But that’s all they really are: a tool. Just like a hammer that can’t work without someone to swing it, a secured card can’t fix your credit all by itself. It’s still up to you to use the card responsibly.

Have you used a secured credit card to improve your credit score? We’d love to hear about it! You can shoot us an email by clicking here or you can find us on Twitter at @OppLoans.


Contributors
John Ganotis (@CardInsider) is the founder of CreditCardInsider.com John comes from a diverse background of software development, web publishing, and personal finance. He knows firsthand what it’s like to accumulate credit card debt, pay it off completely, and then start using credit to his advantage. His passion for technology and attention to detail have made Credit Card Insider one of the premier credit resources on the Internet, and he is eager to help others tackle debt and use credit as a powerful tool rather than fear it.
Rod Griffin(@Experian) is Director of Public Education for Experian. Rod oversees the company’s financial literacy grant program, which awarded more than $850,000 in 2015 to non-profit programs that help people achieve financial success. He works with consumer advocates, financial educators and others to help consumers increase their ability to understand and manage personal finances and protect themselves from fraud and identity theft. He works to help all consumers be better prepared to get the credit they need, at the time they need it, and at rates and terms that are favorable to them.”

 

How One Late Payment Can Affect Your Credit

By Melanie Lockert

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You’re going about your day, going through the mail and then it hits you. “Oh crap! I forgot to pay my credit card bill.”

Missing a payment can happen to the best of us. But it’s not just a minor gaffe, it may actually affect your credit. How much? Well, it depends.

What counts as a late payment? 

Here’s the good news. If you are only a few days late—and you’ve never had a late payment before—you may be able to get out unscathed.

“It all depends on how late it is. A payment that’s less than 30 days late will rarely have an effect on your credit,” says Jason Steele, credit card expert and founder of CardCon (@CardConExpo).

But let’s say you’re out of town or busy with life stuff and end up missing a payment for more than 30 days. What then?

“After 30 days the payment is likely to be reported late and will begin to negatively affect your credit,” says Steele.

Steele notes that it only gets worse if you hit the 60 or 90-day mark. So if your payment is more than 30 days late, it could impact your credit score.

If that’s the case, the next step is to get current on your payments as soon as possible. Even then, it doesn’t mean the damage is wiped away.

“Once you’ve become current on your payments, the late payment will remain on your credit history,” explains Steele.

What will a late payment do to your credit score? 

All late payments are not created equal. Your credit history may be a factor in how much the late payment affects your score.

“The effects of one late credit card payment from a person with a “thin” credit file trying to establish credit may be completely different than a person who’s more credit active with a longer credit history,” says Nancy Bistritz-Balkan, Director of Public Relations & Communications at Equifax (@Equifax), a major credit bureau.

So if you have a strong credit score and a good credit history, one late payment may not do that much damage. However, if you’re just starting out on your credit journey or are trying to repair your credit, the impact may be worse.

Why your payments are so important

You might not think missing a payment here or there is really a big deal. In reality? Your payment history is the largest contributing factor when it comes to your credit score. That’s right. Your payment history equals 35 percent of your credit score .

“Whether you’ve been able to make on-time payments through the course of your credit history is a factor lenders and creditors consider during the selection process,” explains Bistritz-Balkan. “This type of information helps lenders and creditors understand: If they lend you money, extend you credit, or give you goods and services, will you pay them back?”

So your payment history is a pretty big deal when it comes to your credit. If you miss one credit card payment—and 30 days or more pass—your credit score could drop. On top of that, you might be hit with late fees.

Avoid missed payments and protect your credit! 

If you miss a payment, you’re not a bad person. Life happens. There are a lot of things vying for your attention between your job, your family, relationships, etc. It’s hard to keep track of it all.

However, it’s important to stay on top of your payments so you can keep your credit in good shape. To avoid missed payments, you can consider signing up for auto pay, which automatically deducts your payment from your checking account. Of course, you want to make sure you have enough in your account, or you might trade late fees for overdraft fees.

You can typically choose to pay the full balance or only the minimum—if you pay at least the minimum, you can avoid fees or missing a payment (though it’s best to pay in full if you can).

If you don’t want to sign up for autopay, see if your credit card issuer allows you to set reminders.

You can also set reminders in your online calendar and set a deadline a few days before your actual due date.

Bottom line:

If you miss one credit card payment, it may not affect your credit that much if you catch the mistake quickly. However, if you let it go 30 days or longer there could be consequences.

No one wants to pay late fees or deal with a drop in their credit score. To avoid these issues, always pay the minimum and set reminders so you can stay on track with your payments.

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About the Author
Melanie Lockert is the personality behind the award-­winning blog and book, Dear Debt, where she chronicled her journey out of $81,000 in student loan debt. As the co-founder of Lola Retreat, she is passionate about empowering women to rock their money. Currently, she lives in Los Angeles and is dreaming of her next adventure.

Does Your Spouse Have Bad Credit? Here’s How it Can Affect You.

Spouse has Bad Credit

Joint loan applications might be a problem, and joint accounts could be dangerous.


In any good marriage, two people come together and form a single unit, one that is stronger and more capable than either person ever could have been while single—like a two-person Voltron, only with fewer robot lions and more matching towel sets.

But when it comes to credit scores, getting married is a little more complicated. Your hearts may become one, but your credit scores will not. There is no such thing as a “married credit score.”

And if one of you has a significantly worse score than the other? Well, that’s where some of those promises in your wedding vows will really come into play.

First, some credit score basics…

“Most credit today is awarded based on a credit score or “FICO” (which by the way is just a company name “Fair Isaac & Company”) and that number is very powerful in determining your financial future,” says Justin Lavelle, Chief Communications Officer at BeenVerified (@BeenVerified).

“Your credit score will determine if you get a loan, and more importantly how much you will pay for that loan.”

FICO scores range from 300 to 850. The higher the score, the better your credit. Generally, a score above 720 means you have great credit, and a score under 630 means you have bad credit.

Credit scores are based off information in your credit report, and lenders will often check both (score and report) when evaluating your application for a loan or credit card.

According to Katie Ross, Education and Development Manager for American Consumer Credit Counseling (@talkcentsblog), “Your credit score represents your financial reputation in a numeric representation. Therefore, combining finances once you are married can be impacted with a poor credit score of one person in the relationship.”

“Credit scores play a critical role in instances such as applying for larger loans such as for a car or for a mortgage,” says Ross. “Therefore, a higher credit score means you will borrow at potentially low-interest rates, resulting in larger savings in the future.”

One Couple, Two Credit Scores.

Throughout a marriage, folks are going to be faced with any number of large financial decisions, most of which will require getting a loan. And applying for a loan will mean facing the hard truth that one bad credit score between you can drastically hurt your chances of approval.

According to Ross, “Although marriage combines finances between partners, it does not mean your credit scores are merged. Your credit scores can play a major role in finances if and when you apply for loans as a married couple. In a joint application,
creditors
assess the eligibility terms based on the credit score of both parties.”

Lenders are notoriously risk averse, which means that they will generally use the lower of the two scores to determine your creditworthiness.

There’s always the option of leaving your spouse off the application, but Lavelle points out that there are some significant downsides to that as well:

“If one person has terrible credit, they more than likely will need to be left off the credit application, which can mean their income is not considered as well. This can be a real burden if the purchase in consideration is a large one, such as a home or car.”

“If one spouse has a great credit score and the other has a low score, the marriage most likely will be penalized because credit will be awarded based on the lower score,” says Lavelle.

“If you are looking to buy a house, this penalty can be to the tune of thousands of dollars you end up paying in higher interest costs over the life of the loan—and that is if you are even given the loan.”

Joint account pain.

It’s common for married couples to open up joint checking accounts and credit cards. And in many situations, this is a totally safe practice.

But Lavelle warns that opening joint accounts when one spouse has bad credit could end up dragging down both your scores:

“Be wary of having joint accounts if your spouse is bad with money or has poor credit. Once you sign on the “dotted line” and open a joint account, you are responsible for that account and subject to the derogatory remarks on your credit if your spouse fails to keep the account current and pay on time.

“Once you are married, if you do not maintain individual credit, your credit rating could suffer and you may not be able to obtain credit in your individual name. This happens because your credit report will show long gaps of time that you had no credit or accounts in your name.

“If the time comes that you need to open an account, it may be difficult or impossible to do because, in essence, you have adopted your spouse’s credit, good or bad. It will be like starting over for you.”

Lavelle also warns that a spouse’s bad credit may affect your assets—meaning your house, car, and other valuable belongings:

“This usually doesn’t come into play unless there is a real mess and people are suing to collect their money. However, it is important to understand that if you are married to someone that cannot control spending and doesn’t think making payments is important, you may be at risk.

“In this situation, if you do not open a joint account with this person then you will not be individually responsible for his or her debts and your individual credit will not be disturbed by their bad actions, but the problem doesn’t end there.

“In a marriage, if you have joint bank accounts and own property jointly, those assets may be available to creditors of the spouse with a poor history. This is usually only the case after suit and judgment, but with a judgment, a creditor can levy against joint accounts and joint assets.

“It may be best if your spouse is irresponsible with money to just keep everything separate.”

Will your bad credit affect your spouse? 

So far we’ve given you a lot of words about how marrying someone with bad credit can go horribly wrong. (You’re welcome.) But it would be silly to let your love for someone be determined by their credit score

Instead, you and your spouse will just need to take some much needed financial action. And the first step you’ll need to take is—funnily enough—the exact same step you need to take when fixing any issue in a marriage: communicate.

“In order to overcome these credit score issues,” says Ross, “it is important to communicate these among each other. Carefully go through each other’s credit reports to identify any errors and take immediate action to correct them.”

From there, you’ll want to start practicing good money habits. According to Ross, “In addition to identifying errors, the next step you can take as partners is to remind each other to make timely payments. Setting up automatic bill pay, and reminders can help avoid further reductions in your credit score.”

Ross says that “Depending on your financial goals as a married couple, it is important that you take corrective action along the way.

“Coming up with a plan to pay off outstanding credit card debt, avoiding opening any new credit lines or closing too many old accounts or even merely over-utilizing credit can be pitfalls.

“Working together to avoid such pitfalls and practicing good credit habits can help married couples recover their credit scores and reach their financial goals.”

All marriages are going to encounter a rough patch or two (and that’s if you’re lucky). Having a spouse with a bad credit score could certainly be one of them. But smart money management and frank communication can help make it a minor one.

Follow these tips and you can save those big fights for stuff that really matters—like matching towel sets.

Do you or your spouse have bad credit? We want to hear about how you two have managed it! You can shoot us an email by clicking here or find us on Twitter at @OppLoans.

Visit OppLoans on YouTube | Facebook | Twitter | LinkedIN | Google+


Contributors
Justin Lavelle (@BeenVerified) is a Scams Prevention Expert and the Chief Communications Officer of BeenVerified, a leading source of online background checks and contact information. BeenVerified allows individuals to find more information about people, phone numbers, email addresses and property records.
Katie Ross (@talkcentsblog) joined the American Consumer Credit Counseling (ACCC) management team in ’02 and is currently responsible for organizing and implementing high-performance development initiatives designed to increase consumer financial awareness. Ms. Ross’s main focus is to conceptualize the creative strategic programming for ACCC’s client base and national base to ensure a maximum level of educational programs that support and cultivate ACCC’s organization.

Bad Credit Helper: Does Moving Back Home Make Sense.

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There’s a definite stigma against moving back home once you’ve left the house. It’s seen as setback or even total failure if an adult child moves back in with their parents, which is unfortunate, given that whether or not society approves of it, more and more college grads are moving back home.

But what if the alternative is getting behind on your payments? That would leave you with bad credit, and bad credit is not a great place to start your financial journey.

We talked to the experts to find out if a “failure to launch” might just be a chance to refuel. After all, getting more money in the bank and getting ahead of your payments so you aren’t haunted by bad credit for the rest of your life doesn’t sound so bad.

Ignore the haters.

We don’t have to tell you that there’s a stigma attached to moving back home, although we did anyway in the first line of this article. Other people’s opinions about the decision should be the last thing on your mind. The only important question is if it’s the right thing for you.

That’s what we think, and certified financial educator Maggie Germano (@MaggieGermano) agrees: “Sometimes when you fall on hard times financially, the only option is to move home. (Not everyone has this option, so it’s important to keep in mind the privilege of this opportunity.) I definitely think there is no shame in moving home if you need to. It’s a great opportunity to save money in rent and get back on your feet. If your parents don’t charge you any rent, you can end up saving thousands of dollars. You should take advantage of this time to pay off debt, build up savings, and work towards other financial goals. Once you feel more financially stable, it may be time to go back out on your own. There’s no right or wrong amount of time to stay home; whatever works for you and your parents is the right thing.”

Moving back home (if you have the privilege to do so, as Germano clarified) can indeed be a smart financial choice. And we even have the experts with the first-hand experiences to prove it!

Homeward bound.

Phil Risher is the founder of the Young Adult Survival Guide (@yasurvivalguide). He was kind enough to share his personal experience with us:

“I paid off 30k in student loans in 12 months making 48k. After, I saved up and bought my place with cash at the age of 25.

“Without moving back home after college I would not have been able to do these things.

“I always recommend for young adults to live somewhere inexpensive while they are building good financial foundations. If it isn’t at home, it could be a basement or a 1 bedroom, 1 bath apartment.

“I never lived with my Dad until I asked him if I could move home after college. I sweetened the pot by telling him I would cut the grass, clean the gutters, and be an on call baby sitter for my younger siblings. (What a deal!)

“Some steps you can take to get back on your feet are to start budgeting and creating goals. A goal could be when you want to move out again. And a budget is imperative to control your money and reach your goal.”

Kelan Kline of The Savvy Couple (@TheSavvyCouple) wrote about his experience moving back home at Millennial Money Man (@GenYMoneyMan): “We all know moving back home with your parents is not the most glamorous thing in the world. Reverting back to following their rules and having a chore list to complete was not an easy transition.

“The biggest piece of advice I can give you is to remember it is temporary. Most things in life take time and sacrifice to reap the rewards. Be patient. The financial gain you can make while living at home is second to none, trust me!

“I was not only able pay off my student loans ($8,000), but save enough money for a down payment on our first house. My expenses were next to none living at home, and I have always been extremely frugal. You can’t beat free room and board! Almost all my income went straight towards my loans to get debt free as quick as possible. Then I focused on stacking the Benjamins in the bank. My net worth went from -$8,000 to +$12,000, a $20,000 swing!”

But what about the “landlord’s” perspective?

Meet the parent.

So we’ve got the “kids”’ perspectives, but what about a parent’s take on it? Financial coach and fiscally conscious father Brad Kingsley (@maximize_money) gave us the dad’s directive:

“When I’ve tackled this topic in the past it has always been an “it depends” situation.

“The first thing that comes to mind is a recent college graduate coming back home. Sometimes it takes a little longer than expected to land a job that aligns with their education. But working part-time somewhere just to bring in money can hurt them in the job search. In that case moving back in with their parents for a short transition period might be the best short term option.

“The second thing is an older child who wants to come back home. If there has been an unforeseen emergency or life situation outside of anyone’s control, then I’d certainly want to be sympathetic and support that child through the specific challenge.

“In either case there should be a plan though. Having a child move back home should never be an open-ended stay-as-long-as-you-want-for-free type of situation. It can be a bridge from one point to another, but it should not be the destination. And without a plan in place, it can quickly turn into the destination by default.

“I recommend the parents and child agree on timing, responsibilities, expectations, and ‘the plan.’ Yes, the child should share the plan because it impacts the parents and they have a right to know and agree – or disagree and encourage other options.”

In conclusion, moving back home for a while has helped other people and it could help you too. Some people might give you a side-eye, but as long as your parent(s) and or guardian(s) are on board, the side-eyers will be feeling silly when you’re in a better financial situation down the line.

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Contributors
Maggie Germano (@MaggieGermano) is a Certified Financial Education Instructor and financial coach for women. Her mission is to give women the support and tools that they need to take control of their money, break the taboo of discussing debt and income, and achieve their goals and dreams. She does this through one-on-one financial coaching, monthly Money Circle gatherings, her weekly Money Monday newsletter, and speaking engagements. To learn more, or to schedule a free discovery call, visit MaggieGermano.com.
Brad Kingsley (@maximize_money) is a certified financial coach helping people create a plan for their finances to achieve big goals like becoming debt free, paying for college, and preparing for a comfortable retirement. Visit his site at MaximizeYourMoney.com.
Kelan and Brittany Kline aka The Savvy Couple (@TheSavvyCouple) are two thriving millennials that are daring to live differently. They started their personal finance blog September 2016 to help others get money $avvy so they can live a frugal and free lifestyle. Brittany is a full-time 4th-grade teacher and Kelan runs The Savvy Couple full-time and works as a digital marketer. You can follow them here: FacebookTwitterPinterest, and Instagram.
Phil Risher is the founder of YoungAdultSurvivalGuide.com. Phil paid off $30,000 in student loans in 12 months making 48k. After, he saved up and bought his first place with cash at the age of 25. Phil now speaks with college students and young adults around the country about his 5-Step Guide to help them on their financial journey.