Credit Where Credit Is Due

We really have to give credit to our Fab friends over at Citi’s Women & Co. Just when we were feeling overwhelmed at the thought of tackling our credit rating, they’ve brought us Five Fast Facts about Managing Your Credit Score.  So take five – and take control of your credit score!

1. Your Credit History Has A 7-Year Shelf Life

Your credit report tracks monthly payments, credit limits, and payment patterns over 7 years, but prospective creditors are usually concerned with the last 2-3 years.

2. Joint Accounts Link Your Credit Status To Your Partner’s

Divorce settlements are not indicated on your credit report.  Any account that remains in both names will continue to link you to an ex, so a late payment could show up on both of your reports.

3. Employers And Potential Employers Have Access To Your Credit Report

If you’re applying for a job that pays at least $75,000, the employer has the right to see - and judge – your credit history.

4. The Fair Credit Reporting Act Empowers Consumers To Avoid Unsolicited Credit Offers

You can eliminate unwanted credit offers for 2 years with a simple phone request to the credit bureaus.  A written request takes you off the list permanently.

5. You’re Entitled To A Free Credit Report Every Year

Visit annualcreditreport.com or call the toll free number 877-322-8228 to request your report.  And for more information on your credit history, visit the Federal Trade Commission’s website ftc.gov.

For more info on managing your credit score, be sure to check out this recent article from Women & Co.!

By Brandi Savitt – October 20, 2011

…And Knowing When Not To

In the middle of my first date with Sam, he brought up that he was in an “interesting situation” and wanted my opinion.  His ex-wife (who he was still friends with) had just asked him to co-sign a mortgage for her and her new husband.  Yep, I had never heard that one before…  And although I was a bit surprised that he wanted my opinion when we barely knew each other, I totally dove in, and we ended up having a really good conversation about it.  It crossed my mind that maybe he was trying to get me to think he was a good guy for considering lending them money, and in the end, that’s exactly how I felt.

On date two, he gave me a brief update that he had wisely decided not to co-sign the loan, and we went on to have a really good time.  But then on date number three, Sam revealed that before his ex remarried, he would often lend her money.  She had paid him back for some of the loans but not others, and there was one outstanding loan from three years ago that he really wanted back.  This conversation went on through most of dinner, and by the end of it, I realized there  may be a much bigger issue going on – one that I had no interest in exploring…

When Not to Talk About Personal Finances

While the whole spirit and message of Fab & Fru is to encourage people to talk more about money, there is a time and a place for everything.  Talking about your personal finances to people you don’t know well can be tricky, because our personal finances are just that – personal. And even if you’re comfortable sharing, if you don’t know your audience well, you may give off the wrong impression.

What Are You Really Saying?

Let’s take my situation with Sam.  At first I didn’t mind talking about the potential pitfalls of co-signing a loan for someone or how to ask for your money back from a loved one.  However, after several hours of talking about it just over the course of three dates, I couldn’t help but wonder if any of this was really about money at all.  Sam had unresolved issues with his ex wife.  Was he still in love with her?  Was this his way of staying connected to her or feeling in control?   Was it a power move, or did he need to feel needed?  It doesn’t really matter if any of my thoughts were true.  The result was, I started to question his intentions, and unfortunately, I started to analyze and judge.

How to Talk About Money

Now, I’m not saying that you MUST refrain from talking about all personal financial situations until you know someone super well, but learning how to talk about money is a skill worth exploring. Choose your topic carefully and don’t get too personal unless the conversation naturally takes you there.   And you don’t have to flat out ask someone how much they make to be offensive.  Someone who talks too much about their own fortune – or misfortune – can come off equally obnoxious.  Always respect others privacy and respect yourself.  Don’t turn someone off before they get to know the real you!

By Brandi Savitt – October 6, 2011

Planting the Seed to Spend

Yesterday, I saw an email lurking in my inbox with the subject line, “A million dollars could be yours.”  The sender: the Chase Freedom credit card.

And while we all get countless promotions from credit card companies and banks, this one was dangling a bigger carrot than most: a granddaddy million dollar sweepstakes prize (!) plus a slew of smaller prizes, all from one of the biggest banks in the world.  My first thought honestly was – what will they think of next to get people to spend money and rack up debt?  Despite my reservations, I had to see what it was all about.  So, I took the bait and clicked on the link…

Selling Your Soul?

I never got far enough to know if I had to actually apply for the card to enter to win (I’m assuming so).  Promotions today are much less straightforward than that…  To learn more, I had to ‘Like’ the sweepstakes on Facebook, and then I had to give them full access to all my personal Facebook information and friends list.  I couldn’t do it.  Not only do I absolutely not need another credit card, the one in a million chance to win just didn’t seem worth selling out my privacy.

The Power of Marketing

When I first began my inquiry, my fascination was all about how the power of marketing is such a force that it can knock all reason out of even the most logical of heads.  For example: Would you risk going into debt to earn an extra 10,000 points on your card?  But on the flip side, it’s a competitive world out there, so why shouldn’t credit card companies entice you by offering 25,000 free miles, double the points for every dollar spent, or the chance to win $1 million?   Couldn’t it be a win-win if the credit card company matched the consumer up with a card that was tailored to fit their needs?

Don’t Pass the Blame

The truth is, we can’t blame the banks and the credit card companies for marketing the hell out of their products.  We can’t blame them for wanting to make money – and make money off of us.  That’s what they’re in business for, after all.  Therefore, the problem isn’t them – it’s us!

Many of us have no idea how our own credit card habits are affecting our overall credit score.  To add insult to injury, most of us sign up for a new card to get a  bonus offer or discount upfront, without planning on ever using the card again, or worse, not reading the fine print to understand the risks and the benefits the card has to offer.

By Brandi Savitt – September 22, 2011

Do Others Trust You When It Comes to Cash?

Two weeks ago, a friend of mine was recovering in the hospital after surgery when he asked me if I could help him find a signed first edition of Steve Martin’s 1979 book “Cruel Shoes.”  No problem.  And within a few minutes, I located a copy in great condition on eBay – believe it or not, this was my very first eBay purchase ever.  I paid for the book via my credit card on PayPal, just three clicks and I was done. How could anything go wrong?

Out of Sight, Out of Mind

Thinking the book would arrive at my friend’s house within 4-10 days,  I left for a conference in Toronto the next day and never thought twice about my “Cruel Shoes” purchase – until yesterday…

When I got settled back in the office,  I checked my eBay account to check the status of the delivery.  And there they were…  A slew of messages that started sweet and appreciative and then escalated to — “Why haven’t you paid me?  I’m stopping this sale!”  Then, eBay sent me a message officially ending the sale and attaching an UNPAID red flag to my account- SAY WHAT!??  How could this be?  Not only did I think I already paid,  I was horrified someone thought that I was trying to stiff them.  Not to mention, I still really wanted the book!

Saving Face!

I then embarked on my own stalker-like rampage to clear my eBay name.  I emailed the seller twice.  I called eBay and PayPal trying to figure out what I did wrong.  And then finally, the seller wrote me back this morning, and it seems we will be able to resolve the issue without a hitch.  Phew!

How Do Others Think of You & Money?

This whole escapade got me thinking.  Unless we go to apply for a loan, mortgage, or other endeavor where our credit report is scrutinized, most of us don’t ever pay attention to our money reputation, or ever wonder if others find our ‘money word’ credible.

Have you ever borrowed $20 from a friend and forgotten to pay it back (or worse– pretended to forget)?  Or do you always pay people back immediately, no matter what?  Have you borrowed clothing and returned it dirty, or do you always return it clean?  Have you ever said you were going to take care of something financially, but then let someone else take over? Do you pay your rent late, or do you always pay your bills on time?  Some say that if we can’t respect other people’s money, how can we ever truly value and respect our own?  And they might be right…

Actions Speak Louder than Words

Now don’t get me wrong, no one is perfect.  We all make mistakes or are late making a payment here and there.  We all have to deal with financial challenges where our reputation is at stake at some point or another.  But remember, it is not what you say that matters when it comes to fixing a mistake.  Words don’t hold weight if there is no action behind them.   It’s what you DO to resolve a problem that counts in the end.   How we handle sticky situations when it comes to money defines how others ultimately decide whether we are trustworthy.  For example:  You might think I overreacted when it came to the whole eBay debacle, but if I just let the whole thing go, it’s possible that this seller would never accept another bid from me, and Ebay would warn all other sellers that my bids may not be credible.  That’s not okay with me!

Let Your Perception Change Your Financial Future

While we can’t control (and nor should we) how EVERYONE thinks of us, reputation does matter.   If you want a solid MONEY reputation, put your money where your mouth is, and always do what you say you are going to do - when you say you’re going to do it.  And if something changes – say something!  People are likely to work with you if you’re upfront and honest.

You’d be surprised, but by truly respecting and valuing other people’s money (including friends, family, merchants & companies), not only will you automatically earn a good money reputation, you will begin to value your own finances more — which is KEY to growing a strong financial future!

By Stephanie Berenbaum – August 8, 2011

What this Downgrade Means for You & Me

As you’ve probably heard, the good old U.S. of A did not have a very fruitful financial weekend.  Imagine that the U.S. is a friend of yours who had a really crappy week at work.  She finally makes it to happy hour on Friday, only to get dumped by her boyfriend on Saturday.  Well, THAT’S the kind of week our economy just had…

What the Heck Happened?

So, what happened?  The U.S. had it’s credit rating downgraded by one of the major credit rating agencies - Standard and Poors, or S&P. It’s like how we as individuals get credit scores from several different agencies. Well, so does the US government and all other sovereign nations.   S&P’s system is just in letter grades, rather than numbers.

Why Isn’t AA+ Good Enough?

The U.S. was downgraded one notch – from AAA to AA+.  As far as credit ratings are concerned, a AA+ is still a very good score, and on the bright side, the other major ratings agencies – Moody’s & Fitch – have yet to downgrade their AAA ratings.  –Just like how you might get three different scores from Experian, TransUnion and Equifax — same deal with the government.

So, you might think, who cares?   At first glance it may seem like that annoying perfectionist friend of yours in high school who would become hysterical if she got an A- rather than an A +, even though she’s still getting A+s from her other teachers.  The difference is- that since its first credit rating given in 1917,  the U.S. has never had less than the highest rating – thus the shock being sent through financial markets…

Is the Panic Necessary?

When you are the country whose every move defines the global economy, even a slight ratings demotion creates huge negative ripple effects.  Aside from the practical considerations, the psychological ones also come into play - it’s a MAJOR blow to our nation’s ego.  This downgrade signifies a loss – however small – in confidence in the U.S.’s ability to pay its debts and control its finances – much like when an individual’s credit score is downgraded.  

What Does It Mean for You & Me?

Whether you are an individual or a nation, when your credit score goes down, the cost of borrowing money goes up.  And if the government has to pay more to borrow more money, then chances are so will we…OUCH!  This is because many consumer loans, like credit cards, mortgages, car and college loans, are influenced by the rate the government pays on its bonds (ie. the interest rate the government pays to borrow money).

As you probably know, some interest rates you receive are fixed, but some are adjustable. If you have loans with adjustable rates, then you should be keeping an even closer eye on this developing story.  For example, someone who has locked in a low 30-year fixed mortgage rate will be sleeping easier tonight that someone with an adjustable rate mortgage.  This is exactly why having an adjustable rate on something is riskier than a fixed rate!

Credit Where Credit Is Due

As I was solidifying my family’s plan for this Fourth of July weekend, my mind gradually wandered from what to bring to my friend’s BBQ, to where to park for the fireworks, to headier thoughts like life, liberty and the pursuit of happiness.  I’m serious! After all, Independence Day is about celebrating our freedom, right?  I suppose that also includes our right to indulge in all of the half off sales at the mall, but does having the right to do something always mean it’s the right choice?

Then I really got thinking!  What does financial freedom and independence really mean?  After all, wasn’t it all those pesky taxation acts imposed by the King that led up to the American Revolution?  It struck me that while our Founding Fathers & Mothers were ready to go to battle and form a new nation to protect their personal financial liberty, I think that today, we’ve actually become prisoners – not of a monarchy’s financial abuses, but of our own – in particular: credit card debt.

Most of you reading this may be too young to realize that the credit card, as you know it, is a VERY recent invention.  Yes, that piece (or multiple pieces) of plastic you rely on to live in the style to which you have become accustomed didn’t even exist just 50 years ago!

There have been many times when Fab & Fru has challenged you to live for a week without your credit card.  Such suggestion has  provoked some readers to respond as if we had asked you to go without water for a week!  But up until very recently in the history of our country, no one had credit cards at all… So what did people do before plastic?

The History of Credit Cards

I remember when I was little, my parents had a ‘Master Charge’ – it was a charge card – NOT a revolving credit card – which meant you paid it off in full at month’s end.  How did the idea even start?

I did a little digging into the history of the credit card and came across the charming story of the father of modern day credit cards – a businessman named Frank McNamara. Frank was out at a business dinner in 1949 when he realized he had left his wallet in his other suit. He had to call his wife who ran over with it so he had the cash (yes – cash) to pay for dinner.  That night he devised a little idea so he would never be embarrassed like that again – and the Diner’s Club card was born!  Diner’s Club was developed for convenience sake – not so you could go out and charge a really expensive meal you could not otherwise afford! Sadly, we’ve gone way beyond Frank’s original intention today ….

How Did People Live Before Credit Cards?

So, what did people do before Frank’s invention? They mainly used cash, personal checks – and the layaway system, which is making a small comeback.  Today’s consumers can’t even imagine a world without credit cards.  How could you SHOP online? But as modern conveniences became more accessible and people’s lives became more transient, people began to travel far from home more often – to places where their faces might not be recognized to take a personal check.  Because of this, the charge card gained even more popularity.  Not only was it a convenient option, the it gave both vendors and consumers peace of mind!

Back in the day, luxury items were only affordable to, well, those who could actually afford it!  Talk to your parents or grandparents and they will tell you that air travel, big vacations and luxury cars were only for the rich – there is a reason luxuries are called luxuries!  If you wanted to take a trip or make a big purchase, you HAD TO SAVE UP FOR IT!  But with the advent of the credit card, suddenly everyone could ‘afford’ these items, and they became mass market goods…at least on the surface.

Lurking under the surface of everyone you see driving an expensive car they can’t really afford, or wearing clothes that cost more than a month’s rent, is a nasty habit of credit card debt.  According to creditcards.com, of Americans who have credit card debt, the AVERAGE debt per household is a whopping $15,519!  That’s 15 grand of stuff you couldn’t afford!  Of course today instead of socking away savings for a rainy day or saving up for that big ticket item, we just charge it – and therefore have become prisoners to our own ignorance and greed.

Ben Franklin, the superstar of Founding Fathers, once said “It is easier to prevent bad habits than to break them.  And Rather go to bed with out dinner than to rise in debt”.  So, this Independence Day,  take a moment to think about your own financial independence, and what you can do to improve the state of your money matters.  By the time the next Fourth of July rolls around, you might have your own personal financial freedom to celebrate!

by Stephanie Berenbaum – June 10, 2011

Why Making Less Costs You More

Our friend Alex – who is just starting out in her career and is currently waiting tables to supplement her income – recently sent us a humorous yet poignant article from cracked.com about how expensive it is to be poor.  That’s right – as if struggling to make ends meet wasn’t tough enough, to add insult to injury it turns out that being poor is quite a pricey proposition.  So, whether you’re a member of the working poor who is working hard to get your feet on the ground, or you know someone who is (and we all do), take a minute to consider the unfair reality of those barely getting financially by…

It Costs $ to Keep Your Cash in the Bank

When you have a lot of money in your bank accounts, guess what – they waive fees!  And when you don’t — the opposite is true — so the less money you have, the more likely you are to be hit with fees whether they are maintenance fees, overdraft fees, etc.

So, if you miscalculate your account balance or when a deposit will clear, you are charged around $35 for every overdraft you make- even if your balance is up by the end of the day.  Clearly this rule does not just exist for the the poor, but people struggling to pay their bills certainly can’t afford to make a $35 mistake!

It Costs $ to Cash Your Paycheck

Many of those living below the poverty level actually do not have a checking account at all.  That’s where all those Payday Check Cashing stores you see come in to play.  They are of course not there to provide a public service, and charge fees upwards of $8 a check just to give you YOUR own money.  Now, if you work by the hour in the service industry, $8 bucks could equal your entire hourly wage!

Credit Card Chaos

We all know life is easier with a credit card, but let’s say you can’t get a traditional one…then what?  Often times high risk customers are offered a “secured” credit card – meaning that you have to deposit money (usually equal to the credit line) to start using a credit card.  Therefore, the bank is holding on to your money in exchange for you having the convenience of a credit card.

Higher Interest Rates

And of course whether you are talking about credit cards or any other loans, interest rates to borrow money are always much much higher for the financially challenged!

Bad Credit vs No Credit at All

Maybe you thought it was smart to avoid the temptation of a credit card all together, or maybe you thought it was easier if your roommate had all of the bills in her name because you were out of work?  Well,  having no credit at all can be equally (if not more) damaging to your financial future.  If you show zero credit history, it is extremely difficult to even apply to rent an apartment, get any kind of loan, or even get approved for cable TV.

by Brandi Savitt – April 7, 2011

Making Smart Money Decisions

Debt: You might fear it, yet you probably have it.  But the real question is – do you understand it?!

Spending more money than you have is always a risky business, and getting in over your head is NEVER Fab & Fru.  However, not all debt is ‘bad’ debt!  Sometimes a loan can actually be a wealth building tool.  The key – DO YOUR HOMEWORK!

Plain Old Debt

We all know that the definition of debt is when you owe somebody something – in this case money! Well, who in the heck wants to get themselves into a situation like that, right?  It sounds like an awful lot of responsibility. And it is.  So, how could having debt ever be a good thing?

What is Good Debt?

Taking out a loan to invest in your future can equal good debt. Good debt includes anything you need, but can’t afford to pay for up front without completely wiping out cash reserves or liquidating other investments. Whether you apply for a mortgage to buy a home, or take out student loans to go to college, these investments are meant to MAKE you money in the long run.  However, before borrowing money, even if it seems like the best idea in the world, you MUST weigh the pros and cons of the investment at hand – and only take out a loan when you know you can afford the monthly payments!

What is Bad Debt?

Let’s face it, unless you’re looking to buy a home, increase the value of your home, invest in your education or a growing business, most other debt is NOT good.  Bad debt means charging or taking a loan for purchases that you DO NOT NEED and CAN NOT AFFORD!

The second you walk out of the store with the latest Marc Jacob dress, that dress has decreased in value.  So, unless you can afford to pay your credit card off in FULL at the end of the month, buying that outfit was not the wisest choice.  Credit card debt is the ABSOLUTE WORST kind of debt out there because it typically carries the highest interest rates going, and people quickly find themselves making only the minimum payments… sound familiar?  You’re not alone!

Let Your Money Work For You

Sometimes the decision to borrow money isn’t always about not having the cash on hand to pay for something.  You must also recognize how to let your money work for you -meaning -  you ALWAYS want to make sure that your savings is in the most profitable place.  If interest rates are low, compare what you’ll spend in interest on a loan versus what your cash could earn if you invested it. If you can earn a higher return from investing that money than what you will end up paying in interest during the life of the loan, borrowing a small amount at a low rate may make sense – because you will actually be making the cash to pay off the interest – plus some!

* Parents- this is often the case when you are considering taking out a loan to pay for your kid’s higher education.  NEVER pull money from a retirement account or other high earning savings account to pay for college. Paying for the typical low interest rates of student loans will most likely still be far less than what your invested money is earning! So by having your kids take out low interest loans to pay for school, you may actually be able to help them more!

by Stephanie Berenbaum – March 31, 2011

Should You Get It & Why

So, you’re a single woman without kids — think you have no need for life insurance? You may want to think again!

Dependents Don’t Just Mean Your Kids

We’ve all seen those commercials which focus on the ‘man of the family’ taking out a life insurance policy to protect his dependents financially in case of his death. But, it got us thinking, what about single women without traditional dependents – just because you don’t have children doesn’t mean you don’t have financial responsibilities …or a lot of people depending on you!

I started looking around, and it turns out some of the major life insurance players (AXA, New York Life and others) have started marketing to single women without children. So, I wondered, what was this all about — and was it really necessary?  Before I was married with kids the thought of getting life insurance had never dawned on me.

The Last Thing You Want to Think About, But…

I know this is the last thing any of us wants to think about, but it’s usually the things we want to avoid that are the most important to take care of.  Let’s just take a quick peek at this enormous topic, and then we can all move about our day and on to more cheerful matters!

Ok, say that sky-diving trip you planned doesn’t work out so well…  It’s not like all your debts are forgiven and any money and assets you have goes straight to your family – though many people think this is the case!  Apparently, before any beneficiaries get paid, your creditors have a right to your assets to pay off your debts.  Think of it this way – if you were gone tomorrow and all your creditors got paid in full out of your assets, would there be anything left over for the people you want to help take care of?

What & Who Are Your Responsibility?

Which brings us back to you.  You might not have children, but like many women today you may be in the position of taking care of aging parents – or significantly helping out with nieces or nephews. You may be leaving all you have to your parents or nieces and nephews in your will, but your debts will be taken out of your estate first – potentially turning EVERYTHING into NOTHING.  Not to get extra morbid, but your dependents will also be responsible for paying for your funeral…

Benefits & Creditors

We spoke with lawyer Tom Hession to see just how a life insurance policy differ from other assets, as far as creditors going after them to satisfy post-mortem debts.  Aside from being depressing and morbid to think about ‘death benefits’ it is actually this topic that sets apart life insurance money from the rest of your ‘estate’ so listen up!

According to Tom, once a person has died, a life insurance policy left to a specific beneficiary cannot be garnished by creditors.  In a nutshell – creditors can go after the rest of your assets, but you can still be assured that your parents, niece, or whomever you left as the beneficiary of your life insurance policy will be taken care of.  Now things were starting to become clearer to us! And just in the nick of time, because frankly if I write the words “death benefit” one more time, I am going to have to get a cocktail (mind you it’s only 1pm here in L.A.)

Reality Bites, but the Best Deal Makes It Better

One bright side to this downer of a conversation? It is more affordable to buy life insurance when you are young and healthy – so at least there is a Fab & Fru silver lining to looking into all this icky-ness now.  A life insurance policy may or may not be appropriate for you, but we do think it is something many women – single women in particular – don’t pay enough attention to.  So at least consider it, do the research and then go check out a website of puppies playing or something along those lines to take your mind off all this!