In the news: credit score, taxes, retirement savings

claudiaBlog, Current Events0 Comments

Why you could have hundreds of credit scores

The power of your credit score. Lenders use them to decide whether they’ll loan you money and how much interest they’ll charge you. Folks pull your credit when you are looking to buy a car, get insurance or open a new credit card. Some employers even pull your credit!

The scores you receive from three major credit bureaus (Equifax, Experian and TransUnion) are not the same ones that lenders use. Each bureau has a different scoring model and access to slightly different information, so the score from each will vary. The issue is that each lender evaluates different parts of your credit history.

Businesses can request your score from different reporting agencies like FICO or Vantagescore. FICO alone has 19 different kinds of FICO score and can create a customized score that’s tailored to a lender’s needs to evaluate borrowers.

Your score is heavily determined by what’s in your credit history. Free credit reports from annualcreditreport.com help you track your credit attractiveness to lenders.

But you still won’t know exactly what the lenders will review. Best thing you can do is keep paying your bills on time, limit the amount of credit you use and maintain a good mix of credit.

 

Get Your Taxes for Free

You don’t have to pay someone else hundreds every year to get your taxes done.

Below are ways to get your taxes done for free:

  • IRS Free File.  You can get free access to Q&A style tax software if you earn less than $64,000. Can be used to file federal and state returns for free.  Supposedly 70% of all taxpayers qualify for this software but only 3% who are eligible take advantage of this. IRS may need to hire a good marketing intern
  • Free Tax USA. Offers free federal tax returns with no income limit and no limit on complexity. Costs $13 for state returns.
  • Tax ACT free. Free for federal and state returns. It’s limited to 1040EZ and 1040A forms. 40% of all tax returns filled use just these simple forms.
  • Others: Turbotax absolute zero, h&r block more zero, irs vita (filed by an IRS volunteer. Eligible if you make 54,00 or less), AARP tax-aide

BTW, you can use that extra $100+ you saved from using these programs and drop it into your retirement accounts 🙂

 

Retirement Savings in 401k’s are Under Attack

The Fiduciary rule was supposed to be enacted on April 10, 2017. As of this week, the Department of Labor requested a delay of 180 days before it is implemented. That gives time for rule may be repealed or diluted.

The rule requires all financial advisors and brokers to act in “the best interests” of their clients when it comes to retirement accounts.

Currently, under the old standard, advisors simply have to meet a “suitability standard”. In this setup, they could suggest products to their clients into that would pay the advisor a higher commission.

Banks are fighting back. If the banks lose, they would have to give up big commission fees. If the banks win, you end up paying these high fees that over time can greatly erode your investment returns.

The Fiduciary Rule was designed to protect people of are unaware of the high fees they’re paying, or severe conflicts of interest with their advisor.

 

The Paradox of Behavior Change

Your body has feedback loops and is consistently looking for stability. This process causes you to eventually settle into your own equilibrium which becomes your normal, daily routine.

Rapid growth contradicts every stabilizing force in our lives. The faster you try to change, the more likely you are to backslide.

When you try to take massive action, you quickly run into a massive roadblock because the forces in our lives that have established our current equilibrium will work to pull us back whether we are trying to change for better or worse.

To make sustainable change, accumulate small wins and focus on one percent improvements to nudge equilibrium forward. The best way to achieve a new “normal” is not with radical change, but through small wins each day.

If you try to change your life all at once, you will quickly find yourself pulled back into the same patterns as before. But if you merely focus on changing your normal day, you will find your life changes naturally as a side effect.

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