Monthly Archives: September 2016

Should You Learn From the Government Fining of Equifax, TransUnion

Sometimes, there’s a personal finance lesson to be gleaned from the decisions made in Washington, D.C.

Here’s one example: The Consumer Financial Protection Bureau fining two credit-reporting bureaus, Equifax and TransUnion, in January. If these names sound familiar, it’s because they’re two of the three bureaus – along with Experian – from which you can request your free yearly credit report at annualcreditreport.com.

The CFPB, which charged the companies more than $23 million in restitutions and fines, penalized the credit-reporting bureaus for several missteps: First, for overstating the usefulness of the scores they sold, and second, for luring customers into pricey monthly subscription services. The CFPB also dinged Equifax for requiring customers to view advertisements before seeing their free credit reports, a violation of the Fair Credit Reporting Act.

Confusion surrounding credit can lead people to lower their scores by mistake.

“Credit scores are central to a consumer’s financial life and people deserve honest and accurate information about them,” said CFPB Director Richard Cordray, in a prepared statement when the penalties were announced.

But while the action against the bureaus may seem far removed from your own financial life, there are lessons that savvy consumers can take away from it. Here are your rights – and some red flags to be alert for – when checking your credit score.

You don’t always know what score a lender is using. Part of the action against Equifax and TransUnion revolves around the fact that both companies led customers to believe that they were accessing the same credit scores that lenders like, say, credit card issuers, use to make credit decisions.

That’s misleading, experts say. “Unless you are turned down for credit [when a lender must disclose your score], the score you see from any other source is not necessarily the score the lender is using,” says Gerri Detweiler, head of market education for Nav, a credit service for business owners, based in San Mateo, California.

Yes, a solid credit score is a crucial component to being approved for credit. But the truth is that lenders use scores from a variety of sources, sometimes integrating their own proprietary formulas. So, the likelihood that you are going to buy the exact same score variation that any given lender will use is remote, says credit expert John Ulzheimer, who formerly worked with FICO and Equifax.

But, Ulzheimer notes, the scores sold by Equifax and TransUnion weren’t without value. TransUnion’s VantageScore is commercially available to lenders and may be used by some to determine creditworthiness, he says. And having a high credit score through TransUnion or Equifax still points to the likelihood that you have a high credit score elsewhere.
If you have to input your credit card information, the service probably isn’t free. The CFPB also based its action against the two credit bureaus on the fact that consumers thought they were signing up for free or $1 credit scores. In actuality, consumers were signing on to a limited-time trial after which they were automatically enrolled in a subscription program and charged $16 or more each month.

A major takeaway from this applies to virtually any consumer service. “If you’re going to be entering a credit card number, then there’s probably going to be a cost to it eventually,” Detweiler says.

Sometimes, these paid credit services are useful, Detweiler says. For example, consumers may want to sign up for paid identify-theft protection or credit-monitoring services. But don’t get sucked into signing up for a credit subscription you don’t need, want or use.

“In the world of online credit-related services and products, there are two definitions of the word ‘free,'” Ulzheimer says. “There is Webster’s definition, and there is a definition that includes things like ‘conditionally free.'” Having to input credit card data hints at the fact that the service is only free up to a point, Ulzheimer adds.
There are plenty of free ways to get your credit score. When it comes down to it, you shouldn’t be paying for a credit score these days anyway, credit experts say. “I can’t believe consumers are still buying credit scores,” Ulzheimer explains. “There are so many ways to get free credit scores. I can’t believe people are shelling out money at all.”

Sites, such as Credit Karma, Credit.com and Credit Sesame, may hand out free scores (in exchange for registering with your personal information). Your credit card issuer may also include a credit score with your regular statement.

The fact remains: You shouldn’t need to pay for your credit report, a document outlining your outstanding debts and payment history. You’re still owed a free credit report once per year from Equifax, Experian and TransUnion.

More Information About How the Big Game Hits Your Wallets

To say that football fans are invested in the Super Bowl is an understatement. We spend dozens of hours and hundreds of dollars supporting our favorite teams from voluntary off-season workouts through the 16-week season and, hopefully, deep into the playoffs. And if our squad is fortunate enough to reach the big game, many of us are willing to drop everything – from responsibilities to a lot of cash – in order to savor the moment.

And while you might expect curbed enthusiasm this year, as the Super Bowl follows up its golden-anniversary game with a matchup featuring the New England Patriots for the seventh time in 15 years, ticket prices and advertising dollars say otherwise. Plus, you don’t need to be a fan of the Patriots or the opposing Atlanta Falcons to have a vested interest in this spectacle of American culture.

Read on for a glimpse at how the Super Bowl impacts our wallets in all sorts of ways.
1. $4,300 per ticket: Less than a week before kickoff, the average Super Bowl LI ticket is selling for $4,284, according to StubHub, with remaining tickets ranging from $1,500 to $15,432. To put those figures in perspective, the average ticket to this year’s Super Bowl costs about as much as three months of mortgage payments for the average homebuyer these days, who has a roughly $300,000 loan and a 4.19 percent APR , according to data from Freddie Mac and the Mortgage Bankers Association. And the most expensive ticket would cover more than 10 months of mortgage payments.

Super Bowl tickets aren’t just pricey relative to home loans, either. Tickets to the previous four Super Bowls averaged $3,334, which is well above the $2,837 record for a World Series game, set just a few months ago for the historic Game 7 matchup between the Chicago Cubs and Cleveland Indians, according to TicketIQ.

2. $2,000 or more on travel: A last-minute trip to Houston for the Super Bowl could cost you dearly, depending on where you’re coming from. For example, the cheapest flight on Kayak.com from New York to Houston, leaving on Feb. 3 and returning Monday, costs more than $1,000 per person. And the cheapest option out of Los Angeles is more than $670.

The travel expenses certainly don’t stop there, either. The average out-of-town visitor to this year’s Super Bowl is expected to spend about $1,360, based on the Houston Super Bowl Host Committee’s projection of 140,000 out-of-towners and PWC’s forecast of $190 million in direct spending.

As a result, each Super Bowl attendee can expect to shell out at least $2,000 on travel-related expenses.

3. $424 million in chicken wings: Roughly 112 million people in the U.S. tuned into Super Bowl 50 last year, according to Nielsen. But we weren’t just watching. We also did our fair share of eating, too, scarfing down 1.3 billion chicken wings, according to the National Chicken Council. That’s works out to more than 162 million pounds of chicken, 11 wings per viewer and $424.4 million spent overall.

4. $60 million in booze: Americans spend about $60 million more than normal on beer, wine and spirits the week leading up to the Super Bowl, according to Nielsen and The New York Times. That’s an extra $0.53 per viewer, including those who are underage as well as nondrinkers.

5. $400 million in gambling losses: A record $132.54 million was wagered on Super Bowl 50 at Nevada sportsbooks, according to Nevada Gaming Control Board, which also found that the house profited to the tune of $13.31 million. That obviously represents just a drop in the bucket of total Super Bowl betting, as illegal wagers pushed the amount risked above $4 billion, according to the American Gaming Association.

But the official numbers do show how much gamblers of all kinds stand to lose on Super Sunday: about 10 percent.
6. $312 million in lost wages: Around 1.5 million people call in sick to work the Monday after the Super Bowl. That amounts to $208 for the average private-industry worker without paid sick leave, according to data from the Bureau of Labor Statistics, and $312 million overall.

Finally, while football fans are in orbit as the Super Bowl returns to Space City for the third time, the stock market might not continue soaring for much longer if the Patriots win. The Super Bowl stock market indicator, which has been right 82 percent of the time, says the market will fall with an AFC win and rise if the NFC comes out on top. So if you’re invested in more than football, you might want to pull for the Falcons.

Should Know About 25 Ways to Improve Your Finances

A new year often inspires new habits, including financial ones. If you want to put yourself on a path to build wealth throughout the year, then consider these 25 steps, all of which are designed to help you rein in spending and work toward greater financial security. They include both offensive moves, like saving more, as well as defensive ones, like protecting yourself from identity thieves.

1. Set your goals early and share them.

Sharing financial goals with friends – and even strangers through social media – can help you articulate just what those goals are and also hold you accountable. Indeed, research on goal-setting suggests that making public statements about goals helps people commit to them, whether they be money or health related. As 2016 kicks off, consider sharing your goals on Facebook, Twitter or a social goal-setting site like Linkagoal.

If you’re stuck, flipping through images can help inspire and focus goal-setting, says Ellen Rogin, a financial services professional and co-author of “Picture Your Prosperity: Smart Money Moves to Turn Your Vision into Reality.” She encourages people to flip through motivational images such as beaches and sailboats when planning their retirement. This exercise is especially useful for partners to make sure they’re on the same page.

2. Guard against identity theft.

Identity thieves can steal not just your money but also your identity, which allows them to create new, fraudulent accounts in your name. The cost can add up to tens of thousands of dollars as well as hours of your time trying to rectify the situation.

One of the most common online identity theft methods is for an attacker to send an email with a hyperlink that leads victims to an official-looking site that requests personal information. People can be fooled into sharing their names, addresses, credit card numbers and even Social Security numbers this way. To keep yourself safe, avoid clicking on unfamiliar URLs sent to you via email, even if at first glance they appear to be from your bank or a retailer.

3. Get more out of your workplace benefits.

If you’re lucky enough to have a job with benefits, then it pays to make sure you’re getting as much out of them as possible. Aside from salary, take a close look at available retirement accounts (making sure to pick up any matching benefits), flexible spending accounts, financial literacy programs and wellness support, which can include free counseling. Health insurance and disability insurance can also help protect your finances in the long term.

4. Use tools to help you save more.

Apps can make it easier to protect bank accounts from fraud and save more money, and it can pay to use them. Some of the best​ entrants in the field include BillGuard, an app that flags potential fraudulent charges or errors, and Key Ring, which collects your loyalty cards digitally, so you can snag savings even if you leave your cards at home.

Other useful financial tools include PriceGrabber and RedLaser, which help you quickly compare prices when shopping online or in stores, and PriceBlink, a browser add-on that lets you know if there is a lower price elsewhere online. Mint offers a free budgeting tool to help you track your spending, and You Need a Budget is another good option.

5. Become more financially literate.

Financial literacy is a key factor​ when it comes to adults building wealth over time, according to research at the University of Massachusetts. If people understand basic concepts when it comes to saving, investing and compound interest, then they are more likely to sit on a significant nest egg as they get older. That’s why making an effort to educate yourself, whether through workplace education programs or ​online tutorials, can pay off.

6. Get on the same financial page as your partner.

Coordinating your spending and saving habits with your partner can not only lead to a smoother relationship, it can also mean more money in your joint bank accounts. The blogging couple Derek and Carrie Olsen​ of derekandcarrie.com suggest holding a monthly get-together to review finances and to share one bank account, which can ease coordination. They also advocate developing a five-year plan, which can help guide daily choices.

7. Simplify your digital life.​​

If you’re often tempted by emails promising amazing deals and killer savings, then you might want to consider unsubscribing from the dozens of retailer email lists you may have unknowingly signed up for. The tool Unroll.Me makes it easy; with a few clicks you can either unsubscribe or opt for a daily “Rollup” email that you can peruse at your leisure, instead of constantly getting pinged by unimportant emails all day long.

8. Prepare your money to age well.​

As you get older and prepare to retire, it’s important to make sure your money will last. That means ensuring your investments are in a portfolio that’s aggressive enough to outpace inflation and reviewing your budget for any big leaks. You can also ask your bank what services they have in place to protect older adults from fraud

9. Learn from millennial spending habits.​

Millennials might still be at the relative beginning of their financial journeys, but they have some useful habits to teach the rest of us. Young consumers who experienced the Great Recession as they were coming of age tend to be savvy shoppers, maximizing coupons and savings. They also cut costs by taking on DIY projects and prioritizing expenses that are most important to them, like travel.

10. Spend less on food.​

Food might be one constant in our budgets, but there are still ways to trim those costs. Buying in bulk, cooking at home as much as possible and​ cooking meals that can be stored in the freezer for later are among the smart strategies. By planning meals and keeping perishable items visible at the front of your fridge, you can also help minimize waste.

11. Pay off expensive debt.​

If you’re still carrying around expensive debt in the form of credit card debt or other loans, then it’s time to make a plan to pay it off. In “The Debt Escape Plan,” author Beverly Harzog suggests doing just that by setting specific targets for yourself (for example, pay off one credit card by April) and getting the support you need in the form of a credit counselor if necessary. You might also want to look for ways to scale back spending while simultaneously earning more money, which can then be put toward the debt.

12. Know how to start over if you need to. ​

If you’ve had a rough 2015 and 2016 is about rebuilding, then you might want to focus on prioritizing savings and re-establishing your credit, especially if it has been destroyed by previous troubles, like filing for bankruptcy. Financial experts suggest going slow, making on-time monthly payments, to eventually reach a higher credit score.

13. Use social media to improve your finances.​

Facebook and Twitter aren’t all fun and games; social media tools can also help you manage your finances. Tweeting to a retailer about a customer service concern is one of the fastest ways to get a response (or even a refund), and fleshing out your LinkedIn profile can help you land new clients or a new job. You can also check your Facebook “about” section to make sure you’re not revealing details relevant to banking security questions that could make it easier for someone to hack into your account.

14. Improve your credit score.​

Giving your credit score a boost can help you land a better interest rate on your mortgage or a new car loan. To improve it, you can start by paying off debt, requesting a credit line increase and always making on-time payments. Late payments and a high debt-to-credit line ratio can hurt your score.

15. Spend less on clothes.​

Clothing can be a giant money suck, but there are ways to limit spending without sacrificing your style. Buying slightly off-season gear, swapping gently used clothes with friends and using rental sites like Rent the Runway for formal events can all help reduce costs.

16. Max out your retirement savings.​

If you didn’t meet your retirement savings goals in 2015, then you’ll want to be sure to do so in 2016. If you have access to a 401(k) through work, then you can set it up to automatically deduct a certain percentage from your paycheck. Otherwise, you can check on your eligibility for an IRA account.

17. Prepare your finances for natural (and man-made) disasters.​

A bad storm or power outage can leave your financial life in disarray. To prepare for any kind of unexpected disaster, you can come up with a plan for alternate housing, prepare an emergency kit and keep nonperishable food on hand. If you don’t have access to heat or running water, you’ll want to make sure you can still keep your family fed.

18. Manage household finances better.​

Money can get more complicated as your family grows. Using an app like HomeBudget can make it easier to share expenditure information with your spouse. HelloWallet’s emergency savings calculator is also useful to see if you have enough savings on hand to get you through a difficult period.

19. Plug money leaks.​

Paying more than you need to for transportation, especially if you frequently use Uber or taxis, splurging on name-brand products and going out to dinner are among the common money leaks cited by financial advisors. To plug those holes in your budget, take a close look at what you spent money on over the last month by scrutinizing receipts or your credit card statement, and pick some areas to cut back on.

20. Check up on your insurance policies.​

Life insurance is not particularly fun to take out, but it is an essential part of safeguarding your (and your family’s) financial security, especially if you are the primary breadwinner. Reviewing your policies once a year to make sure they are in good standing and you have enough coverage is a good idea. You can also check if you have options to take out supplemental coverage through your workplace.

21. Calculate your net worth.​

Knowing your net worth is a key step toward building it, so take some time, at least once a year, to crunch some numbers. Run through your current assets and liabilities to figure out your current net worth, and then you can work on building from there.

22. Reflect on your money beliefs.​

Sometimes, building your wealth has to start by confronting deep-seated fears and beliefs around money. Perhaps your upbringing led you to believe that you can’t enjoy earning money, or you don’t deserve to have a big bank account, so you sabotage yourself with actions that ultimately hurt your finances​. Exploring those long-held beliefs and massaging them can help you make smarter money decisions.

23. Rebalance your investments regularly.​

If you invest too conservatively, then your money might not keep up with inflation. Meanwhile, if you are overly aggressive, swings in the market could lead to a loss of assets at an inconvenient time, like shortly before retirement. Review your portfolio at least once a year to make sure you have the right mix for you; a financial advisor can also help.

24. Take advantage of freebies.​ ​

You might be surrounded by free items and not even realize it: Local museums, libraries, public parks and outdoor concerts are often all around, but you ​might be overlooking them. Taking advantage of those freebies can help cut your entertainment costs.

25. Carpe diem.​

As important as it is to save money, it’s also important to spend it in ways that bring you joy before it’s too late. That’s why financial advisors recommend traveling in retirement before health issues make it too challenging and spending as much time with family members as possible.