Young Adult Life

Language of Money

Know the Language

The world of money has its own language. Here are a few key terms to know.

How To Keep Tabs On Credit

At some point, you’re likely going to want to borrow for a big ticket purchase – a home, a car, a college education. Preparing for that day means staying on top of your credit score now.

by Jean Chatzky

Part of being a smart consumer is managing your credit history and your credit score. Your efforts will be rewarded – a good credit score gets you lower interest rates, thus saving you money. It’s also particularly important now, because the recession tightened lending requirements. What used to be considered an excellent credit score may now be only good. Generally, if your score lands above 740 (on the FICO score range of 300 – 850) you’re in great shape.

So how do you keep on top of things? By getting your credit report regularly. Luckily, it’s free. Several years ago, the three major credit bureaus came together to create and host a website, annualcreditreport.com, that allows you to pull one copy of your credit report from each bureau every single year. That’s three free copies total within a one-year span, and I suggest spreading them out throughout the year. Pulling one every four months means you can stay on top of your file and spot any suspicious or inaccurate activity quickly.

Once you have your report in hand, you have to know how to read it. Start with your personal data. Are there any mistakes? You’re looking for red flags like names you’ve never gone by, addresses you’ve never occupied, or errors in your Social Security number’s digits. If all of that information is correct, move on to your accounts. Make sure that they are all ones that you’re aware of, and that the information is accurate right down to the credit limit, account status, balance, and payment history. If you have any negative information on your report, you need to check the accuracy of that too. Make sure that if you’ve declared bankruptcy, all debts included in your filing are noted on your report, and if you’ve settled debts, they should be listed as such.

Finally, you want to look at your inquiries. Every time you apply for credit, whether it’s a new credit card, an increase in your credit limit, or a loan, the lender takes a peak into your credit file. Make sure that the inquiries listed on your report are ones that you are aware of—in other words, you applied for that loan or credit card, and no one was trying to apply in your name without your knowing.

If you find an error, it’s up to you to dispute it. If it’s just a simple mistake—like an address that needs updating—you can contact the creditor and ask them to fix it. They will send an update to each credit bureau, so follow up to make sure they do. If your creditor is unable to make the correction, you need to dispute it with the credit bureaus by sending a notice to each one. All three bureaus allow you to dispute information online, but where you can, you should also send a written letter. List all mistakes with a description of why the information is inaccurate and how it should be updated. Include any back up information, such as your account records, for proof, as well as your phone number and social security number. Give the bureau 30 days to investigate. If you don’t hear back (you should receive a letter detailing what was updated on your credit report, or an email if you submitted your dispute online), follow up and keep a paper trail.

Unfortunately, you can’t access your FICO score for free. You can buy one of your scores for $19.95 from myFICO.com (you have two FICO scores, one based on information in your Equifax report and one based on information in your TransUnion report. Experian split from FICO a couple years ago – you can buy their score from experian.com for $14.95). Your scores between bureaus will vary slightly, but they should be relatively similar.

I can see you scratching your heads. You listen to the radio. You see those commercials on television— they say you can get your score for free. Those deals generally require you to sign up for a credit monitoring service, which will cost you in the neighborhood of $15 a month. You do that, and they’ll give you a free score. Is it worth it? Sure, if you cancel the monitoring service before you incur any charges.

You can also get a free approximation of your score from our website. But if you’re going to be applying for a major loan (car, mortgage), I’d shell over the cash for a FICO score six months or a year before you apply

Refinancing Your Car Loan

This is a quick and painless way to shave dollars off your monthly bill and hundreds of dollars off your total interest paid. Plus, the entire process is easy and takes less than an hour.

by Jean Chatzky

You may not be aware of this – it’s not a secret, but it’s also not all that common – but you can refinance your car loan and capture today’s historic interest rates.

And unlike a mortgage, the process is easy as pie. It takes a few hours, sometimes less, and costs you under $100. You pay only for the title transfer.

So why aren’t more people doing it? One reason might be that the difference in monthly payment isn’t as significant as it is with a mortgage refi, because the amount of money borrowed is much less and car loans are shorter term. But with interest rates on used cars hovering around 4%, it’s still worth looking into, particularly if you’ve seen a significant improvement in your credit since you took out your original loan or you didn’t shop around for financing the first time.

Let’s say you took out a five-year, $20,000 loan two years ago. Your interest rate was 12%, which put your monthly payment at about $445. If you were to refinance the remaining amount – about $13,400 – into a three-year loan now, a two percent reduction in interest would drop your payment by about $13 a month. You’d save over $400 over the life of the loan, which is probably not enough to get you excited. But if you’re able to drop your interest rate to today’s current 36-month used car average, 4.63%, you’d save close to $46 a month. Doesn’t sound like much more, but it adds up to a savings of $1,656 over the remainder of the loan.

I’m guessing that got your wheels turning. Here’s how you do the deal:

• Understand the back story. There are a couple of reasons why your rate might be higher than it should be. The first we already talked about – your credit score. The second, though, is that if you originally financed your car through a dealer, the rate may have been inflated. Dealers don’t directly finance, they re-sell financing from other companies. They don’t make a ton of money on the actual sale of the vehicle, so they’re making money when they finance it and when they service it. I know it sounds like a scam – it’s not. But it is up to you to do your due diligence when you finance a car. That means you should have walked in there with your credit report and score in hand, along with pre-approval from at least one bank.
• So now you know for next time. What about now? Get on the computer and do a little research. MyFico.com, the consumer website of Fair Isaac, the company that generates credit scores, has a handy tool that will tell you the average mortgage, home equity and auto loan interest rates for a range of credit scores. It’s updated regularly, and you can input your loan amount to get an even closer estimate. Right now, it says a FICO score of 720 – 850 should qualify for around 4.138% on a 36-month, $25,000 loan, while a score of 620 – 659 will get you 11.168%. Of course, you need to know your credit score to use this tool. You can purchase your FICO score from that same site for $19.95, or pull a free version from CreditKarma.com. It’s not a FICO score, but it’s a close approximation.
• Find your lender. Once you’re ready to refinance – and for the record, you can do this immediately after you took out the original loan, if you think you were short-changed – you should price hunt. Not all lenders who offer auto loans will also offer refinancing. Capital One is one of the biggest players in the game, but you can also try your bank, a local credit union, or an online auction site like MoneyAisle.com, which allows lenders to bid with interest rates for your business.
• Don’t stretch your payment term. Extending the life of your loan may lower your monthly payments, but it will cost you more in interest over time, even if you’re able to lower your interest rate. Your new loan should be no longer than what was remaining on the original loan.

Budgeting

If You Know You Will Never, Ever Budget…

by Jean Chatzky

For some people, budgets work. For others, they don’t. If you fall into the latter category, here’s another system that can get you the same result.

The Accounts Method

Instead of tracking your expenses out of a single account, simply set up three different bank accounts for major categories of cash outlays and one for saving.

1. Mandatory expenses. Use this account to fund and pay payments that you can’t avoid like rent, child support, alimony, taxes, insurance, child care, etc.
2. Discretionary expenses. Put everything else in this account. Include payments for cable TV, cell phones, wardrobe refreshers, etc.
3. Debt payments. This account is for payments such as credit card balances, auto loans, student loans, and other debts you want to focus on paying off with DebtGoal.
4. Saving. The money in this self-described account is hands off.

Step One: Save First

Before you start putting money into buckets take some off the top and save it. I like the idea of saving 10% to 15% a month including your 401(k) contributions. If you can’t save that much to start, start with less and inch your way up.

Step Two: Decide How Much Money Goes Into Each

How do you figure out how much to put into each account? On a legal pad, make a column for each account. Then start adding numbers. Start with your mandatory expenses: These should be easy to identify. Simply define those fixed expenses that you have to pay each month like rent, child support, insurance, etc. Then add in your debt repayments. Start with your minimum payments for all your debts such as credit cards, auto loans, student debt, and your mortgage. This is simply your minimum requirement; you can – and should – aim to pay more. Finally, add your discretionary expenses, the money left over after calculating your mandatory expenses and payments. It’s a good idea to check your past spending and compare to the amount available after your mandatory expenses and debt payments.

Step Three: Put It Into Practice

To put this system into practice, simply set up paycheck direct deposits or recurring transfers to fund each account to the appropriate level each month. To make sure it works, don’t spend on credit cards: This is obvious, but the whole point of an account dedicated to discretionary spending is to help you spend what you have. If you spend on credit cards, you break this critical link. Use text or email alerts to monitor your account balance so you know how much you have available. Have them sent daily to monitor your balances. You’ll find that, with this feedback, it’s easy to keep from spending beyond your means. And make sure to keep your spouse or others with access to the account in the loop. You’ll find that if you talk about your progress and plan your spending, it’s much easier to manage. If you don’t discuss and plan, you’re relying on luck, and that’s an accident, not a recipe for success.

Debit Cards and How They Work

How debit cards work.

Safe and Convenient

Debit cards are a safe and convenient way to get cash at an ATM and make purchases. The funds are deducted from your checking account so you don't pay interest and won't get a 'bill' in the mail.

Use it instead of writing a check. Make purchases at any store displaying the MasterCard symbol. Simply swipe it like a credit card and choose 'credit', sign the receipt and you're done!

By choosing 'credit' (signing) v. 'debit' (PIN), you'll have Zero Liability,* an extra layer of protection provided by the MasterCard network which means you won't be liable for unauthorized purchases that you promptly report.

Get cash. You can use your California Coast debit card at any one of thousands of ATMs worldwide including 30,000 fee-free California Coast or CO-OP^® ATMs and any bearing the MasterCard^®, Maestro^®, Cirrus^®, or PULSE^® Network logos.

Pay your bills. Pay one-time or recurring bills such as utilities, gym membership and cell phone. Use your debit card number to set up the process with the merchant or provider.

California Coast's Debit MasterCard^® comes free with our checking accounts and is a fast and safe way to get cash or make purchases. Simply use it at any California Coast or CO-OP ATM to get cash or swipe it at a store.

Don't have a Debit MasterCard? Give us a call (877) 495-1600 or stop by a branch.

*Does not apply to PIN based transactions, unauthorized purchases must be reported promptly