Get Smart About Credit

Are you smart about credit? Read on for a simple explanation of credit scores and how to improve yours!

The American Bankers Association sponsors Get Smart About Credit Day every October to help consumers understand the role that credit plays in their life and how to smartly build good credit. Many people don’t realize that their credit score impacts their ability to rent an apartment, buy affordable car insurance and even find employment. Here’s a refresher on credit!

What is a credit score?
A credit score is a number that represents a person’s creditworthiness. The higher the score, the better a consumer looks to potential lenders.

Why is it important?
Your credit score and credit history affect a number of practical areas of your life. Credit worthiness determines what loans you qualify for and the interest rate you pay. Typically, the higher your credit score, the better your interest rate. It can also impact your ability to rent a home, qualify for a credit card, buy a car, get good car insurance rates or even get certain kinds of jobs. In other words, a good credit score can save you money and even improve your life!

What Factors Affect Your Credit Score?
– Payment history, including the number and severity of late payments.
– Your Credit utilization rate which is the amount of revolving credit you are using divided by
the total amount of revolving credit you have available. A lower credit utilization rate shows
you are using less credit than is available to you.
– Type, number and age of credit accounts.
– Total amount of debt.
– Bankruptcy.
– How many credit accounts you’ve recently opened.
– Number of inquiries for your credit report.

What is a good credit score?
Excellent              800-850
Very Good            740-799
Good                    670-739
Fair                       580-669
Very Poor            300-579

How is my credit reported?
Your credit is reported to three major credit reporting agencies: Experian, TransUnion and Equifax. Any time you apply for a credit card or loan, apply for each insurance, pay a bill late or on time, or pay off a line of credit, this information is reported to become part of your credit report. Visit a reputable site like to obtain your free annual credit report. Review your report for accuracy by making sure that you are familiar with every account listed and that the information is correct.

How do I improve my credit score if I have already made mistakes?
– Pay your bills on time.
– If you have missed payments, get current and stay current.
– Avoid being sent to collections because a collection account will stay on your credit report
for seven years.
– Keep balances low on credit cards.
– Make a budget and a plan to pay off your debt.

Having good credit is important but building good credit doesn’t have to be hard for the average person. Simply show that you can handle your debts responsibly and your score will naturally grow.

What to Do With Your New Raise

Did you get a raise in 2015? According to PayScale’s annual Compensation Best Practices survey, more than 85% of large and medium-size companies gave raises that year. In 2010, only 30% of companies gave their employees a pay boost, the lowest percentage since PayScale began its survey. So raises are on the rise.

If you got one or are expecting to get one this year, what will you do with it? Here are five smart moves for that additional money.

Pay off debts
Eliminating debt and reducing the money you pay in interest should be the first step. Say your raise was $5,000 and you’re paid twice a month. You’ll be earning an additional $200 before taxes each pay period. If you earmark $300 for your credit card debt each month, you’ll pay it off faster, save on interest, improve your debt-to-credit ratio and raise your credit score.

Build your emergency fund
Now that your credit card debt is paid off, it’s time to build up your emergency fund so that when stuff happens, such as major medical expenses or unexpected job loss, you don’t have to run up your credit card bill. Financial experts say a good emergency fund should cover between three and six months of living expenses. If you normally spend $2,500 a month, you would want build up about $15,000 for a six-month emergency fund.

Because an emergency can strike at any time, having quick access to your cash is crucial. Savings accounts are a good choice because they’re low-risk investments that allow you to withdraw your money without hassle. This emergency stash should be a separate account from one you use daily so that you’re not tempted to dip into your reserves.

Community banks, such as VCNB, offer several types of savings accounts that can suit consumers’ specific financial needs.

Invest for your retirement
Concern about having enough money for retirement is the No. 1 personal finance worry for Americans, according to Gallup’s annual Economy and Personal Finance survey. Don’t be part of that crowd. If the company you work for offers a 401(k) with an employer match, be sure that you’re contributing enough to get the maximum match that’s offered. The money you contribute will reduce your current tax burden, and the match that your employer provides is essentially free additional retirement income for you. Then, consider using the remainder of your salary increase to open an Individual Retirement Account for your future. Along with assuring you a more comfortable retirement, IRAs can also offer you tax benefits.

Give to charity
If you’ve ever thought, “I’d give more to charity if I had more money,” well, now you do. You could make a donation to a charity, your alma mater or a good cause. You’ll feel good about helping others and, as long as it’s a qualified charity, you’ll be able to deduct your donation from that year’s income tax.

Live a little
Treat yourself to something fun to celebrate your raise. After all, you earned it. Dinner at a special restaurant or a relaxing day at a spa won’t eat up all your new income. Just remember that your raise isn’t a lump-sum bonus: It’s coming paycheck by paycheck, and you should invest or spend it that way.

Ellen Cannon, NerdWallet

© Copyright 2016 NerdWallet, Inc. All Rights Reserved




Getting Married? Combining Finances 101

So you’re getting married. You have the church, a dress and a caterer. You know everything there is to know about your partner and you are in love. But do you know their credit score or how much they owe on student loans? This person you are about to marry may have a squeaky clean financial record or could be hiding a deep dark secret like bankruptcy or a fistful of maxed out credit cards.

Once you are married, your individual finances will also be united. Have you discussed what this really means for your relationship?  Every couple handles money matters differently so you need to consider how you will do it. It’s a good idea to have “The Talk” before you tie the knot but it’s never too late.

Rest assured, this will be the least romantic conversation of your relationship and that’s ok. Throughout your relationship you will find life is better when you have open communication about money. Here are some things to think about to get you started:

Combine or remain separate?
First consider how you will keep your money. The options are to have a joint account, individual accounts or some combination of the two. Most financial experts advise at least having a joint household account.  If you are keeping separate accounts, discuss who will pay each bill or how much you each will contribute to a joint account.

Agree on money tools
Will you use checks or only a debit card? Will you both have access to your online banking? Who will create the budget and be responsible for paying the bills? Discuss your preferences and reach a mutual agreement. Will you keep the credit cards you have or use just one joint card?

Yours, mine and ours 
Dump the “mine and yours” mentality. Ideally, assets (and liabilities) are shared and there is some balance in spending. If one spouse makes a lot and spends lavishly, it will wear on the relationship if the other partner is pinching pennies.

Create goals and a plan
What are your goals? Are you planning to buy a home in five years or have a baby soon? Maybe you want to take a vacation or pay off debt. If nothing else, you need an emergency fund. Put those goals on paper and develop a savings plan.

Be Flexible
Something will go wrong. We promise. There will be emergency purchases and your partner will make a bad decision or two. Agree to work together and make it work. Consult each other before major purchases and communicate as much as possible to avoid meltdowns.

Money is a major cause of arguments in most relationships. We wish you the best as you take this important step together and hope our advice will help you create a good financial foundation for your life together!