Why three? It’s a good question, and one that invites a few follow-ups.

One of the most common questions we hear concerns the three credit bureaus (Equifax, Experian, and TransUnion). The question is: “Why three?”It’s a good question, and one that invites a few follow-ups, such as “Do they all have the same information? Will my score be the same across the board? And if not, what does that mean?” It’s understandable that it all seems a bit confusing at first. In actuality, the reason for the number of credit bureaus is simple geography. What is now Experian grew out of the West, TransUnion the Midwest, and Equifax the South and East.

Credit reporting bureaus began as the U.S. was expanding and small groups of merchants began sharing financial information about their customers. This way when a new merchant opened they already knew about how much credit to extend to the people in town. These groups grew and consolidated over the years into credit bureaus. The term ‘credit bureaus’ may sound intimidating to some consumers, but their primary role is to actually help banks and lenders give out loans based purely on financial behaviors and not, like in the old days, on the judgments and assumptions of individual bankers.

The question about the information that’s being collected is really important. While most of the information collected by the three credit bureaus is similar, there are differences. For example, one credit bureau may have unique information captured about a consumer that is not being captured by the other two, or the same data element may be stored or displayed differently from bureau to bureau.

It’s also important to understand that while the credit bureaus provide an extremely similar service, there are differences in the way they work, and in the models or algorithms they use to create their credit scores. It turns out that it’s a really good thing that there are multiple bureaus. Basically, every system needs checks and balances. In the great sweep of data–collection, one bureau might pick up a bit of inaccurate information that, luckily, can be straightened out by cross–referencing another’s bureau’s information. Anything from a unique report to a simple clerical error can cause a mistake to occur. If there were only one bureau, one data bank to reference, good luck arguing your case. Think of it this way: in the world of credit scores, three’s not a crowd, it’s a relief. It’s backup when you need it and security that if there’s a mistake in one, there are two others to help prove it.

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This article was originally published on truecredit.com.

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Once you know how to read a credit report, you’ll have a better sense of what to look for.

You have a different credit report at each of the 3 national credit bureaus: TransUnion, Experian and Equifax. Each bureau’s report may have information from different sources reported at different times. If this sounds overwhelming, don’t worry. Once you know how to read a credit report, you’ll get a good idea of the categories of information all credit reports show. You’ll also have a better sense of what to look for. So let’s jump right in.

Personal Information
Each of your 3 credit bureau reports shows basic identifying information like: name, current and past addresses, date of birth and employer. There’s also a space for a consumer statement, a place where you can explain certain parts of your credit report.

Look for:

• Inaccurate information. Sometimes you’ll see your name or address spelled in different ways because whoever reported your information had it that way in their records.
• Unfamiliar addresses. This could be a sign someone is using (or is trying to use) your information fraudulently. 

Inquiries
This section lists creditors who’ve asked to see your credit report. When you apply for credit—a mortgage, credit cards, car loans and all sorts of other kinds of financing—the company considering giving you that credit will almost always pull your credit report to evaluate whether giving you the credit is worth the risk. This request is called a credit inquiry.

The reports you see show “hard” and “soft” inquiries. Hard inquiries are those that happen when you apply for credit cards or other types of loans and they stay on your report for 2 years. “Soft” inquiries, which aren’t listed on the reports creditors see, come from companies making you credit offers.

Look for:

• How many inquiries are listed. This is a good way to pay attention to how often you’re applying for credit. Too many hard inquiries may be viewed by creditors as a negative.
• Unfamiliar inquiries. If you see any of these, investigate them immediately. You may have just forgotten about a credit application you made last year, but it also may be a sign a criminal has applied for credit in your name. Better to double check now than be sorry later. 

Accounts
This area of the credit report lists all your accounts, open and closed, active and paid, individual and joint. For each account, you’ll see information on: 

• The loan/credit itself
• The creditor (including contact info)
• Balance
• Account status
• Monthly payment history
• Whether or not you paid on time 

Look for:

• Unfamiliar accounts. If you see an account you don’t recognize, follow up with the creditor to verify it. It may be a sign someone has fraudulently opened an account in your name.
• Negative information. Look for any late payments or accounts in collections. By law, the credit bureaus must remove most kinds of negative information from your report 7 years after the information first appeared on the report. 

Public records
If you have court judgments against you, they will be listed along with the settlement amount and the date the record will be expunged. This section also may show information about tax liens and bankruptcies.

Look for any listings, whatsoever. Public records showing up on any of your 3 credit bureau reports can seriously impact your credit. If there is anything listed in this section, make sure it’s accurate. If it isn’t, dispute it with the credit bureau as soon as possible. 

Take the next step: protect your credit and start saving money.

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Why is Debt so Bad?

For starters, the last thing you want to deal with is a collection agency. It’s just more challenging overall to have a good lifestyle when you’re struggling with financial stability. Getting a rental, a mortgage, and sometimes even a job can all be a challenge, thanks to bad credit reports. But managing your debt and getting out of this hole is going to be the best way around it. Let’s take a look at everything you can do.

Dealing with debt can be difficult. Here are 5 steps you can take to make things easier.

For many, debt is a four-letter word and is accompanied by feelings of dread, denial, even despair. Especially if you have a lot of debt, gaining the upper hand on it can seem hopeless. Fortunately, there are proven strategies you can start using, whether you want to avoid debt or really need to get a handle on it. Here are 5 steps to start putting into place now.

1. Set up a budget.

It doesn’t have to be fancy or detailed to start out. Think of a budget as a plan and just get something down on paper. By thinking through all the different categories of spending you have, you’ll get a sense of what your total spending looks like and gain perspective on how dire your debt situation is.

2. See where you can cut expenses.

With even a simple budget in hand, you’ll be able to start seeing easy ways you can save money. Maybe it’s eating out a little less often. The important thing to keep in mind is this: every little bit helps and can go a much longer way toward debt freedom than you might think.

3. Create and contribute to an emergency fund.

What does saving have to do with debt? A lot, and in a way, they’re two sides of same coin. Whether you’re managing debt or trying to stay away from it, saving cash for emergencies means you may not have to borrow for them.

4. Follow a debt payoff plan.

There are at least 2 schools of thought when it comes to paying down debt. One is to tackle debt with the highest interest rates first. Since debt carrying higher interest rates grows more quickly, you can gain some breathing room by tackling that first.

Another school of thought is to pay off accounts with the smallest balances first. This can work well with your psychology: by paying off small accounts completely, you’re creating some quick wins that may give you the confidence and momentum to put a dent in accounts with bigger balances.

5. Negotiate, consolidate.

One way to make a serious dent in your debt burden is to try to negotiate a settlement. There’s no harm in calling your lender to see if you can’t make a compelling offer to pay more sooner in exchange for some debt forgiveness down the road. Just make sure if you agree on something, you get it in writing. Another way to make a big gain on debt loss is to explore consolidation. If you can get a consolidation deal that combines higher-interest debt into lower-interest monthly payments, this can be a lifesaver that can help you reduce the amount of money you’re using to service debt. It can also give you breathing room when it comes to the growth of your payments.

Digging out of debt can be discouraging. But by following smart steps, sticking to a plan and staying positive, you can be back on your feet sooner than you may think. Just remember, too, that the best way to deal with a lot of debt is to be careful about how much of it you take on in the first place! 

Take the next step: protect your credit and start saving money.

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Originally posted by Jerry Golden on Silvernest.com on Jul 31, 2017 9:43:09 AM

In an effort to keep things simple for people who are nervous about retirement – whether they are 42 or 62 – conventional planning strategies focus on how to save and invest money. If you save X amount and invest wisely you will live happily for N years. That is how retirement misconceptions begin.

Saving is good, but hard. Smart investing is good – and also quite difficult if the appropriate strategy is not deployed.

Hoping for the best as you draw down that savings to meet your budget in retirement – while absorbing the ups and downs of the stock market, inflation, medical and caregiver expenses – virtually ensures that you will remain nervous about your financial health up to and through retirement.

The problems with conventional wisdom

Misconception No. 1: 401(k)/IRA plans offer retirement income. Vehicles such as 401(k) plans and IRAs are good ways to save because you can build tax-deferred savings. And if you simply follow the mandated Required Minimum Distributions you will have a retirement drawdown strategy. The problem: While you are required to take distributions out of these plans starting at age 70½ – whether or not you need the money – it is not a retirement income strategy in the true sense of income. P.S. You can’t avoid paying taxes, but you can minimize them, as I explain here.

Misconception No. 2: Retirement calculators are accurate. When you research a plan for retirement, you will find many versions of devices called retirement calculators. It’s OK to fill in the blanks and let them provide a number. The problem: Calculators might give you a rough idea of how much money you must accumulate, but they won’t address your personal situation or help you plan for guaranteed, lifetime income.

Misconception No. 3: Set your asset allocation and forget about it. Most investment advice will tell you to make sure the money in your 401(k) or IRA is diversified. Your savings shouldn’t be invested in just one type of asset class, like growth stocks, for example. The problem: What the advice doesn’t say is this: When you are about to retire you need to reconsider your pre-retirement asset allocation and add other choices to the mix. The plan you developed when you were 35 won’t work at 65.

Misconception No. 4: All annuities are bad.That is what you will hear in a drumbeat of advertising and social media from advisors who have built businesses out of selling based on the stock market and other returns. The problem: The headlines do not distinguish between different types of annuities. An income annuity, for example, is the only product that provides guaranteed lifetime income, similar to Social Security or a pension. If you decide an income annuity should be part – never 100% — of your portfolio, the question becomes how much of your retirement income do you want it to provide?

Misconception No. 5: All reverse mortgage strategies are bad. As with annuities, an industry has grown to convince you never to utilize a reverse mortgage. The problem: Again, retirees should consider whether this option might provide benefits as one part of a diversified retirement strategy. In moderation, and properly managed, a reverse mortgage provides peace of mind in the form of tax-free cash flow and long-term liquidity for a retirement plan.

Misconception No. 6: Financial advisors consider all options. Your financial advisor has discussed asset allocation with you. How much of your money should be invested in stocks, bonds, mutual funds, ETFs, cash? The problem: Advisors don’t talk enough about product allocation. What do you do specifically with your major sources of savings – rollover IRA/401(k), personal savings, deferred annuities and equity in your house – to create retirement income? Each has its own tax and other considerations. Deciding how to use them most efficiently in your retirement income plan may be the greatest contributor to retirement income success.

Saving money is a simple but important concept. As you approach retirement, it is just as important to determine how much income your savings can provide. When you concentrate on the income power your savings have, your decisions will become easier.

I have helped consumers achieve satisfying retirements for more than 40 years. Visit Go2Income for more information about how to plan your retirement using income annuities, and look for more information about the power of income in coming articles.

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