We’re nearing the end of “extension season” around here at Emelia Mensa CPA … and it’s been a doozy.
With so many changes thrown at us, word on the tax professional street is there are going to be a lot of very tired and very grateful CPAs and tax pros after October 15th.
(Which, after all, *is* the deadline for tax returns that have been extended, so consider this to be your reminder that if we are waiting on documents from you, we need them!)
Fortunately, with the kind clients we have, we’ve managed to weather these storms more effectively than many of our colleagues around the country. So — THANK YOU!
It’s also that time of year when we start having conversations about the final quarter of the year. Like, if there are things you can do NOW to make sure that whatever your 2020 tax bill was, there might just be some simple tweaks we can make to ensure your bill doesn’t go up — or even LOWERS. An easy way to do this is by taking some proactive steps now instead of merely reacting “after the fact” during the tax preparation process.
So, if you need to have a conversation about your taxes (whether for this year … or the last three years), we’re right here:
But, today I wanted to take some time to address a circumstance I’ve encountered somewhat during these crazy 18th months … and how you might handle it if it affects you.
Fixing Your Credit Score: How Spenders Can Build Better Credit
“Tough times never last, but tough people do.” – Dr. Robert Schuller
Your new mortgage company sticks you with high interest. The best credit cards are out of your reach. You finally found that great new car and your loan application comes back with a big fat DENIED. None of these are situations anyone wants to find themselves in.
And feeling like you have the plague when it comes to people lending you money or trusting you to pay your bills stinks (just like your credit).
But, you CAN fix it… if you start putting time and money to the right uses…
Fixing Your Credit Score Tip #1: Know the score
First, do not jump to use a credit repair company. A lot of what they do, you can do for free. Save your money, at least initially in your repair process. You’re going to need it.
Second, don’t beat yourself up. Maybe in the past, you spent too much or didn’t pay bills on time. You’re not alone: More than three out of five American adults say they carried credit card debt within the last 12 months – and more than one in four admit they don’t pay all their bills on time.
Figure out where you went wrong later – the boat’s leaking and now is the time to bail out and patch the hole.
The clearest indicator that your credit has sunk is your credit score. One commonly used credit-scoring model is the FICO score, courtesy of a California credit-score software company started decades ago as Fair Isaac Corporation.
Scores are generally between 300 and 850. Guess which number you want to be closer to …
Your score is kept by the credit bureaus Equifax, Experian, and TransUnion (there are others, but those are the big three.) and provided to those who make decisions about lending to you.
A lot of past money mistakes can ding your credit score: spotty bill paying; bankruptcy; using too much of your available credit; or even having too much of just one kind of credit (only cards, for instance, or having no long-time bill outside of a mortgage), to name a very few.
Most American adults have a “good” score topping 700 – but in the end, lenders decide what score works for them. Sounds unfair, doesn’t it? Not to mention the fact that some West Coast software company you never heard of gets to say if you get financing for that new car – or even pass muster for a new job.
Yeah, it’s unfair, but right now the name of the game is “bail and patch.”
Fixing Your Credit Score Tip #2: Know where your bucks will do good
I’m afraid the best advice isn’t easy to hear and is even harder to do. To start, pay your bills on time. Payment history makes up more than a third of your FICO score. This is the best way to start your credit numbers on their way up.
- Pay down debt. For recurring bills, try to use auto-pay (just make sure you have the cash to cover them). Next, attack the high-interest stuff – and try try try to pay more than just the monthly minimum on credit cards. That minimum is a revolving credit trap.
- Remember all those problems that can hurt your score? Address them. Whittling use of all your credit limits improves your credit utilization ratio, which is how much credit you have versus how much you use. And stop applying for new credit for a while – these applications create what are called hard inquiries, and too many of them hurts your score.
- If you’ve got scads of people hounding you for money you owe, try a debt consolidation loan. You might get lower interest rates and easier monthly payments – but you’ll have to qualify and stick to the terms.
- You may also be able to get a balance-transfer card with a low (even zero) interest rate. If you do get one of these cards, do not keep charging on the original card.
- Look into a good credit-counseling agency. Look for a non-profit one with free initial consultations. Try the National Foundation for Credit Counseling.
- And this can be huge: Doublecheck your credit report.
Fixing Your Credit Score Tip #3: Look Out for Mistakes on Your Credit Report
Believe it or not, credit bureaus are only human. Something in your report might actually be wrong. Fix that fast.
You can request a free copy of your credit report from each of the three bureaus once every 12 months at AnnualCreditReport.com, and right now the big three continue to offer free online weekly reports. Experian will give you your FICO score for free, too.
Looking over your report, watch for mistakes in the “derogatory marks” in your history (funny thing how if there are mistakes, they’re usually not in your favor…). You’ll see some of those “dings” we talked about earlier.
If you see something wrong, file a dispute with the bureau. Just know going in that they’ll only remove facts that are plainly inaccurate or old.
We’re in your corner, and the good news is that you don’t have to live with a bad credit history.
If you want to talk about this (or any other tax- or money-related topics) more in-depth… we’re right here:
Keep your head up,
Emelia Mensa EA, CPA