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In Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future, fourth edition, Weston thoroughly covers brand-new laws changing everything from how your credit score can be used to how you can communicate with collectors. Weston also updates her guidance on using FICO 08 to raise your score… fighting lower limits or higher rates… maintaining the right mix of cards and balances… bouncing back from bad credit… choosing credit "solutions" that help, not hurt… and much more!
In There Are No Dumb Questions About Money, Weston answers your most pressing questions, helping you navigate today's more-complicated-than-ever financial world. Through real-life reader questions and clear, to-the-point answers, Weston shows how to manage your spending, figure out what you can and can't afford, and choose the smartest ways to pay off your debt. You'll discover why most investment strategies don't work, and identify better ways to save for retirement. But you'll also learn to handle the trickier, emotional side of money: how to avoid fights with your partner, deal with spendthrift children or parents, and spot con artists or lousy advisors before you get robbed. Using humor, keen insight, and time-tested financial planning principles, Weston can help you wrangle your money into shape -- and find your own path to financial freedom.
Your Credit Score: How to Improve the 3-Digit Number That Shapes Your Financial Future, 4/e
Introduction xxii
Chapter 1 Why Your Credit Score Matters 1
How Your Credit Score Affects You 1
What It Costs Long Term to Have a Poor or Mediocre Credit Score 3
How Credit Scoring Came into Being 6
How Credit Use Has Changed over the Years 7
Consumer’s Fight for Truth About Credit Scores 8
Credit Controversies 9
Credit Scoring’s Vulnerability to Errors 9
Credit Scoring’s Complexity 10
Credit Scoring’s Use for Noncredit Decisions 11
Credit Scoring’s Potential Unfairness 11
Chapter 2 How Credit Scoring Works 15
What Is a Good Score? 17
Your Credit Report: The Building Blocks for Your Score 18
How Your Score Is Calculated 19
The Five Most Important Factors 20
Your Payment History 20
How Much You Owe 21
How Long You’ve Had Credit 22
Your Last Application for Credit 22
The Types of Credit You Use 23
Your Credit Scorecard 24
Your Results Might Differ 25
How Do I Get My Score? 26
What Hurts, and for How Long 31
New Versions of the FICO Score 33
Chapter 3 FICO Versus “FAKO”--Competitors to the Leading Score 39
The VantageScore Scale 40
How VantageScores Are Calculated 42
Comparing the Scoring Systems 43
Some Rules Remain the Same 44
So Which Is Better? 45
VantageScore’s Future 45
Other Scores Lenders Use 47
Chapter 4 Improving Your Score--The Right Way 51
Step 1: Start with Your Credit Report 51
Check the Identifying Information 52
Carefully Review the Credit Accounts 53
Parse Through Your Inquiries 54
Examine Your Collections and Public Records 54
Dispute the Errors 55
Step 2: Pay Your Bills on Time 56
How to Make Sure Your Bills Get Paid on Time, All the Time 57
Step 3: Pay Down Your Debt 60
You Need to Reduce What You Owe Rather Than Just Moving Your Balances Around 61
You Might Need to Change Your Approach to Paying Off Debt 61
You Need to Pay Attention to How Much You Charge--Even If You Pay Off Your Balances in Full Every Month 62
How to Find Money to Pay Down Your Debt 64
Step 4: Don’t Close Credit Cards or Other Revolving Accounts 65
Step 5: Apply for Credit Sparingly 65
How to Get a Credit Score if You Don’t Have Credit 66
Credit Scores Without Credit 70
Chapter 5 Credit-Scoring Myths 71
Myth 1: Closing Credit Accounts Will Help Your Score 72
Myth 2: You Can Boost Your Score by Asking Your Credit Card Company to Lower Your Limits 73
Myth 3: You Can Hurt Your Score by Checking Your Own Credit Report 74
Myth 4: You Can Hurt Your Score by Shopping Around for the Best Rates 75
Myth 5: You Don’t Have to Use Credit to Get a Good Credit Score 76
Myth 6: You Have to Pay Interest to Have a Good Credit Score 77
Myth 7: Adding a 100-Word Statement to Your File Can Help Your Score if You Have an Unresolved Dispute with a Lender 78
Myth 8: Your Closed Accounts Should Read “Closed by Consumer,” or They Will Hurt
Your Score 79
Myth 9: Credit Counseling Is Worse Than Bankruptcy 79
Myth 10: Bankruptcy Hurts Your Score So Much That It’s Impossible to Get Credit 80
Chapter 6 Coping with a Credit Crisis 83
Step 1: Figure Out How to Free Up Some Cash 86
Step 2: Evaluating Your Options 89
Task 1: Prioritize Your Bills 89
Task 2: Match Your Resources to Your Bills and Debts 91
Task 3: Figuring Out a Repayment Plan 92
The Real Scoop on Credit Counseling 94
Debt Settlement: A Risky Option 97
Should You File for Bankruptcy? 100
The Effects of Bankruptcy Reform 101
The Type of Bankruptcy That You File Matters 102
Should You Walk Away from Your Home? 104
Step 3: Choose Your Path and Take Action 106
Option 1: The Pay-Off Plan 106
Option 2: Credit Counseling 107
Option 3: Debt Settlement 107
Option 4: Bankruptcy 107
Chapter 7 Rebuilding Your Score After a Credit Disaster 109
Part I: Credit Report Repair 111
Scrutinize Your Report for Serious Errors 112
Know Your Rights 113
Organize Your Attack 115
What You Need to Know About Unpaid Debts and Collections 116
What You Need to Know About Statutes of Limitations 119
Should You Pay Old Debts? 122
“But You’ve Got the Wrong Guy!” 125
Part II: Adding Positive Information to Your File 126
Try to Get Positive Accounts Reported 126
Borrow Someone Else’s History 127
Get Some Credit or Charge Cards if You Don’t Have Any 127
Part III: Use Your Credit Well 128
Pay Bills on Time 129
Use the Credit You Have 129
Keep Your Balances Low 129
Pace Yourself 129
Don’t Commit the Biggest Credit-Repair Mistakes 130
Chapter 8 Identity Theft and Your Credit 133
New Options That Might Help 137
How to Reduce Your Exposure to Identity Theft 139
Buy a Shredder 139
Get a Locking Mailbox 139
Protect Your Outgoing Mail 139
Keep Track of Your Receipts 140
Keep Your Financial Documents Under Lock and Key 140
Get Stingy with Your Social Security Number 140
Know What’s in Your Wallet 140
Ask About Shredding Policies 141
Don’t Let Your Debit Card out of Your Sight 141
Opt Out of Credit Card Solicitations, Junk Mail, and Telemarketing 142
Don’t Use a Cell or Cordless Phone to Discuss Financial Matters 143
Be Wary of Telephone Solicitors and Emails Purporting to Be from Financial Institutions 143
Be Smarter About Social Media 143
Safeguard Your Social Security Number 145
Monitor Your Credit Reports 145
Consider a Credit Freeze 147
What to Do if You’re Already a Victim 148
Keep Good Notes of Every Conversation You Have Regarding the ID Theft 148
Contact the Credit Bureaus by Phone and Then with a Follow-Up in Writing 149
Contact the Creditors by Phone and Then Follow Up in Writing 149
Contact the Police or Local Sheriff 149
Contact Bank and Checking Verification Companies 150
Contact the Collection Agencies 150
Get Legal Help 151
Don’t Give Up 151
What to Do if the Credit Bureau Won’t Budge 153
Chapter 9 Emergency! Fixing Your Credit Score Fast 157
Repairing Your Credit in a Matter of Hours: Rapid Rescoring 158
Boosting Your Score in 30 to 60 Days 161
Pay Off Your Credit Cards and Lines of Credit 161
Use Your Credit Cards Extremely Lightly 162
Focus on Correcting the Big Mistakes on Your Credit Reports 162
Use the Bureaus’ Online Dispute Process 163
See if You Can Get Your Creditors to Report or Update Positive Accounts 163
What Typically Doesn’t Work 163
Disputing Everything in Sight .164
Creating a “New” Credit Identity 164
Closing Troublesome Accounts 164
Chapter 10 Insurance and Your Credit Score 167
History of Using Credit Scores to Price Insurance Premiums 169
But What’s the Connection? 171
What Goes into an Insurance Score 175
Keeping a Lid on Your Insurance Costs 176
Start Thinking Differently About Insurance 177
Raise Your Deductibles 178
Don’t Make Certain Kinds of Claims 178
Be a Defensive Driver 180
Use the Right Liability Limits 180
Drop Collision and Comprehensive on Older Cars 181
Shop Around 181
Protect Your Score 182
Chapter 11 Can Bad Credit Cost You a Job? 183
Chapter 12 Keeping Your Score Healthy 189
The Do’s of Credit Health 190
Pay Off Your Credit Card Balances 190
Have an Emergency Fund 192
Have Adequate Insurance 194
The Don’ts of Credit Health 195
Don’t Buy More House Than You Can Afford 195
Don’t Overdose on Student Loan Debt 196
Don’t Let Your Fixed Expenses Eat Up Your Income 197
Don’t Raid Your Retirement or Your Home Equity to Pay Off Credit Cards 198
Your Score 199
Get Your Credit Reports 200
Take Action 200
Don’t Be Late 201
Dealing with Mortgages, Car Loans, and Other Secured Debt 201
Consider a Fraud Alert or Credit Freeze 202
Look for Lenders Who Aren’t FICO-Driven 202
In Conclusion: The Three-Year Solution 203
Index 205
Introduction 1
Chapter 1 Balanced Budget, Balanced Life: Setting Your Financial Priorities 5
How to Stick to a Budget 6
For a Budget That Works, Get Control of Your Debt 7
What Do Average Families Spend? 8
Balancing Your Budget in the Big City 9
Income Dropped? Expenses Have to Drop, Too 12
How to Beat “Frugal Fatigue” 12
Fast Ways to Cut Cable, Cell Bills 15
What to Do with an Extra $5,000 a Month 15
Planning a Family? How to Prepare Financially 16
Facing a Layoff? Rule #1: Conserve Cash 17
Living Paycheck to Paycheck? Knock It Off 18
Why Your Budget Doesn’t Work 19
Chapter 2 Slay the Debt Dragon 21
What Comes First? 22
What Comes First, Savings or Debt Payoff? 23
Why You Shouldn’t Pay Down Your Mortgage 23
Don’t Drain Your Retirement to Pay Debts 24
Use Inheritance to Pay Down Debt, Boost Savings 25
How to Stop Collection Calls 26
Garnishments Are Taking Food off This Family’s Table 26
Massive Debts Mean Gambling Is More Than a “Habit” 27
Debt Doesn’t Disappear After Lender Write-off 28
How Long Bad Debt Can Haunt You 29
What to Do When You Can’t Afford Your Life 30
Young Widow Struggles with Late Husband’s Debts 31
Dealing with After-Death Creditors 32
Fighting an Aggressive Collection Agency 32
Student Drowning in Debt Needs Professional Help 33
How to Cope with a Big Medical Bill 35
When Bankruptcy Is the Best of Bad Options 36
What to Do When Bankruptcy Won’t Work 37
Chapter 3 Burnish Your Credit Score 39
Improving Bad Scores Takes Time, Patience 40
Why “Free” Credit Scores Aren’t 41
How Credit Card Balances Affect Your Scores 41
Does a Credit Card Make You a Slave to Lenders? 42
Why Carrying a Balance Is Stupid 43
No Credit Cards? You May Not Get the Best Rates 43
How to Use Credit Cards to Improve Your Scores 44
Should You Stay in Debt to Help Your Scores? 44
Don’t Close Accounts If You’re Trying to Improve Your Scores 45
Close Cards the Smart Way 45
Debts Rising? It’s Time to Cut Spending 46
Big Debts Mean You Can’t Afford Your Life 46
Marriage Doesn’t Combine Your Credit Reports 47
Unwanted Time Share Can Lead to Credit Score Hit 48
“Piggybacking” Can Pose a Serious Risk 49
Skimping on Credit Card Payments Can Damage Scores for Years 50
Short Sale Causes Credit Scores to Plunge 50
Finding an Apartment After Foreclosure 51
Recovering from Bankruptcy Takes Five to Ten Years 52
Installment Loans Can Boost Credit Scores 53
Not All Loans Help Your Scores 54
How to Score 800+ 54
Credit Scores Not Perfect? Don’t Sweat It 55
Zombie Debt May Still Hurt Credit Scores 56
Insurance Scores Differ from Credit Scores 56
“Too Many Credit Cards” Boosts Insurance Premiums 57
Chapter 4 Couples and Money 59
When Savers Marry Spenders 59
Credit Concerns or Just Cold Feet? 61
Fiancé’s Reluctance May Be Just Prudence 61
His, Hers, or Ours? Setting Up Finances As a Couple 62
Time Share Causes Financial Woes 63
Adding Fiancé As “Authorized User” May Help His Scores, but Be Careful 64
New Wife Could Help His Credit, but She’s Not Obligated 65
Marriage Didn’t Trash Son’s Credit Score 66
Spouse’s Debt May Be Yours—or It May Not Be 66
Separate Your Finances Before Divorce Is Final 67
Couples’ Big Age Difference Affects Retirement Planning 68
Choosing Pension Payout? Get Expert Help 69
How Marriage, Divorce, and Death Affect Your Social Security Check 70
Chapter 5 Family Money: Keeping the Financial Peace 75
When Grandpa Reneges on Promised Money 76
When a Sibling Wants a Loan 76
Supporting the Family Spendthrift 77
Quit Trying to Change a Deadbeat 78
Helping Parents Support a Freeloader 78
Saying No to Handouts for Adult Children 79
Daughter’s Family Is Bleeding Them Dry 80
Could Son’s Unpaid Bills Harm Parents’ Credit? Maybe 81
When It Makes Sense to Let Your Adult Kids Live at Home 82
How to Buy Stocks for Children 82
Dealing with Parents’ Financial Crisis 83
Beware Becoming Trustee of a Sibling’s Money 84
Are Family Heirlooms Worth the Fight? 85
Stepdaughter Wants “Everything”: What Does She Deserve? 86
How Can I Resolve a Spat with My Siblings over an Inherited Home? 87
Chapter 6 How to Stop Working Someday: Saving and Investing for Retirement 89
With Retirement, There’s No Making Up for Lost Time 90
$25 Is Enough to Get Started Saving for Retirement 90
There’s No Such Thing as “Risk-Free” Retirement Investing 91
Stocks: A Must or a Gamble? 92
Dependents Can Fund Roths Even If Their Parents Can’t 93
Don’t Tap Retirement Funds for a Bigger Down Payment 94
Build Retirement Funds Before Paying Down a Mortgage 95
Don’t Suspend 401(k) Contributions to Pay Down Loan 96
Retirement Planning Without a Retirement Plan 96
Self-employed? You’ve Got More Retirement Savings Options 97
Roll Your 401(k) into an IRA? Maybe Not 98
Windfall in Your 50s? Don’t Blow It 99
Get a Second Opinion Before Buying a Variable Annuity 99
Don’t Count on an Inheritance to Fund Your Retirement 100
What’s a “Safe” Withdrawal Rate? 100
Is a 3% Withdrawal Rate Too Conservative? 101
Social Security: Grab It Early, or Wait for Bigger Checks? 102
Chapter 7 Protect What You Have 105
Should a 29-Year-Old Buy Life Insurance? 105
Don’t Buy Life Insurance If You Don’t Need Life Insurance 107
Help Your Pet Without Risking Your Finances 108
Going Bare on Health Insurance Isn’t Smart 109
“Eating Healthy” Won’t Protect Against Medical Bills 109
Is Disability Insurance Worth the Cost? 110
Why You Shouldn’t Buy Cellphone Insurance 111
Get a Second Opinion Before Buying an Annuity 112
When You Can Skip Rental Car Insurance 113
Stick with Insurance Minimums or Buy More Coverage? 114
Is Disaster Insurance Worth the Cost? 115
Chapter 8 Identity Theft 117
Don’t Trust Your Tax Papers to the U.S. Mail 118
Sometimes You Have to Cough Up Your SSN 119
Credit Account Closure May Be Cause for Alarm 119
Credit Freezes May Be Your Best Defense Against ID Theft 120
What Should I Do If My Sister Is an Identity Thief? 121
What to Do When Your Wallet Is Stolen 122
Do Dead People Have to Worry About ID Theft? 123
101 for Identity Theft Victims 124
Redact Your Medicare Card to Reduce ID Theft Risk 125
Are Businesses Protecting Your Social Security Number? 125
Chapter 9 Home Sweet Home: What You Need to Know About Real Estate 127
How Much House Can I Afford to Buy? 128
No Down Payment Saved? You’re Not Ready to Buy a Home 128
Student Loan Debt May Limit Mortgage 130
Shop Hard Before You Refinance 130
When to Pay Down Your Mortgage 131
Should You Refinance a Mortgage That’s Almost Paid Off? 132
When Shorter Loans Make Sense 133
Adjustable Mortgage May Not Be Affordable for Long 133
Should She Walk Away from Her Home? 134
What Foreclosure Does to Your Credit 135
Don’t Expect Mortgage Lender to Do the Right Thing 135
New Rules May Help More Underwater Homeowners 136
Get Help with a Mortgage Modification 137
Short Sales Can Trash Your Scores 138
A Short Sale Isn’t a Bailout 138
How to Speed Up Foreclosure 139
Property Loss May Lead to Bankruptcy 140
Will You Face a Tax Bill after Foreclosure? 140
Finding an Apartment after Foreclosure 141
How to Get a House Sold Fast 142
How to Dump a Time Share 143
Chapter 10 Pay for College Without Going Broke 145
If You Can Save for College, You Should 146
529 College Savings Plans Are a Good Option for Many 147
Withdrawals from 529s Can Be Tricky 148
529s Aren’t Always the Best Way to Save for College 149
Mom Stole College Fund. What to Do? 149
Did Grandma Divert the College Fund? 150
Don’t Overdose on Debt for a Child’s Education 150
“Free Money” May Not Make School Affordable 151
It’s Too Late to Borrow for Child’s College Education 152
Finding a Way to Pay for School 153
Is It Too Late to Go Back to School? 154
“Dream School” Can Turn into a Nightmare 154
Is a “Dream School” Worth Any Price? 155
Ivy League Tuition Waiver Doesn’t Apply to Our “Dream School” Applicant 156
Tiny Salary, Big Debt 157
Degree from For-Profit School Leads to Big Debt 158
How to Make Headway on Student Loans 159
Is Graduate School Worth Borrowing For? 159
Wrestling with Student Loan Debt? Know Your Forgiveness Options 160
Student Loans in Collections? Here’s Where to Find Help 161
Settling Student Loan Debt: Tough but Possible 162
Student Loan Settlement Won’t Be Cheap 163
Chapter 11 Find an Advisor You Can Trust 165
Variable Annuity for a Dying Woman? I Don’t Think So 166
“Unsuitable” Annuity Can Be Undone 167
Is a Money Manager Worth the Cost? 168
How to Find an Advisor You Can Trust 69
Your Broker Is Not a Retirement Expert 169
How to Invest an Inheritance 170
Finding Trustworthy Advisors 171
What to Do Now with Your Extra Cash 172
Chapter 12 At the End: Caring for Elders and Planning Your Estate 173
Helping an Indigent Parent Navigate “the System” 173
Son-in-Law Badgers Elderly Couple for Money 175
Protecting a Parent from Financial Opportunists 176
Daily Money Managers Can Help Pay the Bills 176
A Reverse Mortgage Could Keep Mom in Her Home 177
Asset Transfer Could Delay Medicaid Eligibility 178
Incapacitated Parent? Tread Carefully 179
Father’s Living Trust Is Missing 180
The Documents You Need but Probably Don’t Have 181
Who Needs an Estate Plan? 182
Why Estate Plan? 182
DIY Wills and Trusts Can Backfire 183
Can the Guardian of Your Kids Change His Mind? 183
Are Unequal Bequests a Good Idea, or Are They a Disaster in the Making? 184
Credit Cards Must Be Paid Before Estate Is Distributed 185
Executor Won’t Have to Pay Mother’s Debts out of Pocket 186
Dad Died Without a Will. What Now? 187
A Guide for Executors 187
What’s the Best Thing to Do with an Inherited IRA? 188
Social Security Benefits Don’t Last Forever 189
What Happens to Personal Loans After Lender Dies? 189
Index 191