Strategies to Save

Digit’s Surprise $2.99 Monthly Fee Stuns Users

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By Kalyn Wilson

Digit, a once-free automated savings app, now charges users a $2.99 monthly fee.

Consumers are in an uproar this week over the Digit’s new monthly fee. The once-free automated savings app announced Tuesday in a Digit blog post that users will be charged $2.99 a month after a “trial period” of 100 days.

The company said in the announcement that it will increase the “Savings Bonus” — that’s the rate Digit pays to those who store their savings with the app — from 0.2% to 1%, to “reward” users.

The new monthly fee frustrated existing users (who also will have 100 more days of free use and then be charged) so much that Money.com reported the site went down on Tuesday due to increased traffic from complaints and so many customers trying to close close their account. The site was up Wednesday.

Digit CEO Ethan Bloch told Forbes the decision was based on the fact that they needed to monetize the company but didn’t want to sell customer data and advertising that would compromise its brand integrity.

“We went through this huge exercise and a lot of it was in philosophical debates,” Bloch told Forbes.

The app has been free since its launch in 2015. Many customers ranted on social media about the new subscription fee and Digit’s website outage. Some said they planned to abandon the app.

Here’s what you need to know about Digit’s new $2.99 fee and possible alternatives.

Is the app worth the fee?

Considering that no new or enhanced features have been added to the app aside from the increased Savings Bonus, there appears to be no clear benefit from the monthly fee. However, based on the amount of funds you may save due to using this app, some consumers may feel as though the fee is worth the return.

If I decide to leave, how can I cancel the account without getting charged?

For those who signed up for Digit after April 11 — when the changes went into effect — you have a 100-day trial period from your start date before being charged.

If you want to cancel your Digit account without being charged, go to Dashboard > Help > Close My Account within 100 days, as of April 11, 2017.

 

 

 

What are some free alternatives for automated savings?

Other companies offer free automated savings tools, programs, and services to help you reach your savings goals. Here are five options:

  1. Chime offers automatic savings per purchase, plus a weekly bonus reward. This service also offers a “spending” account, a Visa Debit Card and boasts no minimum, overdraft or ATM withdrawal fees.
  2. Qapital allows you to set goals based on “rules” in order to increase your savings potential. For example, the Spend Less Rule encourages you to set a lower budget than what you usually spend in a category, then saves the rest (e.g., if you spend $25 on fast food instead of $35, the app will save the extra $10). The company makes money by accruing interest from your savings and promises there are no fees.
  3. Simple boasts a Safe-to-Spend feature along with its goal-setting and automatic savings feature.
  4. Dobot is similar in its plan for you to establish goals and set aside small amounts toward those goals.
  5. For Bank of America users who prefer the traditional bank atmosphere, you can enroll in the Keep the Change Program. The bank rounds your purchases to the nearest dollar amount and saves the difference. You must have a Bank of America checking account, savings account, and debit card

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Featured

Get The Highest Credit Score Possible: New Credit Card Study Reveals the Key

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Getting a high credit score can make it easier for consumers to save on life’s biggest purchases. But many Americans who are stuck with average or below average credit may find it difficult to move up the credit score ladder.

In a new study, MagnifyMoney, a leading financial comparison and education website, partnered with  VantageScore Solutions to see how much credit consumers are using — and how that impacts their credit score.

In the study, VantageScore delved into the credit score profiles of U.S. consumers who are using credit cards in 2017. Scores analyzed were on a 300 – 850 scale, using the VantageScore 3.0 score model.

We decided to home in on utilization — that’s how much credit people are using compared to how much credit they have available to them. Then, we looked at how their credit utilization corresponded to their credit score.

What we found is that people with excellent credit share one main trait in common: They have incredibly low utilization rates.

If you want the highest score, you need to make sure you haven’t missed any payments in the past and don’t have any public records, collection items or judgments. However, what this data shows is that even if you have a perfect payment history, low utilization is critical to get the highest score.

Key findings include…

  • The best scores have 16x the credit limit of the worst scores: People with the best scores (above 800) have available credit of $46,735, 16x that of the $2,816 of those with the worst scores (below 450), but their outstanding balances are about the same at $2,231 (above 800) vs $2,653 (below 450)
  • People with scores 601-650 have the biggest credit card bills: People with scores between 601 and 650 carry the biggest balances, at over $10k, or nearly 2x the average of all consumers.
  • The average credit card holder has $29,197 in credit lines. With an average balance of $5,720, the average holder is using 20% of available credit.
  • Getting above 700 is the biggest hurdle. People with scores 701-750 have average utilization of 27% vs 47% for those with scores 651-700, the biggest utilization gap of any score band. Average balances for people with scores 651-700 are about $3,000 higher than those with scores in the 701-750 range.

The Power of the Utilization Rate

One of the most influential metrics in credit scoring is called “revolving utilization.” This metric, informally referred to as the debt-to-limit ratio, calculates just how leveraged your credit cards are at any given time by comparing your balances to your credit limits. According to VantageScore, and using data provided by the three credit reporting agencies, people with credit scores above 800 have an average debt-to-limit ratio of just 5%.

To calculate the debt-to-limit ratio you must do a little math. The first thing you’ll do is add up the balances on all of your credit cards, which includes retail store and gas credit cards. Now add up the credit limits of those same cards and any other unused credit cards. Now you’re ready to do the math. Divide the total credit card balance by the total credit limit, and then multiple that number by 100 and you’ll get your percentage.

NOTE: Do NOT include any balances or original loan amounts from installment loans like mortgages, student loans, or auto loans. Revolving utilization is only calculated from your revolving credit card accounts.

Inside the Wallet of Someone With Perfect Credit

As you can see from the chart below, those of you with VantageScore credit scores over 800 have an average debt-to-limit ratio of just 5%. The math it took to get to 5% looks something like this: you have an average total balance of $2,231 and an average total credit limit of $46,735. When you divide $2,231 by $46,735 you get 5% — 5% is a fantastic debt-to-limit ratio. This is where you want to be!

Inside the Wallet of Someone With Bad Credit

On the other end of the score range — those of you with the lowest possible scores, 450 and below — you have an average debt-to-limit ratio of 94%, which is very high and very poor. Your average total balance is $2,653 and an average total credit limit of $2,816. When you divide $2,653 by $2,816 you get 94%. Ninety-four percent is simply too high and a significant reason why your scores are so low. This is not where you want to be!

 

It is important to point out that the debt-to-limit ratio is just that, a ratio. It’s all about the relationship between the balance and credit limit, not so much how large or how small your balances are or how large or how small your credit limits are. In fact, the people whose scores are the very lowest don’t have that much more average credit card debt than the people with the highest scores — $2,231 for the high scorers and $2,653 for the low scorers.

The significant difference between the two populations is in the credit limits. The folks with the highest scores have the largest total credit limit, $46,735 as compared to $2,816 for the people with the lowest scores.

You can see just how problematic it is to have lower limits as it makes even modest credit card balances very problematic for your credit scores as they take up a considerable portion of your available credit. You get too close to maxing out your available credit too quickly.

Use These Findings to Boost Your Credit Score

Here are MagnifyMoney’s tips on improving a low credit score:

Step 1: Get a line of credit

In order to establish credit history, you need to have a form of credit. The simplest way for you to begin will be to open a credit card. If your score is low or non-existent, then you’ll need to apply for a secured card or a store card.

  • Secured Card:  You’ll use your own money as collateral by putting down a deposit of a few hundred dollars with the bank. Typically, that amount will then be your credit limit. Once you prove you’re responsible, you can get back your deposit and upgrade to a regular credit card. [Read more here]

  • Store Card: People with a low credit score can often still get store cards because banks are more likely to approve users who apply through the store. The catch is that the interest rates are often very high if you can’t make your payments. [Read more here]

Step 2: Keep your utilization rate low

Utilization is the amount of your credit limit you spend each month. For example, if you have a $500 credit limit and spend $50 in a month, you’re utilization will be 10%. Your utilization is part of what determines your credit score.

Your goal should be to never exceed 30% of your credit limit. Ideally, you should be even lower than 30% because the lower your utilization rate, the better your score will be.

We recommend you make one small purchase (hello, pack of gum) a month to keep your utilization low and help increase your credit score at a faster rate.

Step 3: Pay in full, and on time, each month

The easiest way to prove you’re responsible is to only charge what you can afford. Never use your credit card to buy an item you won’t be able to pay off on time and in full each month.

Being late on your payments has a huge, negative impact on your credit score.

There is also no advantage to only paying the minimum amount due on your card. That will only result in you paying interest and does nothing to help your credit score. So just save yourself money and pay your entire bill.

Step 4: Avoid credit card debt

This goes hand-and-hand with step three. By only purchasing what you can pay off in full, you’ll never accumulate credit card debt.

If you’re already in debt from the misuse of credit cards, then make sure you continue to pay at least the minimum due on time each month. Paying on time is the number one indicator of a responsible borrower. You should consider applying for a personal loan, and using the money from the loan to pay off your credit card debt. Personal loan companies have interest rates that start as low as 4.25%, and they are approving people with credit scores as low as 550. You can shop around for a personal loan without hurting your score, because the lenders will approve you using a soft pull (which doesn’t impact your score). A recent study by Lending Club showed that people who paid off their credit card debt with a personal loan saw their score increase by 31% on average, right away. You can look for the best personal loans using this personal loan tool. After you pay off your credit cards with the proceeds on the loan, do not build up your debt again. Instead, just make one purchase each month and pay it off in full.

Once you pay off your cards, resist the urge to close them. Closing your cards will not only lower your utilization but remove history which damages your score in the “length of history” category.

Step 5: As your score improves, so do your options for better credit cards

You’ll start to get credit card offers as you begin to build your credit history and improve your score. Credit card companies still love sending snail mail.

Beware of any offers, especially for cash back cards, while your score is below 650. These cards typically provide little value and can smack you with high interest rates if you fail to follow step three.

Not sure if an offer is a good deal? Try checking it out in our cashback reward cards page. Our Magnify Transparency Score will let you know if it’s the real deal.

Once you get your credit score above 680, the good credit card offers will start rolling in. You can have your pick of the top-tier reward credit cards and start using your regular spending to get cash back or rack up points for travel.

Step 6: Protect your score

Once you’ve achieved a higher credit score, but sure to protect it by following these simple steps:

  • Always pay on time – late or missed payments will cost you dearly

  • Try to keep your credit used below 30% of your available credit

  • If you apply for a store card to increase your credit then immediately put in the freezer (literally if you have to) and avoid spending

  • Be sure to check your credit reports for accuracy and signs of fraud – you’re entitled to one free report per year from each of the three credit bureaus

If you have any questions or just want a helping hand, please reach out to us at info@magnifymoney.com or tweet us @Magnify_Money.

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Building Credit

Which Credit Cards Allow a Co-Signer (And What to Do If You Can’t Get One)

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Which Credit Cards Allow a Co-Signer (And What to Do If You Can't Get One)

There may be no greater misconception in the financial world than the notion that “anyone” can get a credit card. Getting approved for a traditional credit card is no sure thing. In fact, a recent study by the Consumer Financial Protection Bureau found the approval rate for general-purpose credit cards to be less than 40%.

All of which means many borrowers, particularly those who are routinely denied new credit, need another way to access credit if they want to build or improve their credit history. Finding a reliable co-signer is one option. The concept is simple. If you can’t get approved for a traditional credit card on your own, you find a co-signer with a stronger credit profile who is willing to agree (in writing) to bear full responsibility for the card’s balance should you not pay, thus easing the lender’s concerns.

Joint accounts work much the same way, but there’s a big difference: joint account holders have charging privileges, meaning they can use the card as they want, whereas co-signers usually do not. At the end of the day, whether someone is a co-signer or a joint account holder, they’re every bit as liable as you for any outstanding debt on the card and, for better or worse, the resulting impact on their credit history.

Banks That Accept Co-signers

Among the major credit card providers, only a few, such as Bank of America and U.S. Bank, allow for joint or co-signed accounts, while most others, such as American Express, Capital One, Chase, Citi, and Discover, do not.

Should You Ask Someone to Co-sign Your Credit Card?

According to most credit experts, however, it’s not really a question of can you get a co-signed credit card, but rather, should you?

The answer, according to those same experts, is virtually unanimous.

Experts Agree: Avoid Co-signed Credit Cards

“Few people realize what they’re asking when they ask someone to co-sign,” says Ben Woolsey, president and general manager of CreditCardForum. “They think the bank just needs someone as a credit reference. It’s way beyond that, and something that’s never really a good idea.”

Among the many drawbacks to pursuing a co-signed or joint account is the significant risk you’re asking that co-signer to accept, according to Michelle Black, a credit expert with HOPE4USA, an organization that specializes in helping consumers and businesses repair and access credit. Ultimately, the co-signer has nothing to gain and everything to lose. If you fall behind on payments, they must either pick up the slack or see their own credit dragged down by your failure to stay current.

“Co-signing is like playing Russian roulette with your credit scores,” says Black. “It’s extremely dangerous and typically ends badly.”

The fact that all of the risk associated with a co-signed credit card generally falls on the shoulder of the co-signer often creates challenges that go beyond the financial realm, according to Woolsey.

“It’s something people should approach carefully with respect to the ethical position you’re putting someone in,” Woolsey says. “Aside from the financial risk, there’s also the dynamic of potentially hurting the personal relationship, and that’s something people don’t really think about.”

Fortunately, there are many alternatives to co-signed credit cards, most of which are equally effective at providing access to credit and building your overall credit profile, without the financial and moral hazards.

Alternatives to Getting a Co-signed Credit Card

Become an authorized user on someone else’s account

One of the best alternatives to a co-signed credit card is to have someone add you as an authorized user to an already existing account, says Woolsey.

“It gives you all the benefits of getting a card in your own name, but it gives the primary account holder the control they don’t have as a co-signer, because they can revoke that privilege any time they want,” he says.

Whereas only some of the aforementioned credit card companies allow for co-signed credit cards, all allow for the addition of authorized users to an account.

Get a secured credit card

If you’re strictly looking to build or improve your credit, the secured credit card is another alternative. With a secured credit card, you put down a cash deposit that in turn becomes the line of credit for your account. If you put down a $1,000 deposit, you have $1,000 against which to spend and build credit. As you make “payments” on your secured card over a set period of time (usually 6 to 12 months), the lender will report your good behavior to credit bureaus. Some lenders may even upgrade you to a traditional credit card once you’ve proven you can make on-time payments.

Most major credit card companies offer secured credit cards, as do most credit unions.

“Secured cards can be a wonderful credit-building tool when managed responsibly,” says Black.

Take out a personal loan

If you’re looking to build your credit profile while also gaining access to cash, a personal loan is another option to consider, says Tim Hong, SVP of Products at MoneyLion.

“When you agree to a personal loan, you get your funds upfront and have a steady, predictable payment schedule,” Hong says. “You know exactly how much it will cost over time and when you’ll be done. That’s a dramatically different and more predictable experience than a credit card.”

Apply for retail credit cards

Finally, borrowers needing to build their credit profile can always fall back on the old-fashioned store credit card. Though not everyone is a proponent of store credit cards, most such cards, especially those from retailers, tend to have a lower barrier to entry than standard credit cards, says Ryan Frailich, a financial coach and planner based in New Orleans, La.

“Of course, since they’re taking on more risk by approving cards for those without a great track record, they also have the highest interest rates,” says Frailich. “If you go this route, you have to be absolutely certain you can pay off the full balance monthly.”

The Bottom Line

Whether you find a co-signer for your credit card or pursue one of the many alternatives, the experts agree your primary focus should be on building your credit to the point where banks will approve you on your own.

“What it boils down to is that co-signing is really just one option amongst many,” says Hong. “In the big picture, it’s about showing that reliable payment history and improving your credit score so you avoid having the need for the co-signed card to begin with.”

 

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Won’t impact your credit score

About MagnifyMoney

MagnifyMoney’s Editorial Code of Ethics

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The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

At MagnifyMoney, all of our writers — both freelance and full-time staff — must adhere to a strict editorial code of ethics whether they are developing product reviews, recommendations, personal finance guides, features, investigative reports, or videos.

Our Commitment to Unbiased and Fair Reporting

MagnifyMoney is an independent, advertising-supported comparison service which receives compensation from some of the financial providers whose offers appear on our site. We do not let compensation from our advertising partners impact the order in which products appear on the site.

Affiliate links help keep the MagnifyMoney site and financial education tools free, but they in no way influence our recommendations, reviews, and other editorial content. You can learn how we make money here.

When articles are clearly based on commentary or opinion, we will note that visibly to the reader.

Whenever there is potential conflict with a source or product mentioned in one of our articles, we will be transparent and forthcoming with that information.

Our Commitment to Accuracy

Our writers strive for 100% accuracy in their work. They must verify all data, names and other pertinent information before publication. Additionally, our team of editors and copy editors provide additional layers of fact checking for all articles.

When corrections or updates to stories are necessary, writers and/or editors must bring it to the Executive Editor’s attention immediately so that any changes are made as speedily as possible.

When information is corrected after publication, the writer or editor will make a note at the end of the story to provide further context.  We will attribute all sources where possible and never plagiarize our content.

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Featured, News

Best Places to Retire Early 2017

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Best Places to Retire Early 2017

The rise of the FIRE (Financial Independence and Retiring Early) movement has given way to a new emphasis on retiring early. Rather than leaving the workforce at the typical age of 62, FIRE retirees aim to retire in their 40s or 50s. This lofty goal typically requires an aggressive savings plan, as early retirees must live off their savings until they can expect to withdraw benefits like Social Security or dip into their 401(k) or IRA savings without facing a penalty.

In a new study, MagnifyMoney ranked 217 U.S. cities to find the best and worst places to retire early.

Methodology

We sought to find cities that had a combination of a low cost of living (highest priority), a great quality of life and access to employment if needed to supplement income.

Each city was given a final composite score out of 100 possible points. The composite score was based on those three factors, each weighted differently: cost of living (50%), quality of life (30%), and employability (20%).

Within each of these three categories, we looked at specific elements that play a key role in determining the best city to retire early.

Cost of Living: The cost of groceries, housing, utilities, transportation, health care and other goods and services.

Quality of Life: Weather (average annual temperature and number of sunny days); access to arts and entertainment services; walkability.

Employability: Early retirees may choose to incorporate part-time work into their lives even after they retire to stay active and supplement their existing savings. We looked at the minimum wage, unemployment rate, average commute time and state income tax for each metro.

Key Findings

Looking for a low cost of living? Move to the South or Midwest

Cities in the South and Midwest dominated the list of best places to retire early, mostly due to a lower average cost of living than any of the four regions studied. Southern and Midwestern cities boasted an average cost of living score of 63 —13 points higher than the average score across all 216 cities studied of (50).

The South and Midwest also boasted the two highest overall early retirement scores (57 and 56, respectively).

The South may be the best bet for early retirees looking for the option of part-time work to supplement their income as well. The region scored the highest employability score of any other area. The employability score was based on the unemployment rate, minimum wage, average commute time and state income tax.

Favor quality of life over low cost of living? Head Northeast

-Early retirees will need to save a pretty penny to retire in the Northeast, but they may find retirement more entertaining at least. Although the Northeast earned the highest score of any region for quality of life (67, well above the national average of 50), the region suffered due to its relatively high cost of living. It earned the lowest cost of living score of any region with a paltry 17.

Western cities had a poor showing in all three categories, barely eeking out a higher final score than the Northeast. But whereas the expensive Northeast was buoyed by its relatively high quality of life score, the West was dragged down on all three fronts.

The 10 Best Cities to Retire Early

The 10 Best Cities to Retire Early

The 10 Worst Cities to Retire Early

10-Worst-Cities

 

RANKINGS BY REGION

Region-Wise

MIDWEST: The 10 best cities to retire early

MIDWEST-10-Best-Cities

MIDWEST: The 10 worst cities to retire early

MIDWEST-10-Worst-Cities

NORTHEAST: The 10 best cities to retire early

NORTHEAST-10-Best-Cities

NORTHEAST: The 10 worst cities to retire early

NORTHEAST-10-Worst-Cities

SOUTH: The 10 best cities to retire early

SOUTH-10-Best-Cities

SOUTH: The 10 worst cities to retire early

SOUTH-10-Worst-Cities

WEST: The 10 best cities to retire early

WEST: The 10 best cities to retire early

WEST: The 10 worst cities to retire early

WEST: The 10 worst cities to retire early

Sources:

Cost of living:

http://coli.org

Quality of life:

Employability:

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21% of Divorcées Cite Money as the Cause of Their Divorce, MagnifyMoney Survey Shows

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Magnifymoney - Divorce and Debt Survey

In MagnifyMoney’s 2017 Divorce and Debt Survey, we polled a national sample of 500 divorced U.S. adults to understand how money played into the end of their relationship.

Here are our key findings:

AMONG ALL SURVEY RESPONDENTS

More money = more problems

Among all respondents, 21% cited money as the cause of their divorce.

In fact, the more money a respondent earned, they more likely they were to cite money as the cause of their divorce.

Among people who earned $100,000 or more, 33% cited money as the cause of their divorce.

By contrast, only 25% of people who earned $50,000 to $99,999 cited money as the cause of their divorce. And the lowest income-earners, those earning $50,000 and under, were the least likely to say money was the cause of their divorce at just 18%.

Money might cause more stress for younger couples

While rates of divorce rose along with the amount of a couple’s’ earnings, the opposite seemed to be true when it came to age. Younger couples reported that financial issues drove them to divorce, while the rate went down for older couples.

  • Among 25-44 year olds: 24% cited money as the cause of their divorce
  • Among 45-64 year olds: 20% cited money as the cause of their divorce
  • Among those 65 and over: 18% cited money as the cause of their divorce

AMONG SURVEY RESPONDENTS WHO CITED MONEY AS THE REASON FOR THEIR DIVORCE…

Divorce often led to debt 

AMONG SURVEY RESPONDENTS WHO CITED MONEY AS THE REASON FOR THEIR DIVORCE

Between legal fees, paying for your own expenses instead of sharing the burden with a partner, and other costs that come up when you choose to end a marriage, divorce gets expensive. For couples who already faced financial problems, the added expense often meant getting into even more debt.

Well over half (59%) of respondents who cited money as the cause of their divorce also said they went into debt because of their divorce. And a whopping 60% said their credit score fell after the divorce. By comparison, just 36% of the total survey group said they went into debt because their divorce, and only 37% said their credit score suffered.

Among those who cited money as the cause of their divorce…

  • 2% of respondents said they got away with $500 or less in debt.
  • 13% said they racked up debts of $500 to $4,999.
  • 14% said they took on between $10,000 and $19,999 worth of debt
  • 23% said they owed $20,000 or more

Among all survey respondents…

  • 2% were less than $500 in debt
  • 8% were $500 to $4,999 in debt
  • 6% were $5,000 to $9,999 in debt
  • 8% were $10,000 to $19,999 in debt
  • 12% were $20,000 or more in debt

Overspending was the biggest source of tension

Overspending was the biggest source of tension

Nearly one-third (30%) of those who said that money was the reason for their divorce also said overspending was the most common problem they faced. Overspending can easily add up to carrying credit balances when the cash runs out — and in fact, credit card debt was the second most common money problem these respondents cited.

Bad credit was also a problem, along with other types of debt like medical and student loan debt. Most financial issues seemed to stem from bad cash flow habits, however. Only 3% said bad investments caused trouble within their relationships.

Financial infidelity was rampant

Financial infidelity was rampant

When overspending and debt become issues within a marriage, partners may feel compelled to hide mistakes and bad money habits from each other. In fact, 56% of survey respondents who said money was the reason for their divorce also admitted that they or their spouse lied about money or hid information from the other person. By comparison, just 33% of all divorcees surveyed said they lied or were lied to about money during their marriage.

Among the survey respondents who cited money as the cause of divorce…

  • 37% said their spouse lied to them about money
  • 8% said they lied to their spouse about money
  • 10% reported that they both lied to each other.

Among all survey respondents…

  • 24% said they their spouse lied about money
  • 3% said they lied to their spouse about money
  • 5% said they both lied about money

Most would rather keep separate bank accounts

Separation of finances

With financial stress causing trouble in relationships, it’s not too surprising that 57% of people who cited money as the cause of their divorce said married couples should maintain separate bank accounts. Forty-three percent maintained that within a marriage, couples should keep joint accounts — even though their marriages ended in divorce.

Most failed to keep a budget

Budgeting and divorce

A whopping 70% of respondents who said their marriages ended due to money said they didn’t stick to a budget during their marriage. A budget is such a simple tool, but one that’s essential to tracking cash flow and understanding where money comes from — and goes.

Most don’t believe prenups are necessary

Prenups and divorce
Dealing with divorce is never easy, especially when financial problems caused the separation and continue to plague couples after the paperwork is signed thanks to new debts.

Still, 58% of survey respondents whose marriage ended in divorce due to money said they didn’t think couples should get a prenuptial agreement before tying the knot.

How to deal with your finances after divorce

Here are a few tips to help you get back on your feet, financially speaking, once your divorce is finalized:

Recognize your bad money habits. Money issues can negatively impact a relationship, and even cause it to end. But they can hurt you as an individual, too.

Create a budget. Remember, most people whose marriage ended due to financial stresses didn’t keep a budget during their relationship. Doing so now will help you stay on top of your money and know exactly where it goes. That will allow you to make better spending decisions and help prevent taking on even more debt.

Don’t make major money decisions right away. If you just finalized your divorce, you may feel like you need to make major changes or choices right away. But take a moment to slow down and give yourself time to heal. You shouldn’t make emotional decisions with your money — and going through a divorce is an emotional time. Wait until you can think more clearly and rationally before doing anything with your assets, cash, or career.

Money should not be your therapy. Because divorce can do a number on you, mentally and emotionally, you may need help with the healing process. But that does not mean retail therapy! It’s tempting to spend on material things in an effort to make yourself feel better, but any happiness you feel from shopping sprees is temporary and fleeting. It can also leave you into even more debt. Put away your credit cards, stick to cash, and use your budget to guide you.

Work to rebuild your credit. 60% of people reported their divorce hurt their credit. If your credit suffered too, take steps to rebuild it. Pay down debts, make all payments on time and in full, and don’t continue to carry balances on credit cards. Try to avoid taking out too many new loans or lines of credit all at once.

You should also work through this checklist of important actions to take after your divorce:

  • Update your beneficiary information on your accounts and insurance policies.
  • Update your will and estate plan.
  • Make sure all of your assets are in your name only and no longer jointly held.
  • Cancel accounts or services you held jointly, like utilities or cable. Open new accounts for you in your name.
  • Allocate a line item for savings in your budget. You want to start rebuilding your own cash reserves. Set an automatic monthly transfer from your checking to your savings so you don’t forget.
  • Close joint credit cards and get a new line of credit in your name.
  • If you have children, keep careful records of expenses for them that you plan to split with your ex, in case of disagreements. Ideally, make sure your divorce agreement includes an explanation of how child care will be split and who is responsible for what, financially.
  • Think about whether you need to hire new financial professionals to help you. You may want to find a new financial planner and certified public accountant. You’ll want to update your financial plan to reflect the fact that you’re no longer married.

Survey methodology: 500 U.S. adults who reported they were in a marriage that ended in divorce via Google Surveys from Feb. 2 to 4, 2017.

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Featured, Health

3 Ways to Keep Medical Debt from Ruining Your Credit

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3 Ways to Keep Medical Debt from Ruining Your Credit

Turns out, your physical well-being isn’t the only thing at stake when you go to the hospital. So too is your financial well-being. That’s because no debt is more common than medical debt.

The numbers are staggering in their scope. According to the Consumer Financial Protection Bureau, more than half of all collection notices on consumer credit reports stem from outstanding medical debt, and roughly 43 million consumers – nearly 20% of all those in the nationwide credit reporting system – have at least one medical collection on their credit report.

Now, you might be inclined to think that because you’re young or have both a job and health insurance, medical debt poses you no risk. Think again. According to a recent report from the Kaiser Family Foundation, roughly one-third of non-elderly adults report difficulty paying medical bills. Moreover, roughly 70% of people with medical debt are insured, mostly through employer-sponsored plans.

Not concerned yet? Consider that a medical collection notice on your credit report, even for a small bill, can lower your credit score 100 points or more. You can’t pay your way out of the mess after the fact, either. Medical debt notifications stay on your credit report for seven years after you’ve paid off the bill.

The good news (yes, there is good news here) is you can often prevent medical debt from ruining your credit simply by being attentive and proactive.

Pay close attention to your bills

Certainly, a considerable portion of unpaid medical debt exists on account of bills so large and overwhelming that patients don’t have the financial wherewithal to cover them. But many unpaid medical debts catch patients completely by surprise, according to Deanna Hathaway, a consumer and small business bankruptcy lawyer in Richmond, Va.

“In my experience, it’s often a surprise to people,” says Hathaway. “Most people don’t routinely check their credit reports, assume everything is fine, and then a mark on their credit shows up when they go to buy a car or home.”

The confusion often traces back to one of two common occurrences, according to Ron Sykstus, a consumer bankruptcy attorney in Birmingham, Ala.

“People usually get caught off guard either because they thought their insurance was supposed to pick something up and it didn’t, or because they paid the bill, but it got miscoded and applied to the wrong account,” says Sykstus. “It’s a hassle, but track your payments and make sure they get where they are supposed to get. I can’t stress that enough.”

Stay in your network

One of the major ways insured patients wind up with unmanageable medical bills is through services rendered – often unbeknown to the patient – by out-of-network providers, according to Kevin Haney, president of A.S.K. Benefit Solutions.

“You check into an in-network hospital and think you’re covered, but while you’re there, you’re treated by an out-of-network specialist such as an anesthesiologist, and then your coverage isn’t nearly as good,” Haney says. “The medical industry does a poor job of explaining this, and it’s where many people get hurt.”

According to Haney, if you were unknowingly treated by an out-of-network provider, it’s not unreasonable to contact the provider and ask them to bill you at their in-network rate.

“You can push back on lack of disclosure and negotiate,” Haney says. “They’re accepting much lower amounts for the same service with their in-network patients. They may do the same for you.”

Work it out with your provider BEFORE your bills are sent to collections

Even if you’re insured and are diligent about staying in-network, medical bills can still become untenable. Whether on account of a high deductible or an even higher out-of-pocket maximum, patients both insured and uninsured encounter medical bills they simply can’t afford to pay.

If you find yourself in this situation, it’s critical to understand that health care providers themselves usually do not report unpaid bills to the credit bureaus – collection agencies do. After a certain period of time, most health care providers turn unpaid debt over to a collection agency, and it’s the agency that in turn reports the debt to the credit bureaus should it remain unpaid.

“If you can keep it out of the hands of the collectors, you can usually keep it off your credit report,” says Hathaway.

The key then is to be proactive about working out an arrangement with your health care provider before the debt is ever sent to a collection agency. And make no mistake – most providers are more than happy to work with you, according to Howard Dvorkin, CPA and chairman of Debt.com.

“Trust me, no one involved with medical debt wants it to go nuclear,” says Dvorkin. “The health care providers you owe know very well how crushing medical debt is. They want to work with you, but they also need to get paid.”

If you receive a bill you can’t afford to pay in its entirety, you should immediately call your provider and negotiate, says Haney.

“Most providers, if the bill is large, will recognize there’s a good chance you don’t have the money to pay it off all at once, and most of the time, they’ll work with you,” he says. “But you have to be proactive about it. Don’t just hope it will go away. Call them immediately, explain your situation, and ask for a payment plan.”

If the bill you’re struggling with is from a hospital, you may also have the option to apply for financial aid, according to Thomas Nitzsche, a financial educator with Clearpoint Credit Counseling Solutions, a personal finance counseling firm.

“Most hospitals are required to offer financial aid,” says Nitzsche. “They’ll look at your financials to determine your need, and even if you’re denied, just the act of applying usually extends the window within which you have to pay that bill.”

If all else fails, negotiate with the collection agency

In the event that your debt is passed along to a collection agency, all is not immediately lost, says Sykstus.

“You can usually negotiate with the collection agency the same as you would with the provider,” he says. “Tell them you’ll work out a payment plan and that in return you’re asking them to not report it.”

Most collection agencies, according to Haney, actually have little interest in reporting debt to the credit bureaus.

“Think about it,” Haney says. “The best leverage they have to get you to pay is to threaten to report the bill to the credit agencies. That means as soon as they report it, they’ve lost their leverage. So, they’re going to want to talk to you long before they ever report it to the bureau. Don’t duck their calls. Talk to them and offer to work something out. They’ll usually take what they can get.”

At the end of the day, according to Haney, most people can keep medical debt from ruining their credit by following one simple rule.

“Just be proactive,” he says.

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Credit Cards

Best Credit Cards for People with Fair Credit

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Best Credit Cards for People with Fair Credit

People with fair credit now have plenty of credit card and borrowing options available. Just because your credit score is not perfect, you shouldn’t have to pay the high annual fees or servicing fees associated with subprime credit card issuers.

But until your score is perfect, you want to avoid dinging your score with applications for cards you don’t have a decent shot at being qualified for. Keeping that in mind, here is MagnifyMoney’s recommendation on how to find a credit card while you still have fair credit:

Step 1: See if you are pre-qualified for a credit card

Although credit inquiries do not have a big negative impact on your credit score, they can take 5-10 points off your score. And when you are in that 640-699 range, every point counts.

Before applying for credit cards, you should check to see if you can get qualified without hurting your credit score. A number of credit card issuers have pre-qualification pages, which take some of your personal information and check to see what cards you’re qualified for without having an inquiry hit your report (and your score).

You can find out how to check what cards you’re pre-approved for here. Credit card companies are changing their qualification criteria all the time, so you might be surprised to be qualified for a card you thought was out of reach.

Step 2a: If you are not pre-qualified, work on building your credit score

If you can’t get pre-qualified for a credit card, you should take out a secured credit card to build your credit score. With a secured credit card, you provide a deposit and receive a credit limit that is tied to your deposit. As you can imagine, this is not a way to borrow money. Instead, it is a way to build your score.

There are plenty of secured credit cards with no annual fee. You can find the best secured credit cards here.

Step 2b: You are not pre-qualified — and you really need to borrow money — take out a personal loan

If your score is not perfect and you need to borrow money today, a personal loan is the best way to get the lowest interest rate. Many personal loan companies will approve people with scores in the 500s. However, you will need to verify your job and income in order to get the money — so be prepared.

If you want to see what type of personal loan you can qualify for without hurting your credit score, use the MagnifyMoney personal loan tool.

Our Credit Card Picks for People with Fair Credit

If you don’t want to try the pre-qualification route, there are some credit cards that you may qualify for without perfect credit, but have some of the features you typically find in cards for people with good or excellent credit.

To make the process of choosing an ideal credit card for fair credit less daunting, we’ve rounded up five of the best to consider.

1. Capital One Platinum Credit Card

capital one bankThe Capital One Platinum Credit Card can be great for people who have a fair credit score. It has no annual fee, a variable interest rate of 24.99%, and fraud protection if your card is ever lost or stolen.

After at least three months of on-time payments, you may have access to a higher credit limit, helping you continue to build your credit score. As long as you pay your monthly bill in full, the variable interest rate won’t affect you. Also, the fact that there is no annual fee can prompt you to keep your account open so you can continue building a positive credit history for years to come.

2. Aspire Credit Union Platinum

Aspire Credit Union Credit CardAspire is a Credit Union anyone in the country can join – and in fact you don’t even have to be a member to apply. They explicitly state ‘fair or good credit is required’ for the Aspire Platinum Card, which is a great choice because the rates and fees are reasonable.

There’s no annual fee, an intro APR of 0% on purchases and balance transfers for 6 months, and after that a reasonable rate of 8.65% – 18.00%, which is less than many other cards that are available if you just have fair credit. They also offer generous credit limits to get started.

3. USAA Classic Visa Platinum Card

USAA Classic Visa Platinum CardThe USAA Classic Visa Platinum card is another option if you are looking to build credit and are affiliated with the military. This card has a $35 annual fee, and the APR ranges from 18.15% to 24.15%, depending on your creditworthiness.

They offer a lower APR and other benefits if you are an active-duty member, and don’t charge a foreign transaction fee. While the active-duty member benefits make this card attractive, you should also consider their $35 late and returned payment fees.

It’s also worth noting balance transfers and cash advances are not available with this card.

4. QuicksilverOne from Capital One

QuicksilverOne from Capital OneThe QuicksilverOne is another leading Capital One credit card that you may qualify for if your credit score is at least in the mid 600s. While this card has an annual fee of $39, it’s lower than most other credit cards with annual fees, and all new cardholders get 0% APR for the first nine months. Then, the APR goes up to a variable rate of 23.24%.

Like the Capital One Platinum Credit Card, there is fraud coverage, and users may have access to a higher credit limit after making at least their first three monthly payments on time. One major perk that comes with using the QuicksilverOne card is that you can earn 1.5% cash back on every purchase. Just beware to make up the $39 annual fee with cash back rewards you’ll need to spend at least $200 a month on the card to earn enough.

What Is Fair Credit?

The term “fair credit” is used often, but its meaning is not always clear. In general, your credit is “fair” if you have a FICO score or VantageScore between 640 and 699. If you do not know your FICO score or VantageScore, it is easy to find out for free:

Check your official FICO score for free with the Discover Credit Scorecard or Chase Credit Journey.

Remember: Credit card companies will use their own proprietary scores to determine whether you are approved or declined. The credit score range is much more important than the actual number itself. In general, once your score crosses 700, your chances of getting access to the best credit card offers increase dramatically.

But just knowing your credit score is not enough. Ask yourself the following question:

Why do I have a score below 700?

There are a few reasons why your score might be below 700:

  • You have a short credit history: If you have a perfect (but short) credit history, your score is likely below 700. Over time your score will improve. Unless you really need access to credit, it might make sense to wait a few more months until your score is above 700 so that you can take advantage of the best credit cards in the market.
  • Your utilization is too high: Maybe you have had a perfect (and long) credit history, but your total credit card utilization is far too high. (Utilization is the percentage of available credit that is being used. You start to get punished above 50% — and punished brutally above 90%). In this situation, you should try to pay down your debt and reduce your utilization before looking for the next card. Or, consider a personal loan to pay off your debt and naturally reduce your utilization.
  • You have missed payments in the past: Some missed payments in the recent past might be the reason your score is low. Just one late payment of 60 days or more can take more than 100 points off your score. Credit card companies tend to be tougher on missed payments than age of credit history.

You can still get a credit card, even with fair credit. However, you should understand why your score isn’t excellent and take steps to improve your score. The steps to a good credit score are fairly simple: Keep your utilization low and pay your bills on time, every month. If you do this consistently, your credit score will improve.

 

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Featured, News

4 New Federal Regulations That Could Impact Your Finances in 2017

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By Katie Tiller for MagnifyMoney

The new year rings in a few federal regulations that could impact your wallet and savings accounts.

With no major tax legislation taking effect in 2017, the changes are not as drastic as in past years. For example, Roth and Traditional IRA contribution limits will stay the same, capped at $5,500 for individuals under 50 years old and an additional $1,000 contribution for individuals 50 and over.

“This is a pretty quiet year,” says Eddie Patat, a CPA and owner of Turner and Patat, an accounting firm in Athens, Ga.

However, low-wage employees, individuals who work with financial advisers, college students, and Hurricane Matthew victims could earn and save a bit more, with these four rules and tax benefits in 2017.

Higher minimum wage

Millions of workers will pocket more each week due to minimum wage increases in 21 states.

The first state to do so will be New York, raising its minimum wage from $9 hourly to up to anywhere between $9.70 and $11 per hour on Dec. 31, 2016.

Eighteen states will raise their minimum wage beginning Jan. 1, 2017: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Florida, Hawaii, Maine, Massachusetts, Michigan, Missouri, Montana, New Jersey, Ohio, South Dakota, Vermont, and Washington.

Some of these states — Alaska, Florida, Missouri, and Ohio — will see wage increases of only 5 cents per hour. However, Washington and Massachusetts will see increases of a dollar, while workers in Arizona will have an extra $1.95 added to their wages each hour.

Workers in Maryland, Oregon, and Washington, D.C., won’t see their wages rise until July 1.

Some states, such as Arizona, California, and New York, are raising wages with an endgame in mind. Arizona’s goal is to eventually raise wages to $12 hourly, while California has plans to raise the wage a dollar each year until 2022, when it will hit the $15-per-hour mark. New York state’s newest wage increase is reportedly the first of five moves with the goal of increasing wages to $12.50 an hour.

However, many experts argue that increasing wages may not assist those the increase is meant to help. As the cost of labor grows increasingly more expensive, businesses will likely have to take steps to preserve their bottom line. As minimum wages increase, Patat says it is likely that businesses will raise prices on consumer goods to cope, decreasing workers’ spending power.

“So the people who are trying to be benefited by a minimum wage increase would simply see prices for things they use every day go up,” he says.

Or, if the prices of goods can’t be raised, employers could find other ways to save money, adds Michael Chadwick, a certified financial planner and owner of Chadwick Financial Advisors in Unionville, Conn.

“It seems like a great thing on the surface,” says Chadwick. “But it’ll hurt the minimum wage worker by cutting their hours and outsourcing their jobs to computers or some other form of automation.”

Chadwick points to the expansion of self-checkouts, automated restaurants, and stores like the new Amazon Go in Seattle, and the takeover of the movie rental industry by Netflix and Redbox as proof that human employees can easily be replaced when the cost of employment is too high.

The new “fiduciary” rule

On April 10, 2017, the Department of Labor will enact its new “fiduciary” regulation. This rule will ensure that every financial adviser is acting in the best interest of the client rather than himself or herself.

According to the White House Council of Advisors, about $17 billion in income is lost to investors due to conflicts of interest by financiers each year. The new rule will apply to retirement accounts, IRA accounts, and regular brokerage accounts, which are at risk for being misadvised. Financial advisers are often commission-based and receive their fees according to the transactions that they make.

Patat says the new “fiduciary” rule offers added protection for investors. Financial advisers will be required to provide details about services and fees, and their clients will receive a best-interest contract that will explain the relationship and disclose any conflicts of interest on the adviser’s behalf.   

“It’s going to provide a little more transparency, especially with respect to the fees the client is charged,” Patat says. “There has always been probably a degree of people who didn’t know how the broker was making money. I think this kind of disclosure is probably going to help open up people’s eyes as to what this product might mean as far as commissions to a broker. With all these disclosure rules on how much they’re making, I think you’ll see only good things happen for investors.”

Many firms, such as Merrill Lynch, will begin offering fee-based advising services, self-directed accounts, and an automated, fee-based adviser alongside commission-based advising.

Chadwick, however, says while most clients should make more in the long run, this new rule may not help out smaller investors who are not contributing to their retirement accounts or saving enough to make it worthwhile for the financial advisers.

“It’ll be hard for small clients to get good advice moving forward,” he says.

Hurricane Matthew relief

Victims of Hurricane Matthew in the Southeast will be able to access their retirement account without the typical restrictions in order to help recover from the 2016 storm.

Those who have been affected by the hurricane will be able to withdraw money from retirement accounts without incurring the 10% early withdrawal fee. Those who do will be able to spend the money on food and shelter, which do not typically qualify for IRA hardship withdrawal.

However, Patat says, this won’t apply just to those within the hurricane’s path. Volunteers with government or religious organizations who helped with cleanup and assisted victims are also entitled to relief.

“It does apply to people who live outside the area,” Patat says.

Those who have incurred a loss can file it on the previous year’s tax return. In the case of Hurricane Matthew, he says, the 2015 tax return can be amended to receive an immediate refund.

The relaxed IRA rules will continue until March 17, 2017.

Federal student financial aid changes

In 2017, students and parents filling out the Free Application for Federal Student Aid (FAFSA) form will be required to provide household income information from two previous years. This stems from a decision to begin sourcing earlier income information from those who apply for federal financial aid, rather than requesting the previous year’s income information. This means that students applying for financial aid for 2017 will need to submit income information from 2015.

While at first glance it seems as if students will simply receive the same benefits they did for the 2016 school year, Patat says this move will benefit students in the long run.

“There was always a rush to get information in for financial aid that required you to get your tax return done quicker than almost humanly possible,” he says, “so the fact that they are going back over a year to get old financial information, that saved a lot of hassle of going back and changing information that may have been estimated at that time.”

Furthermore, in order to make reporting income even easier, Chadwick notes that students can now fill out their FAFSA information for the coming school year in October, instead of January.

In the case of a drastic change in income, Patat says not to worry.

“You can still speak to your financial aid office at the school based on your financial situation,” he says.

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Pay Down My Debt

Live Richer Challenge: 5 Rules to Boost Your Credit Score

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Improving a low credit score can feel like an overwhelming task. But you only need to follow these five simple rules to improve your credit score.

Rule 1: Keep your utilization rate low

Utilization is the amount of your credit limit you spend each month. For example, if you have a $500 credit limit and spend $50 in a month, you’re utilization will be 10%. Your utilization is part of what determines your credit score.

Your goal should be to never exceed 20% of your total credit limit across all of your cards. That means if you have three credit cards with a total available limit of $5,000, you should never carry more than a combined total of $1,000 across the three cards. The lower your utilization rate, the better your score will be.

We recommend you make one small purchase a month to keep your utilization low and help increase your credit score at a faster rate.

Rule 2: Pay in full and on time each month

Being late on your payments has a huge, negative impact on your credit score.

There is also no advantage to only paying the minimum amount due on your card. That will only result in your paying more interest and does nothing to help your credit score. So just save yourself money and pay your entire bill. The easiest way to prove you’re responsible is to only charge what you can afford. Never use your credit card to buy an item you won’t be able to pay off on time and in full each month.

Rule 3: Eliminate lingering debt

If you’re already in debt you can’t afford to pay off, make sure you continue to pay at least the minimum due on time each month. Paying on time is the number one way to boost your credit score.

Then, get to work chipping away at that debt until it’s gone. Two of the most popular strategies to eliminate debt are the debt snowball and the debt avalanche.

Balance transfer: A balance transfer or personal loan can help you consolidate your debt and reduce your interest rate. If you trust yourself to open a new credit card but not spend on it, consider a balance transfer. You may be able to cut your rate with a long 0% intro annual percentage rate (APR). You need to have a good credit score, and you might not get approved for the full amount that you want to transfer.

Personal loan: Consider applying for a personal loan and using the money from the loan to pay off your credit card debt. Personal loan companies have interest rates that start as low as 4.25%, and they approve people with credit scores as low as 550.

Use our simple comparison tool to find personal loan offers. Then, easily see if you prequalify for a loan without dinging your credit in the process.

After you pay off your credit cards with the proceeds on the loan, do not build up your debt again. Instead, just make one purchase each month and pay it off in full.

Once you pay off your cards, resist the urge to close them. Closing your cards will not only lower your utilization but also remove history which damages your score in the “length of history” category.

Rule 4: Resist temptation

You’ll start to get credit card offers as you begin to build your credit history and improve your score. Beware of any offers, especially for cashback cards, while your score is below 650. These cards typically provide little value and can smack you with high interest rates if you fail to follow Rule 3 above.

Not sure if an offer is a good deal? Try checking it out on our cashback reward cards page. Our MagnifyMoney Transparency Score will let you know if it’s the real deal.

Once you get your credit score above 680, the good credit card offers will start rolling in. You can have your pick of the top-tier reward credit cards and start using your regular spending to get cashback or rack up points for travel.

Rule 5: Protect your score

Once you’ve achieved a higher credit score, be sure to protect it by following these simple steps:

  • Charge a small amount to the card each month and pay it off in full.
  • Aim to carry a balance that is no more than 20% of your available credit limit.
  • Sign up for a credit monitoring service such as Credit Karma, Discover’s credit scorecard, or another service that lets you check your report monthly, for free. You can also get a free annual credit report from all three bureaus at AnnualCreditReport.com.

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