Can I Pay Off My Student Loans with the Public Service Loan Forgiveness Program (PSLF)?

PayOffMyStudentLoansThere’s no quick and easy way to get your student loans wiped off the record, but in 2007, the government introduced the Public Service Loan Forgiveness Program (PSLF). If you’re a recent college graduate or a graduate student, and you’re buried in student loan debt, you might have heard of the program or even considered it as a way to help you pay off your student loans faster.

The basic idea is that if you work for 10 years in public service (aka for the government), the remainder of your student loan debt after 120 payments on that loan will be forgiven. It sounds simple enough, but there are several caveats that determine whether you qualify and whether it’s really a financially sound decision for you in the end.

So before you start planning your career path for the next 10 years to meet the requirements of the program, here are a few questions to ask yourself.

Do I Qualify for the Public Service Loan Forgiveness Program?

To qualify for the Public Service Loan Forgiveness Program, you have to make 120 qualifying payments on your direct student loan from the Department of Education. They credit only one payment a month, so that’s 10 years of making payments on your loan. Qualifying payments constitute those made after October 1, 2007 that are on time and in the full amount required under your repayment plan. Your payments also only qualify when they are made during eligible employment (when you are working in public service).

But the payments do not have to be consecutive, so that means if you work two years in public service, then take a couple years off to work somewhere in the private sector, the 24 qualifying payments you made when you were employed in public service still count toward the 120 qualifying payments. If you choose to return to public service, your qualifying payments continue to accrue on top of the 24 qualifying payments you made when you were in public service prior to your private sector employment.

If you’ve just graduated and you’re considering the program, keep in mind that it matters what type of loan you have since direct loans from the federal government are the only ones that qualify for this program. If you just started repayment on loans, you might want to consolidate all your loans (if you have a Perkins or Federal Family Education Loan) into a direct loan if you want all of them to be included in loan forgiveness. But if you’ve already been paying on your direct loans and other types of loans for years, it might not be worth consolidating, as payments made before consolidation will not count toward your 120 qualifying payments on your direct loan. Consolidating would simply extend the length of time and amount you’re paying in the end.

Also, it is important to remember that if your loan was in default at any point, it does not qualify, and you’ll have to go through loan rehabilitation before your loan can qualify.

Is the Public Service Loan Forgiveness Program Worth It?

There are several factors to consider if you’re deciding whether the Public Service Loan Forgiveness Program is really “worth it” for you.

First off, if you are considering the PSLF program, then you need to make sure you’re on an income-tied repayment plan (income based, income contingent, or pay as you earn). If you do a standard repayment plan, then after 10 years, your entire loan would have already been paid off since a standard repayment plan is typically 10 years.

Now as for whether the program is “worth it,” it really depends on your priorities for your career and your financial goals. If it’s strictly about your finances and the numbers, then you need to carefully calculate your salary potential in a private sector vs. public service position. Eligible public service employment often means lower pay, so the amount of your loan that is eventually forgiven might be less than the amount of money you might make in a private sector position with a higher salary for 10 years.

If you have always wanted to work for the federal, state, or local government or for organizations that provide qualifying public services, then PSLF might be an easy choice. After all, the program was meant to encourage people to choose public service careers and not be deterred by the overwhelming and increasing cost of college and professional school. If you’re passionate about working full-time for the AmeriCorps or PeaceCorps after medical school, then PSLF might help you put your mind at ease about making the financial sacrifice with your large college and medical student loans.

How Do I Apply for the Program?

Once you’ve made 120 qualifying payments, you can apply for loan forgiveness through the Department of Education. If you’re working in public service and considering applying for PSLF once you make all the qualifying payments, then you might want to consider sending in your employment certification form annually so there is a record for every year of your public service. Since you might be changing jobs within those 10 years or more of making loan payments, this paper record will help you demonstrate your 10 years of eligible employment when the time comes to apply for PSLF. You can access the form here.

You have to be working in public service when you apply for and receive loan forgiveness. So before you map out your long-term career plans and make sure they fit the requirements for PSLF, remember that you’ll have to be working in public service/eligible employment when you fill out the paperwork to request and receive your loan forgiveness.

Last Thoughts and Things to Consider

The PSLF Program wasn’t introduced until 2007, so no one has actually gone through the application process and received loan forgiveness. It’s not clear how easy or quick the process will be for those applying for PSLF.

Some even fear that the program will be cut before anyone can actually benefit from the program. That seems unlikely, though just earlier this year, House Republicans proposed cutting the program, and even Obama’s budget proposal included a $57,500 cap for PSLF. Even if changes were made, they probably would only take affect on those taking out loans after July 2016.

As October 2017 nears, the Public Service Loan Forgiveness Program application process will become clearer, but until then, you can read more about the requirements here and register for ReadyforZero to monitor not just your student loan debt, but also your credit card accounts and payments.

For more resources, you can also check out our ReadyforZero student loan debt resource center.

The post Can I Pay Off My Student Loans with the Public Service Loan Forgiveness Program (PSLF)? appeared first on ReadyForZero Blog.

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How Much Baby’s First Year Will Cost You


If you’re a veteran parent, are expecting a child, or are simply planning ahead for the future, then you’ve already likely experienced at least some of the exciting emotions that come along with family planning. A new baby ushers in a whirlwind of emotions that swing from excitement to anxiety on a moment’s notice. A baby is not only a new family member, but a new life, and one for which you’re responsible.

Some couples choose to wait until the right financial moment to start growing their families. Whether you’re an avid planner or not, it’s still important to sit down before the baby’s arrival to calculate the impending costs. There are many financial aspects to raising a child – especially within the first year – that are important to consider when planning out your baby budget. Let’s take a closer look at some of the costs that many parents will experience within the first year of baby’s life as well as different ways to reduce these financial burdens to ease the strain on your family’s finances.

Insurance and Medical Bills

Before baby is even born, you’ll begin to rack up charges for medical bills. Regular doctor’s visits typically require a copay (depending on your insurance), while other specialty visits for sonograms, vaccinations, laboratory testing, and the like will also start to slowly dwindle away your cash. Your insurance plays a large role here in how much you’ll be paying for each visit as well as how much you can plan to pay in total for your deductible to be met.

How can you make this more affordable? You have some say in which insurance company you pick, and opting to use insurance offered by an employer typically means that the employer will pay part of the cost of that insurance every month. Be sure to pay close attention to the deductible limits as well as maternity care costs and how much you can expect to pay (typically a percentage) after you’ve met these limits.

When choosing your doctors, always check to be sure that they’re in network with your insurance company. When you choose medical providers that are out-of-network, you’ll likely end up paying substantially more than if you stuck with somebody who was in-network. For instance, an in-network laboratory testing may only require that you pay a copay amount. These amounts are typically pretty low, especially compared to the price you’ll pay out of pocket if you choose an out-of-network provider.

Keep in mind that many insurance providers will automatically add your newborn to your plan for 30 days after, but you’ll usually need to contact your HR department (if insurance is through your employer) as soon as possible after the arrival of your baby to get him or her added to your plan.

Formula, Diapers, and Supplies

If this is your first baby, then you may have had the luxury of a baby shower where many of your initial supplies have been covered by the goodwill of family and friends. But there’s always something that you realize was missed, and for those having their second or third child, many of these supplies will need to be purchased by the parents. So what does it actually cost for many of the basic supplies?

For formula (if you’re not breastfeeding), one can likely expect to spend about $60-$100 per month (according to BabyCenter) which totals about $720-$1,200 for the first year of life. Other estimates put this first year cost at closer to $1,700.

For diapers, it’s estimated that disposable diapers will run you around $30-$85 per month for a yearly total of $360-$1,020.

How can one make this more affordable?  Many first-time moms will likely be inundated with coupons in the mail before baby even arrives. Be sure to utilize these where possible for diapers and formula, and ask on online yard sale websites and other forums for unused coupons from other moms too. If you’re opting to breastfeed, then the cost of formula is $0, but you’ll want to consider the costs of nursing covers, absorbing pads, and a breast pump (although pumps can be covered by insurance, cutting out that cost as well). If you’re opting to use cloth diapers, then you’ll spend a little more money off the bat (each disposable diaper can run you anywhere from $25-$60 or more, depending on the type and brand you choose), but after that initial purchase, you simply just calculate the costs of extra laundry loads and liners.

Beyond diapers and formula, you’ll also have varied costs of clothing, gear, and other accessories, which depends on what you already have, what you think you need, and what you prefer to purchase. Sticking to the essentials will obviously cut out more of the financial burden than somebody who prefers to purchase all of the available accessory items and gear, so those looking to save a few dollars will want to purchase the basics and only splurge when items go on sale.

Ultimately, the Costs All Depend on You

Your first year costs for a baby – including medical bills, insurance, formula, diapers, accessories – can vary drastically depending on how you go about purchasing items and how careful you are when selecting these items and providers. According to a 2010 USDA report, the average middle-income family will spend roughly $10,000-$12,000 on child-related expenses in their baby’s first year of life. Cut down on some of these costs by making wise, thought-out decisions instead of splurging on tempting, but unnecessary, baby items, and always be on the lookout for ways to cut back when possible. Check out BabyCenter’s First Year Cost Calculator to get a better grasp on your expected costs, and find avenues for cutting back on different areas to bring your total to a manageable level.

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Maximizing Special Benefits for Teachers

Very Upset Woman Holding Her Many Credit Cards.

As James was driving to school to start another day of teaching, he had a sinking feeling in his stomach that things weren’t supposed to be this way. As he shopped last night at Target for pens and notebooks for his students who couldn’t afford them, he fought the demon on his shoulder that told him, “This isn’t your responsibility, stop spending your money on people who should be buying these things themselves.” 

It wasn’t that he minded buying supplies for his students – they needed them to learn – but it stretched him financially. He had just bought a house and the mortgage was higher than the old rent payments; his credit card balances had an interest rate that was climbing for reasons unknown to him; his student loans weren’t going away fast enough; and things he knew he should have – like life insurance – didn’t make the cut. There wasn’t enough money left at the end of the month. 

Would things ever change, or was this the way life was going to be from now on? 


James is feeling the pinch, but he’s not alone. Many teachers who try to manage spending in the classroom along with their personal finances have to be careful to make sure they don’t derail financially.

Even teachers who don’t have buy supplies for their students need to keep a close eye on their finances.

But there are some benefits available – only to teachers – that may relieve the burden of this financial situation.

Educator Expenses Deduction

For those teachers who find themselves buying supplies for their classroom or students, and do not get reimbursed by their school, relief comes during tax season.

This relief comes in the form of a $250 tax deduction (a reduction used in lowering the amount of income used to calculate your tax bill), each teacher in the family can claim $250 of unreimbursed expenses that they have incurred throughout the year. If both spouses are teachers, then this can total $500, but not more than $250 per person.

It doesn’t just have to be pens and notebooks like James experienced – this can be used for books, computer programs and services, and other learning materials. Even if this amount goes over $250, then the remainder can be used in another section of your tax return to further reduce your tax liability (called Unreimbursed Employee Expenses).

Teacher’s Credit Union

As James is seeing his credit card rates climb, a bank that understands his situation probably isn’t serving him. That’s where teacher-focused credit unions can be an advantage. Credit Unions are different from banks in that they are member-owned (not publicly traded) and, in this case, are only available for teachers and their families. By restricting access and not having to worry about profits to shareholders, these credit unions offer lower rates, have less fess on their accounts, and are more lenient in their underwriting of certain products. Just Google “teacher’s credit union” and you’ll be able to see all the choices available.

Teacher-focused Insurance

James, like many others, decided to forgo life insurance when his budget got tight. But instead of just sacrificing a major need in his financial life, he should be educating himself on the options. If he’s a member a teaching organization (like NEA or one of its state affiliates), then there are insurance options available through those organizations. These are sometimes priced lower than what he may find on the market, given that it is just serving a certain class of people (teachers). Even if they are priced a little higher, then underwriting standards (i.e. blood work, urine samples, health exam) are more relaxed as the insurance is only being offered to teachers.

Car Insurance, Just for Teachers

Some teacher organizations are now providing car insurance, but many insurance companies have been offering “teacher’s auto insurance” for a while. This insurance is able to provide lower rates and more customized insurance to meet the needs of educators. As teachers are believed to be a more conservative class of people (own it – you are!), they are less likely to get into accidents, and can therefore be offered cheaper rates on car insurance. (As companies will limit the school boundaries and teachers they offer this to, it is essential to research companies to make sure they offer coverage in your area.)

Student Loan Forgiveness for Teachers 

Knowing how much it costs to get a degree, but also how little some teachers get paid, there are Federal programs in place to forgive some student loans held by teachers. If a teacher teaches in a Title 1 school in a certain subject area (often math, science or special education) for a period of 5 complete and consecutive years, then up to $17,500 of certain loans can be forgiven.

It gets better for school counselors – should they still be paying their student loans 10 years after graduation, and meet certain criteria, then the balance of their federal loans will be cancelled and forgiven.

If you’re like James and struggling to make ends meet each month, take a few hours to do some research and see if teacher benefits could help lighten your financial burden.

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The New Foreclosure Threat: Troubled HELOCs & Second Mortgages

Foreclosure Declines Continue

Prior to the financial crisis of 2008, when the real estate market was still thriving and properties were increasing in value year after year, it was very common for homeowners to take out second mortgages or home equity lines of credit (HELOCs). I’ve written previously about the financial shock many homeowners are now experiencing, as HELOCs they acquired in 2005-2006 begin reaching the 10-year mark, where they commonly reset from interest-only payments to repayment of principal and interest. In recent months though, as I coach people facing difficult decisions about their properties and mortgages, I’ve seen a new issue arise for certain homeowners. These owners are currently living in their home, are in good standing on their first mortgage, but have long been in default on their second mortgage or HELOC.

This is a situation that represents a definite risk of foreclosure, yet my experience has been that many people do not understand this reality and seem totally oblivious to the risk. Let’s take a closer look at some of the mistaken assumptions people are making, and what you need to know if you’re facing a similar scenario.

Do Second Lien Creditors Have the Right to Foreclose?

One of the most common assumptions people make is that a second position lienholder (the lender who issued the second mortgage or HELOC) does not have the legal right to foreclose while the first mortgage is currently being paid on time. Another variation on this misunderstanding is that the second lienholder doesn’t have the power to foreclose without the full cooperation of the first lienholder. Both of these assumptions are totally false!

There is no question, in either instance, that a second lienholder has the right to initiate a foreclosure. All that is necessary is for the second lender to absorb the cost of the foreclosure. Once the property has been sold at auction, the second lender must still pay the first mortgage balance before they can recover any proceeds towards the defaulted note or the costs of bringing the action. But there is nothing about a first mortgage that blocks foreclosure by a second lender.

What About the Statute of Limitations?

“I’m past the statute of limitations in my state, so they can’t come after me anymore.” I hear this misunderstanding frequently as well. Homeowners learn that their state has, say, a four-year statute of limitations for legal actions following a contractual default, and they assume this applies to their unpaid second mortgage. It’s true that the statute period may come into play in situations where a home has already been lost to foreclosure and a residual deficiency balance remains after the sale. In many cases, lenders can file a lawsuit to recover such unpaid balances. In that situation, the second lien gets extinguished on sale of the property, so the statute of limitations can definitely be a factor.

However, if you still live in the property and it has not been foreclosed on, then the second lien remains intact. And there is no statute of limitations for active property liens. All of the rights associated with that lien remain whether or not in default, and without regard to any limitation on duration. So it doesn’t matter if you haven’t paid the second mortgage in five years and your state has a four-year statute of limitations. The lender still has a right to foreclose.

What If a Property Is ‘Underwater’?

Another common mistake people make is believing the risk of foreclosure is virtually non-existent as long as the house continues to be “underwater.” This is by no means a safe assumption to make. For one thing, many people fail to distinguish between a home that is underwater relative to the total mortgage debt (first and second loans combined) compared to one that is underwater against the first loan alone. Those are two completely different risk profiles. It’s crucial to understand why, so let’s look at some examples:

If a Home Is Fully Underwater…

Your property’s current fair market value is $300,000. You owe $350,000 on the first mortgage, which is paid current, while your defaulted second mortgage of $50,000 remains unresolved. In this case, there is no equity covering the second mortgage at all, since the home is worth less than the balance owed on the first mortgage alone. In situations like this, it is unusual to see the original lender proceed with a foreclosure. Foreclosures can be expensive to process. A lending institution that has already been forced to write off $50,000 is not likely to risk another potential $50,000 in foreclosure costs, only to take back a property that will sell for an amount insufficient to cover the first loan’s balance. This property, in other words, is truly “underwater.”

If a Property Is Partly Underwater…

Your property’s current fair market value is $400,000. You owe $350,000 on the first mortgage, which is paid current, while your defaulted second mortgage of $100,000 remains unresolved. The total mortgage is therefore $450,000 on a home worth $400,000, so at first glance it looks like the home is underwater, right? Well, not really. To be precise, it is only partly underwater, because a sale of the house would cover all of the first mortgage and some of the second mortgage. In this example, there is $50,000 of home value covering the unpaid $100,000 second mortgage, so that loan is actually 50% “in the money.” Would a lender initiate foreclosure under these conditions? There is still the matter of costs to consider, but $50,000 in equity is sufficient to cover the cost of most foreclosure actions, so these figures definitely represent a property at risk.

If There’s Positive Equity in Your Home

Your home’s value has bounced back to being worth $500,000. You owe $350,000 on the first mortgage, which is paid current, and your defaulted second mortgage of $100,000 remains unpaid. The total mortgage debt of $450,000 is exceeded by the price of the home, with $50,000 of positive equity. Obviously, this home is not underwater at all, and is therefore a logical target for foreclosure by the second lienholder. In addition to the risk of foreclosure itself, there is also the risk of losing some or all of the $50,000 of paper equity to foreclosure costs and a below-market auction price (which is common for distressed sales).

Why Should I Worry Now?

The real estate crash happened seven years ago. Since then we’ve seen a general trend of rising property values. It’s crucial for homeowners to understand that the risk associated with defaulted second mortgages increases as the property climbs in value over time. The concern here is that this risk may develop at a point when the homeowner is no longer paying much attention, perhaps several years after the original default. With little to no collection activity during that whole time, it is tempting for people to think nothing will happen in the future. But this attitude fails to account for the higher risk that comes with a rising property value.

If the default took place at a time when the house was worth less than the first mortgage alone (as per the first scenario above), there was no point from the lender’s perspective to foreclose on the property. As time has gone by, however, and the value of the home has risen, it may now be only partly underwater or even have positive equity again. The risk is then much higher that the lender will “wake up” and attempt to recover their loss via foreclosure. In an upcoming piece, I’ll discuss why settling your second mortgage or HELOC may be your best option for keeping your home and moving on from the debt.

More on Mortgages & Homebuying:

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Thinking About Taking Out a Loan? Read This First

taking out a loan

The prospect of taking on debt can be nerve-racking, but borrowing money can also help you make life-changing purchases. From funding your higher education to buying a home to meeting other financial needs, most people borrow money eventually. It’s a good idea to remember that it is always a financial risk when you borrow money, so it is important to do your research before making this kind of financial commitment. If you aren’t sure you are ready to borrow money, check out the information below.

How to Prepare

Before you make any borrowing decision, it’s important to ask yourself whether the associated debt is necessary and to also have a plan for how you will pay it back. If it still seems like a good idea, you can get ready for the application process by getting familiar with your credit history.

It’s a good idea to request a copy of your free annual credit report well before submitting any applications, review it and dispute any errors you find. It’s also a good idea to check your credit scores (you can get two free credit scores, updated every 30 days, from If your score looks like it may deter you from qualifying for favorable loan terms, you can look for ways to build up your credit score before you apply.

Next, make a list of your purchasing goals for the next few years and try to assess where you may need to borrow money and how that could affect your budget and overall financial future.

What to Look Out for

When it comes to taking out loans, it’s important to look at all your options. Comparison shopping can save you lot of money. Look for a loan that meets your requirements and will result in monthly payments you can afford. Important factors to consider include interest rate, any prepayment penalties, and even insurance add-ons that can get rather expensive. Once you choose your loan, be sure you really know the terms and stay up to date throughout the repayment process.

How to Keep Up

It’s a good idea to plan how you are going to pay back any loan before you even take any money. If you aren’t already keeping a budget, this is a good time to start. If you don’t have one in place, track your income and spending. Then sit down and go over your records, decide where you can adjust, and build in your new loan payments. If you can, it can be a good idea to try living on the new budget (with the loan payments) before you take out the loan. For example, if you are thinking of taking out a mortgage that will change your current housing costs, you may want to try living off that lower amount for a few months while putting the amount you will be paying on your mortgage into a special account. This can then serve as your emergency fund in the future.

To ensure you make every payment on time you may want to try setting reminders or making the payments automatic. This removes the temptation to overspend as the repayment funds are never in your hands. Just be careful to have enough money in your checking or savings account so you don’t overdraft and incur a fee.

Lastly, if you are having trouble paying back your loan on time, you may want to seek help. You can turn to a nonprofit credit counseling organization, family member, friend or financial adviser for guidance.

Borrowing money has its pros and cons, but most of us will need a loan at some point. The choices we make about when, how, and how much to borrow can have a big impact on our finances. The more you get educated on the topic, the more likely you are to stay fiscally healthy — so study up and remember the tips above as you move forward.

More Money-Saving Reads:

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You’re Saving $22 a Month on Gas Right Now. Are You Throwing It Away?

buying gas

In September, Americans saved about $350 million per day on gasoline, compared to what they were spending last year, according to the latest monthly fuel prices report from AAA. Nationwide, drivers are benefiting from gas prices that are $1.05 per gallon less than they were in September 2014 — so where are they putting those savings?

A new report from Chase indicates consumers are just spending more on other things, rather than putting away money they used to spend on gas. The report details an analysis of more than 57 million credit and debit card users in the U.S. and what they bought during times when gas prices were high (between December 2013 and February 2014) and when they were low (between December 2014 and February 2015). In the period of high gas prices, the median monthly fuel spending amounted to $101 per person. A year later, people were spending $22 less on gas per month. That’s $264 a year in extra cash in your wallet.

What would you do with an extra $22 a month? Perhaps it doesn’t seem like much, but given that gas prices have continued to remain lower than they were last year, it’s possible you’ve saved a few hundred dollars on gas this year (though that depends on where you live and how consistent your driving habits have been). You can do a lot with that kind of savings, like put money in a retirement fund and watch it grow, or make progress toward getting out of debt.

A more likely scenario — based on Chase’s research — is that you’ve spent it already. According to Chase’s analysis of people’s credit and debit card activity, consumers spent 80% of their gas savings on other everyday things, like groceries, dining out, entertainment and shopping.

That’s not to say everything people bought with gas savings qualifies as frivolous spending, but this analysis shows how easy it is to miss out on savings, rather than capitalize on them. A common term for this is lifestyle inflation — when you start making more money or cut an expense from your budget, you use those funds to feed a higher standard of living, rather than maintaining your spending habits and putting the extra money toward goals like paying off debt or buying a house. (You can calculate how much faster it would help you get out of credit card debt, for example, using this credit card payoff calculator.) Tracking your spending can help you avoid lifestyle inflation, make progress toward your financial goals and, perhaps most important, keep you from overspending your way into debt. You can see how your spending is impacting your credit scores for free on

More Money-Saving Reads:

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How Your New Credit Card Could Hurt Your Credit

emv credit card

Chances are, you recently received a new EMV chip credit card or debit card. (And, if you haven’t, don’t fret: yours is likely in the mail.) These cards can certainly help protect you from counterfeiting, but cardholders beware: There is a way they could inadvertently hurt your credit score.

Replacement cards — typically issued when a card expires, fraud occurs or an issuer needs to do an upgrade — more often than not come with some type of change to your account information.

“The changes could be subtle or they could be obvious,” Bruce McClary, vice president of public relations and external affairs at the National Foundation for Credit Counseling, said. For instance, the account number on the front of your card may stay the same, while the expiration date or its security code (located on the back) could be different.

Changes to any piece of this aforementioned data, however, could cause an automatic bill or recurring payment associated with the card to get declined. “When [creditors or service providers] try to process your next charge, it’s going to come back rejected,” McClary said. After that, “there are whole number of scenarios that could unfold.”

In a best-case scenario, the creditor or service provider would call you, get the new account information and process the payment before it’s actually due. In a less-than-ideal scenario, the bill could go unpaid — and if this bill is a loan payment (more commonly tied to debit cards or checking accounts, though some creditors do accept payment via credit card), you may wind up with a missed payment on your credit report. Missed payments are one of the quickest ways to tank a good credit score. In fact, a new one can cause a drop of about 100 points to a FICO score of 780 or higher.

Missing a non-loan payment, like a gym membership or streaming subscription, can be equally problematic, since, if left unaddressed long enough, they could wind up in collections — and that type of slip will also badly damage a previously stellar credit score.

How to Prevent Any Credit Score Problems

Once you get an EMV chip card — or any replacement credit or debit card, really — in the mail, spend some time reviewing the monthly billing statements associated with that account to identify any linked automatic billing or recurring charges. “Go back 12 months if you can, because sometimes you have things that you are billed for annually,” McClary said. You can call these creditors or service providers to update your billing information. (You may be able to do this online as well.)

You can also monitor your credit report regularly to spot a missed payment or collections obligation. You can get your credit report for free each year at or check your credit scores each month for free on

There are some steps, too, that you can take to minimize the odds of a replacement card coming back to haunt your credit score. First, “designate one of your credit cards as the card that any of your accounts that you want to have automatically processed,” McClary said. “The simpler, the better when it comes to automatic billing.”

You can also try signing up for any email or text messaging alerts that a creditor or, even, service provider, like your cable company, may offer. These alerts can help you keep track of due dates and readily spot if a payment has gone unprocessed.

More on Credit Cards:

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Holiday Shopping Countdown: 5 Ways to Stay on Track

Why You Should Start Your Holiday Shopping Now

There are about two-and-a-half months left until Christmas. You may feel like you have all the time in the world to save and shop for the holidays, but those weeks can fly by in the blink of an eye.

Americans spend over $800 on holiday gifts, according to the American Research Group — and that money doesn’t grow on trees! It has to come from somewhere – and going into debt for holiday shopping isn’t the wisest money move. It can damage your credit scores and leave you struggling to keep up with your normal, fixed expenses. (You can see how your credit card spending affects your credit scores for free on

Here are some easy steps to ensure you have all the money you need to shop ‘til you drop (and the tools to shop smart) this upcoming holiday season.

1. Get Listy.

Make a list – yes, a real list that is not only in your head! List the people you need to buy for and how much you plan to spend per person. Tally the costs to determine your shopping budget. Also, use this list to record gift ideas. (Here are some gift ideas for mom and a list of ideas for dad too.) Be sure to check off names once a gift is purchased. If you use a tool like Evernote or Excel, you can update it year to year to see how you’re doing. How efficient are you?

2. Sock It Away.

Calculate how much you need to save each week to reach your total gift list tally and, based on your household budget, figure out how much you can spare from your paycheck. Each pay cycle, move that money over to your savings account.

3. Tighten That Belt.

If what you take from your paycheck isn’t enough to cover your holiday fund, it’s time to make some sacrifices, at least through the holidays. Here are some easy (ish) ones:

      • Mani/Pedi. Just think — if you do your own nails through Christmas, you could probably save a couple hundred dollars!
      • Car Wash. Wash your own car for a change. Or better yet, have the kids do it and pay them a few bucks. It will be much less than what you pay the pros.
      • Selfish Shopping Moratorium. Stop buying for yourself. Yes, it hurts, but it’s for a good cause.
      • Sell It. And if you can’t bear to deny yourself anything, try selling stuff you don’t use on Amazon Marketplace, Craigslist, eBay or ThredUp.

4. Track Prices. 

As you build your gift list, start keeping an eye on prices to determine the best time to pounce. Sites like PriceZombie and CamelCamelCamel track the prices of lots of online retailers, including Amazon!

5. Revisit Layaway.

Ready to start buying but don’t want to pay all at once? You may think that layaway is a thing of the past, but it has had a resurgence in recent years. Stores like Walmart and Toys “R” Us offer free layaway with a small deposit. Kmart, Sears, Marshalls and T.J. Maxx offer layaway for a $5 fee.

More Money-Saving Reads:

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Can a Debt Collector Check My Credit?

Consumers are often shocked by the amount of information debt collectors have about them — including, sometimes, the amount of available credit on their credit card accounts, or that they recently paid another past-due debt. But how do debt collectors find that out? One way is by checking the debtor’s credit reports, sometimes years after they defaulted on a debt, or before they pick up the phone or send a letter to collect.

Is That Legal?

Debt collectors have the right to review your credit reports, as long as they do so in conjunction with their effort to collect a debt from you.

Specifically, the federal Fair Debt Collection Practices Act says a “consumer report” (the technical name for a “credit report”) may be furnished to someone who “intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer…” (emphasis added).

“This is pretty much a blanket rule, though it was restated in the April 2012 decision of Pyle v. First National Collection Bureau, a case decided by Magistrate Sheila K. Oberto of the U.S. District Court for the Eastern District of California,” says Jay S. Fleischman, a lawyer who helps people correct errors on their credit reports.” He goes on to explain: “In the Pyle case, the consumer pulled a copy of his credit report and saw that First National Collection Bureau had obtained a copy. The court dismissed his lawsuit against the company because First National was a debt collector, and the presumption was that it had a permissible purpose for accessing Pyle’s credit file. In the absence of proof to the contrary, the court held that First National’s actions were proper under the law.”

How Often Do They Check?

There is no specific limit, but they probably don’t check as often as you think. After all, credit reports cost collectors money. “In general, debt collectors would only pull a credit report once, either at the time they receive the account or at the time they are negotiating repayment options such as a settlement,” says Nick Jarman, president and COO of Delta Outsource Group, and a contributor. “The main reason a credit report is checked nowadays is to validate the consumer’s statements to the debt collectors about their current financial situation.”

Unfortunately, these inquiries may be what are known as “hard” inquiries, which affect your credit rating. Generally, though, inquiries only take a few points off scores, and usually don’t count after they are 12 months old. (This guide explains how inquiries affect your credit.)

Can You Stop Them?

Probably not. If you want to stop someone from accessing your credit information, you’ll usually need to place a credit freeze on your reports. But that won’t necessarily stop a debt collector. Equifax notes on its website for example, that “companies that have a current account or relationship with you, and collection agencies acting on behalf of these companies,” are exempt from credit freezes. (Plus, keep in mind that unless you are a victim of identity theft, you’ll usually have to pay a fee to freeze and unfreeze your reports.)

The bottom line? If there are debts you haven’t repaid, there is a good chance a debt collector will review your credit reports at some point. It’s helpful for you to know what they are likely to see, and also to be alerted to inquiries from bill collectors. You can get free annual credit reports and stay on top of changes by getting your free credit scores, updated monthly from

More on Managing Debt:

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Seriously, Is There a Difference Between a 700+ Credit Score & a 800+ Score?

credit score differences

With some of the most common credit score models, an 850 is the best you can get. Sometimes, people get really hung up on that “perfect” score, agonizing over every point change, even if their scores are in the low 800s or high 700s.

Credit scoring involves more than numbers; there are also ranges. For example, a 780 and an 820 are both considered excellent credit scores (this is true among many FICO models and the VantageScore 3.0 model, both of which lenders use to evaluate borrowers). Think of it like your school days: While getting 95% of questions right may not seem as good as getting 100% correct, both scores are probably considered As, or a 4.0 on most grade point average scales. A student who consistently gets 95% of test answers right could end up with the same GPA as someone who always gets 100% right. Sure, it feels good to get a 100%, but is it crucial to making the honor roll? No.

With credit scoring, there’s nothing wrong with trying to get the best credit score you can, but realize that once you fall into that “excellent credit” range, your precise score may not make much of a difference in your ability to qualify for credit and low interest rates on loans. (You can figure out the “good credit score” range here.)

The loan-level price adjustment matrix published by Fannie Mae is a good example of this: It shows how lenders tend to increase or decrease interest rates based on an applicant’s credit score and loan-to-value ratio. The higher your down payment and the higher your credit score, the lower your mortgage rate is likely to be. The table breaks down how different credit scores can affect your mortgage rate. Say you will make a 20% down payment, and your credit score is between 700 and 719: The table indicates your rate could be 0.75 percentage points higher than if you had a score of 740 or higher. If your credit score is between 680 and 699, you’re looking at a rate 0.5 percentage points higher than that. That shows how much a few credit score points could affect the cost of your loan.

But the highest that table goes is a 740 credit score. Once you’ve achieved such a high score, you’re not seen as much of a lending risk as someone whose score is in the 800s. The reason you may want to aim for as high a score as possible is because scores fluctuate often, so if you’re borderline — say, in the 740s — a small change in your credit information or the use of a slightly different scoring model than what you’ve been looking at could knock you down into a lower credit tier. As a result, you may end up paying a higher interest rate.

You can see how much you can save with a higher credit score by using our Lifetime Cost of Debt calculator — you’ll notice the highest credit score range you can use is 740 or higher, because data shows that people with scores in that range qualify for the best interest rates. Again, because scores fluctuate often, it’s important to check your credit scores so you notice if something is dragging it down, like a missed payment or high credit card balances. You can see your credit scores for free every 30 days on

More on Credit Reports & Credit Scores:

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