Financial Literacy

October 20th, 2015 by

Each week we’ll feature an article to help improve our financial literacy.

Better Credit In 30 Days

Your credit score is more than an abstract three digit number.  It can impact your ability to get or keep a job, continue your education, start a business, purchase a car, your insurance premiums, and even the ability to keep a roof over your head.

Some financial “experts” encourage us to avoid credit and pay cash for everything but that is a very expensive mistake.  It is literally impossible to escape the financial impact of less than perfect credit and, in this brief article, I’m going to give you some key tips to rapidly increase your credit scores in one month without paying for a credit repair service that can set you back $1,000 or more.

Not surprisingly, the biggest impact to your credit score is your payment history.  Thus, paying your bills on time is obviously important.  However, don’t be confused with which bills impact your credit score positively as many financial obligations that you pay monthly will never be reflected on your credit report.  For example, it is very unlikely that your landlord or cell phone service incurs the cost to report your on-time payments.  However, we can help you get, for instance, your rental payment history (up to two years retroactively) reported on your credit so you can immediately recognize a boost in your credit scores.

Next, your revolving utilization has a dramatic impact on your credit scores.  For example, if you are using a large percentage of your available credit card limits, your credit scores will go down as you are perceived as more “risky”.  This can be true even if you pay the full amount off each month!  A general rule is to not use more than 20% of your available credit to avoid being penalized by this utilization-driven indicator.

For most people, we can average a 67 point credit score increase in less than one month by adding select new trade lines.  This works for two reasons.  First, opening new credit lines while keeping the utilization low can reverse the impact of having large credit card balances on existing cards.  Second, we need to have three to five revolving accounts (credit cards) with good payment history to optimize our credit scores.  Even for folks with bad credit, we typically avoid secured cards and seek credit lines of $1,000+ as size does matter when it comes to improving credit scores.

What about negative items on your credit report?  While there are legal and effective strategies to address derogatory items on your credit, rapid credit building can typically have the biggest impact on increasing your scores rapidly.  One of the most common credit mistakes that we witness is when individuals make payments on charged-off or collection accounts that resets the DLA (date of last activity) which actually will lower your credit scores and reset the statute of limitations for the creditors to pursue you for the debt.

If you are looking to better understand and improve your credit scores, free assistance is now available through an innovative Credit & Money Program that recognizes credit issues are typically the symptom and money /money management issues are usually the underlying root problem.  Email [email protected] for more information about available community resources to help.

Each week, Thomas Montgomery, MBA, MHA, Aubrey News Financial Literacy Columnist, Denton ISD Adult Learning Educator, and Aubrey ISD Business Teacher, contributes a Financial Literacy article.  For questions or more information, contact him at [email protected].  

 

Use your Life Insurance to Pay for Senior Care

The costs of long term care are increasing every year, but most families do not understand what they will be confronting when it is their time to start paying for care.  Too many people wait until they are in the midst of a crisis situation before they start trying to figure out how the world of long term care works.  Long term care is a very expensive proposition.  Families can go broke trying to provide for a loved one.

New approaches to fund long term care must be encouraged, and converting life insurance policies into a Long Term Care Benefit Plan is an option that has grown into a mainstream and accepted financial solution.

A life insurance policy can be used to pay for Long Term Care.  How?  Instead of allowing a policy to lapse or be surrendered; the owner of the policy can convert the policy into a Long Term Care Benefit Plan. This option extends the time a person would remain private pay and delays their entry onto Medicaid.  This option is also a qualified spend down to bridge the time while waiting for Aide and Attendance approval or the monthly benefits from both can be combined.

For many seniors, they either cannot afford to pay the premiums, or they plan to lapse or surrender their policies to qualify for Medicaid. What they don’t realize is that they have the legal right to convert their policies into a Long Term Care Benefit Plan and are able to immediately direct payments to cover their senior housing and long term care costs. Converting a policy allows the senior to remain private pay — meaning they are not reliant on public assistance and can choose the form of long-term care that they want: Homecare, Assisted Living and Skilled Nursing, Hospice or Memory Care.

The Long Term Care Benefit Plan is an accepted form of payment with any provider of Senior Care in the United States.  This funding option has been covered in the New York Times, the Wall Street Journal, Fox Business News, and on radio programs across the country.  Because it is a consumer protection and saves tax payers’ money, it has been endorsed by numerous consumer and advocacy groups as well as political leaders across the country.

At a time when seniors and their families are struggling with how to afford the high costs of senior care, and state budgets are looking for ways to save money, converting a life insurance policy to pay for long term care instead of abandoning it for nothing in return makes much more sense.

Each week, Thomas Montgomery, MBA, MHA, Aubrey News Financial Literacy Columnist and Aubrey ISD Business Teacher, contributes a Financial Literacy article.  For questions or more information, contact him at [email protected].  


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