Money Management

Is your credit score on par with the average consumer’s? Read on to find out. 

Your credit score paints a picture of you as a borrower. It tells lenders how risky it is to loan you money or issue you a line of credit. And so the higher your credit score, the easier it becomes to not only borrow money, but borrow at a lower interest rate.

The most widely used credit-scoring method in the U.S. is that created by the Fair Isaac Corporation, now better known as FICO. And recent data from FICO found that the average consumer has a credit score of 718. That’s the highest score on record since 2005.

If your credit score is higher than 718, congratulations. That means you may be in really good shape to borrow money the next time you need to.

If your credit score is lower than 718, it doesn’t necessarily mean that borrowing is off the table. And to be fair, there’s not much of a notable difference between a credit score of, say, 715 versus 718. A lower score may, however, mean getting stuck with a higher interest rate on your next loan.

If your credit score is a lot lower than 718, then you may want to work on boosting it. And here’s how you can do that.

1. Pay all bills on time

Different factors are used to calculate credit scores, and the one factor that carries more weight than any other in that number is your payment history. Being late with a single personal loan or mortgage payment could significantly bring down your credit score. On the other hand, paying all bills on time consistently could help your credit score rise.

If your credit score needs work, make a list of your various bills and try to set up as many as you can to get paid automatically. That way, you know you won’t be late. For the bills you can’t put on autopilot, fill your calendar with reminders.

At the same time, work on boosting your savings account balance so you have cash reserves to tap. That could help you avoid a scenario where you’re late paying a bill due to a lack of funds, as opposed to simply forgetting.

2. Pay down some existing credit card debt

Another factor that goes into calculating your credit score is your credit utilization ratio. This measures how much revolving credit you’re using at once relative to your total spending limit across your different credit cards. Credit usage accounts for 30% of your FICO® Score.

A credit utilization ratio of 30% or less is considered favorable. So if you currently owe $4,000 on a $10,000 credit card limit, paying down $1,500 of that could leave you with 25% utilization instead of 40%. That could, in turn, lead to a boosted credit score.

Of course, finding the money to pay down credit cards may be easier said than done. But one thing you can do there is pick up a flexible side gig you work as time allows for. A gig like that could include driving for a ride-hailing service or signing up to house-sit at times that are convenient for you.

3. Check your credit report regularly

Your credit report is a snapshot of your borrowing history. It shows what loans and credit card balances you have outstanding and how current you are on your financial obligations.

It’s important to check your credit report regularly — ideally, about once every four months. The reason? A credit report can contain an error. If yours has one that paints you in a less favorable light, it could result in a hit to your credit score. But if you spot a mistake and correct it, your credit score could get a nice lift.

What sort of errors should you be looking out for? Pay attention to debts that are listed as delinquent that you know you’ve been timely with. Also, make sure your credit report doesn’t reflect credit accounts (current or otherwise) that aren’t actually yours.

If you see an open credit card or loan listed on your credit report that you don’t recognize, investigate at once. It may actually be that someone opened a fraudulent account in your name.

It’s good to see that the average U.S. credit score has gone up. But if yours needs work, take these steps to put yourself in the best position to borrow affordably when you need to.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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If an appraiser spots health and safety issues, a lender may not be willing to provide a home loan until the problems are corrected. Find out why. 

When you are buying a house, you will need to get an appraisal. A home appraiser doesn’t just look at what the home’s market value is, although that is their main job. They’re also checking out the property to see if there are any obvious health and safety issues.

If the appraiser spots certain problems affecting the health and livability of the house, they have to note this on the report that they send to the lender. Unfortunately, a mortgage lender may decide that they are unwilling to give you a loan unless these issues are corrected prior to closing. When that’s not possible, your deal could fall apart.

Here are some of those health and safety issues that could make getting a loan a no-go.

1. Exposed wiring

If there is a problem with the home’s wiring, it creates a risk of the home burning down — or of someone being electrocuted on the property. Mortgage lenders aren’t in the business of helping people buy houses that could be death traps or that could burst into flames at any moment. There’s too big of a risk that the property could be destroyed or that it would be unsellable if the lender had to foreclose on it.

If you’re considering buying a house that has exposed wiring, you’ll need to make sure the seller is willing to get an electrician in to fix the issue properly prior to an appraisal. That just makes good sense, as you also shouldn’t want to buy a home that presents such a big safety risk.

2. Broken windows

Broken windows can also make a house unsellable. And they could mean there are other problems resulting from the exposure to the weather that resulted from the broken window. Because of that, windows will typically need to be fixed or replaced prior to a mortgage lender providing a home loan.

3. Insufficient smoke or CO detectors

A home typically must have one smoke detector in each bedroom, one detector on each level of the home, and one detector in the hallways outside of bedrooms. A carbon monoxide (CO) detector also must be installed on each level of the property, as well as in hallways outside of bedrooms.

If a home is missing those detectors, lenders may find it presents a health and safety risk and isn’t mortgageable.

4. Active roof leaks

When a roof has less than two years of active life left, this is a major red flag. Typically, repair or re-roofing will be necessary before the lender will offer a loan. That’s the case both because a roof can be really expensive and because a leaking roof could cause other problems in the home that are expensive to fix (like damage to the rafters).

Lenders will usually require a roof inspection if there are any questions about the roof’s durability — such as water stains from an active leak.

5. Non-working appliances or heaters

For home buyers getting FHA loans, there are additional health and safety issues that could derail a loan. This includes appliances that don’t work, a heater that cannot heat the house to at least 58 degrees, or appliances that are missing.

All of these issues make lenders nervous that the home will not be good collateral. If they come up on your appraisal, you’ll need to negotiate with the seller to make fixes. If that’s not possible, your lender may not approve you to buy the house and you could find yourself starting from square one.

It’s best to be on the lookout for these problems when you’re house hunting. You don’t want to get through the offer phase and pay for an appraisal, only to find out a home’s condition means you can’t get the mortgage loan you need to buy it in the end.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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Flying business class is much different than flying economy. Watch out for these common mistakes that many business-class beginners make. 

Business class is a big step up from economy and premium economy. It’s also much more expensive — potentially thousands of dollars more, if you pay cash. You can save money by booking with miles earned on your credit cards, but you’ll still spend a lot more miles than you would booking economy.

Considering the cost, you definitely want to get your money’s worth when you book business class. This may seem easy enough, but some mistakes can detract from the experience or cost you more.

These mistakes are normal. There are lots of differences between flying business class and economy, and if you haven’t done it before, you aren’t going to be an expert. That’s why it helps to be aware of the most common mistakes so you know what to avoid.

1. Assuming all the seats are the same

Some people think that there’s no major difference between business-class seats. That couldn’t be further from the truth. The quality of your seat will depend on several things, including the airline, the route, the plane, and even which seat you choose.

For example, many airlines provide lie-flat seats that turn into beds in business class. But some only have recliner-style seats, similar to what you get in domestic first class. These aren’t bad, but they’re not nearly as comfortable. Check the options an airline offers before you book and if possible, go with an airline that has lie-flat seats.

Even within the same cabin, some business-class seats have advantages over others. If you’re traveling with someone else, you may want to see if there are two seats next to each other in the middle of the cabin. If you’re flying solo, then a seat on its own by the window may be a better choice.

SeatGuru is a great way to check seating options before you buy. You provide the flight info, and it will give you the important details on the seating options. That includes the type of seats offered, which ones are in favorable locations, and which ones have potential issues, such as being close to the galley and potentially noisy.

2. Not choosing your meal in advance

One of the perks of business class is the food. There are normally much better meal options in business class than in economy. Airlines often have recipes from well-known chefs for business-class passengers, and you get served a meal with real cutlery, not plastic.

Most airlines give you the option of choosing your meal in advance. If so, make sure to do so. There are a limited number of each meal option available. If everyone who orders before you picks the steak, and that’s what you want, the flight crew could run out before they get to you. This is easily avoided by selecting your meal online before your flight.

It’s especially important to do this if you have any food allergies or dietary restrictions. If you need a meal that’s dairy-free, vegetarian, gluten-free, or meets any other requirements, the airline may have options available. But you need to request it in advance so the airline can prepare.

3. Spending more than necessary

Business class costs a premium. That’s why it’s even more important to get the best deal possible, because it could save you thousands.

There are a few reasons why travelers miss out on these deals. Here’s what not to do if you want to save money when booking business class:

Being inflexible about your travel dates: Business-class prices can vary quite a bit, even from one day to the next. If you’re flexible, you’re more likely to find a good deal.Waiting until the last minute: Since the business-class cabin has far fewer seats than economy, it’s more likely to be completely booked if you wait too long. Also, you’ll have more options if you’re setting up a trip well in advance as opposed to booking at the last minute.Always paying in cash: You can also book business class with miles, and one of the fastest ways to earn them is with travel credit cards. Instead of paying $3,000 or more, you could redeem 60,000 to 80,000 miles.

4. Not taking advantage of all the benefits

When you fly business class, you get more than just a better seat and food. There are lots of other perks, starting at the airport. They can include:

A priority check-in lineA priority security laneFree checked baggage with higher weight limitsAirport lounge access

You definitely don’t want to spend 30 minutes waiting in the standard check-in line when you could’ve sped through the priority line. And it’d be a shame to sit around the boarding area or pay for an expensive meal because you didn’t realize you had access to a comfortable airport lounge with free food.

Airlines typically provide info on all their business-class amenities on their websites. This could also be in the emails they send you after you book. If you’re not sure what all the benefits are, make sure to find out online before your trip so you don’t miss out on anything.

There’s no wrong way to fly business class, but it makes sense to make the most of the experience. By avoiding these mistakes, you’ll do just that.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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You may be able to borrow via a personal loan or a home equity loan — but it’s important to understand the differences between the options. Find out how. 

If you need to borrow money, there are different ways you could do it. A personal loan could be one option. If you are a homeowner, a home equity loan could be another. But there are important differences between these two borrowing methods.

How can you decide which is right for you? Just ask yourself these key questions.

What do you need the money for?

If you are borrowing to do home improvements, a home equity loan could potentially be a better option because you may be eligible to deduct the interest on your taxes if you itemize. This is typically allowed if you use the proceeds from the home equity loan to buy, build, or substantially improve the home that is guaranteeing the loan.

If you’re borrowing for some other reason, you can typically still use a home equity loan. You can use the proceeds for just about anything when you tap into your home’s equity. But the interest will not be tax deductible.

How much do you need to borrow?

When you take out a home equity loan, you can only borrow a set amount based on the equity you have in your home.

Most home equity loan lenders cap the total amount of your mortgage and home equity loan at somewhere between 80% and 90% of your home’s value. So if you have a $250,000 house and already have a $200,000 mortgage, you’d only be allowed to borrow between $0 (if lenders capped total loans at 80% of value) and $25,000 (with a 90% cap). If you needed to borrow more than that, you’d be out of luck.

With a personal loan, there are lenders that allow you to borrow up to $100,000. However, the specific amount you can borrow is based on factors like your credit score and income. If you have solid financial credentials, you may be able to borrow more with a personal loan if you don’t have much equity in your house.

How much risk are you willing to take on?

A personal loan isn’t secured by your house. A home equity loan is. If you take a home equity loan, you risk losing your house to foreclosure if you default (stop making payments). You may not want to take that chance.

With a personal loan, you’re still expected to pay as promised and could face collections activity if you don’t. But that’s not likely to lead to foreclosure, so you’re taking much less of a risk of devastating financial loss if something goes wrong.

Is a low interest rate or low upfront costs more important?

When you take out a home equity loan, you have to pay closing costs just like you do when you get a first mortgage loan. This can include expenses like an appraisal fee and an origination fee. The fee could add up to around 2% to 6% of the amount you’re borrowing. So if you got a $50,000 loan, you could owe as much as $3,000.

By contrast, many personal loan lenders allow you to borrow with no upfront origination fees. Home equity loans do often come at lower interest rates than personal loans, though, since they are secured loans. You’ll have to ask yourself if you’d rather pay higher fees upfront for a home equity loan at a lower rate or get a personal loan with lower fees and a higher rate.

Both a personal loan lender and home equity loan lender should disclose borrowing costs, including upfront fees and total interest over time, so you can compare these costs to decide what makes sense.

By asking yourself these questions, you can make an informed choice about the best borrowing method for your particular situation.

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Our experts vetted the most popular offers to land on the select picks that are worthy of a spot in your wallet. These best-in-class cards pack in rich perks, such as big sign-up bonuses, long 0% intro APR offers, and robust rewards. Get started today with our recommended credit cards.

We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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