Money Management

A great credit score is something you earn, not purchase. Read on to learn the right way to go about improving your score. 

A strong credit score has the potential to open a lot of doors for you. If your credit score is excellent, you may be more likely to get approved the next time you apply for a new loan or credit card. And you may also be more likely to snag a competitive rate on a personal loan with outstanding credit.

Experian says a credit score of 800 or above is exceptional (a score of 850 is perfect). Meanwhile, a credit score of 740 to 799 is considered very good.

If your score falls between 740 and 850, you’re pretty likely to get approved when you apply for a loan or credit card, provided you meet the income-related requirements. And a score in this range means you’re also likely to qualify for a relatively competitive interest rate when you sign a loan.

This doesn’t mean you won’t get approved to borrow money with a lower score. But the higher your score is, the better your chances are.

You may be wondering if it’s possible to pay to boost your credit score. And the answer is sorry, but no. A high credit score is something you earn through specific financial behaviors. You can’t just toss a credit bureau $500 to raise your score by 50 points. But if you make the right moves, you might see your credit score improve over time.

It’s not about money

Your credit score is completely separate from your net worth and income. It’s true that people with a higher net worth or income might be in a better position to have great credit, since having access to more money makes it more likely you’re able to pay your bills on time and not borrow excessively.

But the amount of money you have in no way directly impacts your credit score. If your credit score needs work, you can’t simply throw money at the problem.

How to raise your credit score

If you feel that your credit score could use a boost, there are different steps you can take to make that happen. But do know that improving a credit score tends to take time, so don’t expect results overnight. It might take several months or longer to see your score get a lift, but don’t get discouraged — that’s just part of the process.

To raise your credit score:

Make all bill and loan payments on time. This tells lenders that you can be trusted to borrow again.Keep your credit card balances to 30% of your total spending limit or less. This tells lenders that you’re not overextended.Maintain long-standing credit card accounts. A lengthy credit history is a good thing in the eyes of lenders because it shows consistency.Don’t apply for too many new credit cards at once. This can serve as a red flag that you’re not in such great shape financially because you need sudden access to credit.Maintain a diverse credit mix. It tends to reflect more favorably on you if your credit profile includes not just credit card balances but also installment loans like car loans.

Another way to raise your credit score is to check your credit report for errors. If you spot a mistake that seems to be working against you (for example, showing a delinquency that’s not legitimate), correcting it could help your credit score improve fairly quickly.

There are certain problems in life that money can solve, but a lower credit score isn’t one of them. If you want your score to improve, you’ll need to commit to the above moves. But as a reward, you might get access to more borrowing opportunities — and more affordable ones at that.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Concerned about debt? Read on for steps you can take to whittle it down. 

It’s not uncommon for most people to carry some sort of debt. Many people have to finance a home or car purchase, for example, because they don’t have the funds to cover such large expenses in full.

But while it’s one thing to carry a mortgage or auto loan, it’s another thing to juggle multiple credit card and loan balances. So if you’re in the latter category, you may be fairly stressed about it.

You’re not alone.

Among consumers with debt, about two in three worry about paying debt “very frequently” or “often,” according to a recent survey by First Tech Federal Credit Union. But living your life plagued by debt-related worries isn’t great for your mental health, so it’s important to do what you can to break that cycle. You have a couple of options.

1. Tackle your debts from highest interest rate to lowest

The sooner you pay off your debt, or at least make notable progress on it, the more your outlook might improve. One approach you may want to take is to tackle your debts by order of highest interest rate to lowest, since debts with higher interest are costing you more to carry. This is called the debt avalanche method.

So, let’s say you owe $500 on a credit card charging 12% interest and another $2,500 on a credit card charging 17% interest. You may be inclined to pay off the $500 balance first, since it’s smaller. But financially speaking, it actually makes sense to pay off some of that $2,500 balance first because it’s costing you more.

Consolidate your debt into a single loan

Part of the problem of carrying credit card debt is that the interest rate on your card can be variable. This means it can climb over time and make your balances harder to pay off.

Another good tactic to employ in the course of paying off your debt is to consolidate your various balances into a single loan. You could also do a balance transfer, especially if you’re eligible for a 0% introductory rate on it. But that 0% interest rate will only remain in effect for a limited period, and once it ends, the interest rate on your balance could skyrocket.

A personal loan may be a safer bet because you’ll get to lock in a fixed interest rate on your debt from the start. As such, your monthly payments on that loan will be set in stone.

If you own a home, you could also look at consolidating your debt via a home equity loan. It’s a good idea to compare interest rates between that and a personal loan to see which is more favorable.

It’s important to note that falling behind on home equity loan payments could put you at risk of losing your home. So you may want to stick to a personal loan for that reason alone.

Bottom line

Carrying debt can be stressful no matter how much you have. If you spend a lot of your waking hours worrying about your debt, make a plan for paying it off for good, whether by tackling your balances in order of most interest to least or via debt consolidation. You may not end up debt-free in six months or a year. But if you keep at it, you should eventually reach the point where you’re no longer burdened with owing money.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

The FederalReserve has raised rates to over 20 times what they were in July 2022. Here’s how to weather the consequences. 

The same forces that tipped Silicon Valley Bank into bankruptcy are out for blood. The Fed has hiked rates at unprecedented speeds, scooping dirt-cheap interest rates from historic lows and catapulting them skyward. That’s had some interesting ripple effects on the economy:

Bank failuresA tight housing marketBallooning credit card balances

Shark Tank executive and money mogul Kevin O’Leary suggests that rates will again bankrupt banks, leaving consumer savings in limbo. If he’s right, consumer deposits could be at risk of disappearing — especially deposits at small, regional banks.

Kevin O’Leary’s thoughts on bank failure

In a CNBC interview, O’Leary addressed the effect of Fed rate hikes on the U.S. economy. O’Leary says, “I am just predicting — and I am very cautious on this — it will break down in the regional banks, which support 60% of the economy.”

How does he figure? Well, regional banks are especially susceptible to rate hikes because they are less diversified and capitalized than big banks. In other words, should small banks be caught swimming naked, they have less cash and alternative revenues to fall back upon when the tide goes out.

Specifically, O’Leary thinks regional banks will suffer from holding real estate loans. For one thing, as the cost to mortgage property rises, so does the risk of default. When consumers default on loans, lenders (banks) are forced to swallow losses.

Plus, high interest rates could cool demand for commercial real estate, dropping sticker prices. Banks that hold commercial real estate as collateral could be in trouble as those holdings become less valuable — in three words: bad for banks.

Other financial experts, including famed money manager Cathie Wood, echo the sentiment on X (formerly Twitter). Wood claims monetary policy was “the primary culprit” for bankrupting SVB and Signature Bank. But will more banks fail?

Will more banks actually fail?

It’s possible. Since March 2023, three banks have failed: First Republic, Signature Bank, and Silicon Valley Bank (SVB). But the U.S. government stepped in to prevent a bank run on Signature Bank and SVB, offering customers a one-time guarantee all deposits would be 100% refunded.

Should more banks fail, the government could again step in to protect deposits. It’s worth noting the government already covers many banking deposits up to $250,000 via FDIC insurance, which many banks offer.

But customers with more than $250,000 deposited per account, per bank could lose money if banks fail. Some customers have taken measures to secure their short-term or long-term savings to prevent worst-case scenarios.

How to protect savings from bank failure

Generally speaking, banks are safe places to put cash. The U.S. government protects many checking and savings accounts up to $250,000 per depositor, per bank, and account type insured by the FDIC. But you can take extra steps to secure cash.

You can open a savings account at one of the safest banks in the U.S. These banks are typically large, with plenty of cash to weather tough times. But in exchange for safety, you’ll probably earn less interest on savings than you could with a high-yield savings account. It’s a tradeoff.

You can also diversify savings among multiple accounts to increase how much the FDIC insures. By depositing no more than $250,000 per account at one bank, you guarantee the FDIC will reimburse you 100% should one or more of your banks fail.

Kevin O’Leary is taking a wait-and-see approach. He suggests investors “wait 90 days to see what happens in the small banking arena in the United States.” In the meantime, it’s worth watching for more bank failures.

These savings accounts are FDIC insured and could earn you 12x your bank

Many people are missing out on guaranteed returns as their money languishes in a big bank savings account earning next to no interest. Our picks of the best online savings accounts can earn you 12x the national average savings account rate. Click here to uncover the best-in-class picks that landed a spot on our shortlist of the best savings accounts for 2023.

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.

 Read More 

You may be amazed at how much wealth you can grow by age 40. Read on to learn more. 

The average 60-something has $112,500 saved for retirement, according to Northwestern Mutual. And frankly, that’s not a whole ton of money to have by that age.

But accumulating $100,000 by age 40 is a different story. And if you’re not sure how to get there, here are some steps that could make you more likely to achieve that goal.

1. Start early

Some people don’t start saving and investing their money until their 30s or beyond. And it’s easy to see why you may not be so inclined to start pumping money into a brokerage account in your 20s. During that period, you may be more focused on paying off credit card debt and trying to establish yourself in a career.

But many people graduate college by age 22. And if you’re able to start saving and investing at that point, you might end up with a nice sum of money by age 40.

2. Choose quality stocks

One trap newbie investors can fall into is buying stocks because they’re familiar with the companies, or because those stocks are seemingly popular. A much better bet is to do your own research to determine which stocks are worth buying. A company that’s in the news a lot isn’t necessarily a company you want to invest in.

So how can you tell if a stock is worth buying? Look for factors like how much debt the company has versus cash flow. And think about what the company is doing with its resources. Is it introducing new products and services or recycling the same old ones without innovation whatsoever? These are factors that can help you make sound choices.

3. Make sure you’re diversified

It’s important to maintain a diversified portfolio if you want to grow a nice amount of wealth over time. And you can do that in a few different ways.

First, you could simply buy stocks across a range of market sectors — for example, fill your portfolio with not only tech stocks but also bank stocks, energy stocks, and retail stocks. You could also take an easier approach and fill your portfolio with broad market ETFs, or exchange-traded funds. These funds allow you to effectively own a bunch of different stocks with a single investment.

It really can be done

We’ve talked about ways to grow your brokerage account balance to $100,000 by age 40 in theory. Now, let’s look at some numbers.

Let’s say you start investing $200 a month at the age of 22, and your investments deliver an average annual 10% return. That’s in line with the stock market’s average return over the past 50 years, as measured by the S&P 500 index. If you go this route, by age 40, you should have about $109,400 — more than $100,000.

Of course, there may be some months when you can’t afford to invest $200. And there may be some months when you can invest more. So all told, accumulating a $100,000 portfolio balance by age 40 is doable if you commit to it early on and take the right investing approach.

Our best stock brokers

We pored over the data and user reviews to find the select rare picks that landed a spot on our list of the best stock brokers. Some of these best-in-class picks pack in valuable perks, including $0 stock and ETF commissions. Get started and review our best stock brokers.

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.

 Read More 

Paying your credit cards off in full can be a huge money-saver. Read on for ways to make that happen. 

When you charge expenses on a credit card, you don’t necessarily have to finish paying for them by the time your bill comes due. You’re allowed to carry a balance forward as long as you make your minimum payment on your credit card each month.

Credit card companies want you to carry a balance forward because that way, they get to make money off of you in the form of interest. And so it’s not so surprising to learn that only 38% of U.S. consumers pay off their credit cards in full every month, according to a recent survey by First Tech Federal Credit Union.

But carrying a balance forward on your credit cards could have serious consequences. So it’s best to do what you can to pay your bills in full.

The problem with carrying a credit card balance

Credit card companies generally do not let you carry a balance forward without it accruing interest. The only exception is if you have a 0% interest rate credit card, but that 0% APR will only be in effect for a limited period. This means that for every month you don’t pay your bills in full, interest can accrue against you.

So, let’s say you carry a $2,000 credit card balance for 24 months until it’s paid off completely. If your card has a 20% APR, it means you’ll end up spending about $400 on interest in the course of paying off your debt. That’s a lot of money to part with.

What’s also problematic about carrying a credit card balance forward is that it has the potential to lower your credit score. One factor that goes into calculating your credit score is your credit utilization, or the amount of credit you’re using at one time relative to your total credit limit. Once your credit utilization exceeds the 30% mark, your credit score has the potential to dive.

So, let’s say you owe $2,000 on your credit cards but your total spending limit is $5,000. Even if you make your minimum payments on time every month and aren’t considered late or delinquent, 40% credit utilization is apt to drag your score down.

How to pay off your credit cards in full every month

Many people hate the idea of budgeting. But if you want to make it more likely that you’ll be able to pay off your credit cards in full regularly, then you may need to take the time to set one up — and then stick to it.

If you set up a budget that maps out your ongoing expenses, you’ll know what you can afford to spend in each expense category. That means you may be less likely to overspend and wind up with a credit card balance you can’t pay in full.

There are several budgeting apps you can use that will sync up with your credit cards to help you track your spending. It’s worth playing around with different ones to see which you feel most comfortable using.

Another good bet is to check your credit card balances weekly. If you see them starting to creep upward, you can scale back your spending so you’re not left with a giant tab you can’t cover in full.

Carrying a credit card balance is a pretty common thing to do, but it’s not ideal for your finances. Sticking to a budget and being vigilant about checking your spending could make it so you’re more likely to be able to pay your bills in full going forward.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More 

Your credit card might give you access to cash. Read on to see why you may not want to take advantage of that. 

As a credit card holder, you may be privy to a host of benefits. For example, your credit card might offer protection against lost or stolen purchases, and you may be entitled to cash back on the various items you charge.

Another option that might be available to you as a credit card holder is using your card to get money when you need some in a pinch. Over the last two years, 33% of consumers have taken a cash advance from a credit card at least once, according to a recent survey by First Tech Federal Credit Union. But while that might seem like an easy, convenient way to access money when you need to, it’s a move that might sorely backfire on you.

The problem with cash advances

Sometimes, emergency bills arise that require you to have money immediately. And you may be inclined to turn to your credit card if you don’t have the cash you need sitting in savings. But while a cash advance might seem like a good solution, there are some big problems you should know about.

First, you’ll typically be charged a fee for a cash advance, and that fee could be substantial. Experian says you could be looking at a fee of 5% of the sum you’re taking out. So for a $500 cash advance, that’s $25.

Also, many credit card companies impose a higher interest rate on cash advances than regular purchases, so your cash advance might cost you more than you think. Also, interest often starts to accrue on a cash advance as soon as you take out that money.

Alternatives to a cash advance

Before you rush to take out a cash advance using your credit card, you may want to consider other options, depending on the sum you’re looking to borrow. One option is to take out a personal loan, which lets you borrow money for any purpose.

Personal loans offer the benefit of fixed interest rates, which also means monthly payments that are set and predictable. And the interest rate you’ll get on a personal loan is often considerably lower than what a credit card company will charge.

If you own a home, a home equity loan is another option you can look at when you need money. Like a personal loan, it allows you to borrow money for any purpose, and your interest rate and monthly payments will be fixed. But as the name implies, this loan option will only be on the table if you own a home and you have equity in it to tap.

Now, one hiccup you might encounter with a home equity or personal loan is that lenders commonly impose minimum borrowing requirements. So if you only need a small amount of cash, these solutions may not work for you.

But some lenders do write smaller loans. So it’s worth looking into your options, especially since a personal or home equity loan might be a far more affordable way to borrow money when you need to.

Alert: highest cash back card we’ve seen now has 0% intro APR until nearly 2025

If you’re using the wrong credit or debit card, it could be costing you serious money. Our experts love this top pick, which features a 0% intro APR for 15 months, an insane cash back rate of up to 5%, and all somehow for no annual fee.

In fact, this card is so good that our experts even use it personally. Click here to read our full review for free and apply in just 2 minutes.

Read our free review

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.

 Read More