Money Management

I didn’t know just how bad my credit was until my car died. Read on for four things I wish I knew back then that can help you rebuild your credit faster. 

When I went car shopping in my late 20s, I knew my credit was bad. I’d charged up a bunch of credit cards about five years earlier, then let the accounts go to collections because I couldn’t pay. But I couldn’t bring myself to actually look up my FICO® Score to see just how bad it was.

Delaying the car purchase wasn’t an option. My old Corolla had over 200,000 miles on it and was beyond repair, according to my mechanic.

Finally, the guy in the dealership financing office told me the three-digit number I didn’t want to know: My FICO® Score was 515. Anything below 579 is generally considered poor — which means getting credit is hard and you pay exorbitant interest rates when you’re approved.

I still drove away in a new (used) Kia Rio that day. It cost $7,700. My only option was to finance it at an atrocious 18% interest rate.

More than a decade has passed since then. Today my credit scores are in the high 700s — not perfect, but still within FICO’s “very good” range. If you’re struggling with bad credit, you can rebuild with time and patience. Here are four things I wish I knew when I was trying to improve my 515 credit score.

1. Time is the only way to heal negative payment history

I used to see a lot of ads that made outlandish claims, such as promising to add 150 points to your credit score in 30 days. So I thought that maybe I’d be able to repair my credit quickly when I finally needed the car loan I’d been dreading.

It’s true that you can repair your credit score fairly quickly if your reports have errors or outdated information. But what if all those negative marks on your reports are accurate — as was the case with my credit report? Time is the only thing that heals the damage.

Negative information, like accounts in collections, stays on your credit reports for seven years. A bankruptcy can remain on your reports for up to 10 years. But the impact of negative information starts to fade before that, so long as you build healthy credit habits.

2. A secured credit card is the easiest way to start rebuilding

I wish I’d known sooner that a secured credit card is tailor-made for situations like mine. Essentially, you put down a deposit and that deposit becomes your credit line. When you have bad credit, opening a secured credit card is one of the best ways to heal.

Since you’re putting down a deposit, there’s less risk to the issuer. That’s why even people with bad credit scores can typically open one. Your payments get reported to the credit bureaus. Your score improves over time if you pay on time and keep your balance low. Building positive information on your credit reports is vital, since payment history determines 35% of your credit score. In fact, it’s the most important credit score factor.

3. Your rent and utilities aren’t helping you build credit

I always paid my rent and utilities on time. But because landlords and utility providers generally don’t report to the credit bureaus, those on-time payments weren’t improving my credit.

Today, there are several rent-reporting services that allow you to build credit history by having your rental history reported to the bureaus. (Most of these services weren’t around when I was struggling with bad credit.) Not all credit scoring models use rental payment history to calculate your scores, though many newer models consider this information if they receive it.

4. Paying down loans helps less than paying off credit cards

I put every extra penny I earned into getting rid of that toxic car loan. Within 18 months, I’d paid it off. Though my score had slowly improved as I made on-time payments, I didn’t get the big boost I expected when I paid it off.

Not all debt payoff is equal in credit score formulas. Your credit utilization ratio, which is the percentage of your open credit that you’re using, determines 30% of your score. Credit cards and other lines of credit, like a HELOC, affect credit utilization. But paying off loans doesn’t reduce your credit utilization ratio, and you want that number to be as low as possible.

Don’t get me wrong: Paying off an 18% car loan was absolutely the best thing to do for my personal finances. But it didn’t give my credit score the jolt I was hoping for.

How I kept improving my credit

By the time I paid off my car, my credit score was in the low 600s, which FICO® considers “fair” credit. I applied for a few credit cards designed for bad credit and fair/average credit. Finally, I got approved for a $300 line of credit.

I only used the card once a month (to buy gas) to keep my utilization low. I paid off the bill in full each month. After about six months of on-time payments, the issuer increased my limit to $1,200.

I started applying for a new credit card every year or so. I aim to pay off the balance of each card in full each month. I haven’t always been perfect on that front, but since rebuilding my credit, I’ve paid at least the minimum amount due on time. Usually, when I carry a balance from month to month, I’m taking advantage of a temporary 0% APR.

Recovering from bad credit is doable, but don’t expect it to heal overnight. Aim for slow and steady progress.

Above all, don’t be like me. Don’t put off looking at your credit reports. Take action before you’re in desperate need of financing and have no other choice but to accept terrible terms.

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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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Have a Prime membership? Read on to see if it’s time to shed it. 

There are plenty of benefits to joining Amazon Prime. For $139 a year, you get access to unlimited free two-day shipping on orders of any size. You also get the option to try on clothing before you commit to buying it, as well as access to loads of digital content, from movies to music to TV series.

But given that living costs are still so elevated these days, the reality is that if you’re spending $139 a year on Prime, then it’s important to make sure you’re getting great value out of that subscription. If not, there are plenty of other bills that your $139 could go toward, like groceries, utilities, car payments, or your mortgage. Here are a few signs the money you’re spending on a Prime membership just isn’t worth parting with.

1. You don’t place orders on Amazon very frequently

If you’re someone who shops regularly on Amazon (say, two to three times a month or more), then it might be pretty easy to justify the cost of a Prime membership. But if you only place, say, one order a month, then a Prime membership may not be worth paying for.

Let’s say you place one Amazon order a month that doesn’t qualify for free shipping, but rather, you have to pay $7 per shipment. In that case, you’re spending $84 a year on shipping, which is considerably less than the cost of an annual Prime membership.

2. Most of your Amazon orders amount to $25 or more

If you find that the majority of your Amazon orders amount to $25 or more, then a Prime membership may not be worth it. That’s because orders of $25 or more ship for free on Amazon.

Granted, you won’t be eligible for free two-day shipping in that case. But if you don’t tend to need your Amazon items in a hurry, then you may want to consider letting go of your Prime membership and seeing how well you fare without it.

3. You never access the digital content that comes with a Prime membership

Free two-day shipping is often hailed as the primary benefit of joining Amazon Prime. But you can also benefit from your membership by accessing free content on the site, whether it’s music, books, or TV. But if you find that you never utilize that content, that’s another reason to consider canceling Prime and saving your money instead.

Don’t throw your money away

Amazon Prime is a program that makes sense for a lot of people. If you’re someone who’s too busy to shop at stores, then the convenience of a Prime membership might make your $139 fee worth paying. Similarly, if you live in a rural area without many stores, a Prime membership could give you better access to the things you need.

But if the above situations apply to you, then it may be time to consider dropping your Prime membership. You can always sign up again if you miss it, but this way, you won’t be spending money on something that isn’t giving you such great value.

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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.John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Maurie Backman has positions in Amazon.com. The Motley Fool has positions in and recommends Amazon.com. The Motley Fool has a disclosure policy.

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Could your credit score use work? Read on to see why you may not want to refinance your home loan just yet. 

The mortgage you start out with won’t always be the mortgage you continue to hold until your home is paid off in full. It’s common for homeowners to refinance their mortgages to take advantage of lower borrowing rates.

When you refinance a mortgage, you swap an existing home loan for a new one. And the savings there could be significant, depending on the difference between your old mortgage rate and your new one.

But when your credit score isn’t so great, you might struggle to qualify for a mortgage refinance. And even if you do qualify, you might end up unhappy with the interest rate you’re offered.

Poor credit could hurt you

A credit score of 579 and under is generally considered poor, says Experian. When your credit is poor, it sends the message that you’re a risky borrower. And so to account for that risk, a mortgage lender will generally only agree to write you a loan — whether it’s a purchase mortgage or a refinance — at a higher interest rate than what it gives borrowers with great credit.

So, let’s say your mortgage’s current interest rate is 6%. If rates fall into the 4% range, you may be tempted to refinance. But while someone with great credit might get to refinance at 4.05%, you might get stuck refinancing at 4.95%. That’s a big difference. In fact, for a 30-year, $200,000 loan, it’s a difference of $106 a month.

Try to boost your credit score before you refinance

It’s best to go into a mortgage refinance with as high a credit score as possible. If your score needs work, there are steps you can take to help improve it.

First, make a point to pay all bills on time. Your payment history carries more weight than any other factor when calculating your credit score.

Next, aim to pay off a chunk of credit card debt. Doing so could lower your credit utilization ratio, which measures the amount of credit you’re using at once and is another important factor in calculating your credit score.

Additionally, avoid closing out long-standing credit cards. You might think that doing so will help your credit score, but it will generally have the opposite effect, since the length of your credit history also plays a role in determining your score.

Finally, take a look at your credit report and see if you spot any errors. If there’s a mistake on your credit report that makes you come off as a less trustworthy borrower, like a delinquent debt you never racked up, that’s the sort of thing you’ll want to correct. Doing so could improve your credit score.

You may be able to qualify for a mortgage refinance with poor credit. But that doesn’t mean you’ll end up getting a good deal on a new home loan. So if your credit score isn’t in the best shape, it could pay to hold off on refinancing and wait until that number gets to a better place.

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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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Some aging cars are worth hanging onto, but you’ll need to run the numbers to make sure repairs make sense. Read on to learn more. 

As of earlier this year, the average new car price was about $48,000, reports Cox Automotive. So if the idea of having to buy a new car — and take out an expensive auto loan — doesn’t appeal to you, that makes sense.

Now, perhaps you don’t need a new car right away, since your current vehicle is still chugging along. But what if your current vehicle is on the older side and repairs start to become increasingly necessary?

It can pay to repair an aging vehicle, but only to a point. And you’ll need to decide what that point is to avoid spending a lot of money to get little usage from your vehicle in return.

The problem with sinking money into an aging car

It’s one thing to spend $50 to change the oil on an older car, or to spend $100 to $200 on minor repairs. But it’s another thing to pull, say, $4,000 out of your savings account to fix a car that may not last very long even once you make that repair. That’s why you’ll need to crunch some numbers before repairing an older car to see what makes sense.

The average monthly car payment these days is $733, according to Edmunds. But let’s say you’re willing to buy a less expensive vehicle that will result in $500 monthly car payments. If you’re looking at spending $4,000 to repair an older car, you’ll need to ask yourself if you think that fix will give you at least eight more months out of that vehicle.

Since a $4,000 repair bill is the equivalent of eight months of car payments at $500 apiece, that’s your break-even point. So if you do the repair and your older car lasts nine months or longer, you’ll actually come out ahead financially despite that outlay. But if you’re not confident your aging car will make it that long, or if you simply don’t want to take the chance, then you may not want to spend the money on repairs.

A tough call to make

Sometimes, it can pay to keep repairing an older car, especially if those repairs are minor in nature. But you might also reach the point where you begin to throw your money away by continuing to repair a car that’s at the end of its road.

Of course, without a crystal ball, it can be difficult to make the right call. But if you have a car that’s old enough to be a senior in high school and you’re looking at a multi-thousand-dollar repair bill, you may decide it makes more sense to replace your vehicle rather than fix it again.

Keep in mind that in addition to having a car payment on your hands, replacing your aging car might also mean having to spend more on auto insurance, since the value of your replacement vehicle will likely be higher. But if you can swing that expense, then you may find that it’s worth parting ways with an older car if a really costly repair pops up.

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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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Love Target? Read on for ways to save money when you head there next. 

Many people love shopping at Target because the selection is vast, the products are great, and the prices are usually pretty reasonable. But Target isn’t exactly a discount retailer, so you won’t necessarily save money in the course of your shopping unless you go in with a plan. Here are a few steps you can take to maximize your next Target visit — and avoid leaving with a credit card tab you’re uncomfortable with.

1. Get a RedCard

The Target RedCard comes in three forms — credit card, debit card, and reloadable gift card. No matter which type you choose, you get the major benefit of saving 5% on your Target purchases. And there are no annual or monthly fees associated with your Target RedCard account.

Now, if you already have credit card debt, you may not want to apply for the credit card version of the Target RedCard. But if you shop at Target on a regular basis, then it could pay to apply for the debit or reloadable version for that 5% discount.

2. Join Target Circle

Target Circle is Target’s rewards program. Signing up is free, and you’ll earn 1% back on your Target purchases that you can redeem later on for future purchases. In fact, you get a full year to use the rewards you earn from Target Circle, and you’ll be privy to occasional bonus offers that could allow you to earn extra points on the items you buy.

3. Make a list before you shop

There’s a running joke that it’s impossible to visit a Target store without spending a minimum of $100 on purchases in the process. But actually, it’s not such a funny joke.

Target’s vast selection can easily lead to overspending. And if you’re already in debt, that could force you deeper into that hole, which isn’t what you want.

Even if you aren’t carrying debt at present, you don’t want to risk racking any up in the course of shopping at Target. So to avoid that, go in with a list. Figure out exactly what you’re looking to buy and stick to the items you’ve identified — even if a number of sale items happen to catch your eye while you’re loading up your cart.

Remember, Target puts items on sale all the time. So if you pass up an opportunity to buy something discounted during your next Target run, you can rest assured that another opportunity is apt to present itself in the future — perhaps when you’re in a better place to afford extra purchases.

Target is a fan favorite for sure, but it’s important to shop there strategically. It pays to utilize these tips not just for your next Target trip, but for pretty much every visit you make to the store.

And remember, these tips apply to online Target shopping, too. You have the potential to fall into some of the same traps when you shop on Target’s website, so make those lists and sign up for the right programs ahead of time to reap as much savings as you can.

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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.Maurie Backman has positions in Target. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.

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Wondering why medical costs are up? Learn how an increase in pickleball injuries could be to blame and what you can do about it. 

America has seen a dramatic increase in the popularity of pickleball, a sport that has become a favorite pastime for many seniors. However, according to new reports, this sport may be posing increasing healthcare costs all across the country. Medical costs may go up to $500 million by the end of the year, and the reason behind this astronomical rise in medical bills is none other than pickleball.

What is pickleball?

Pickleball is America’s fastest-growing sport for the third year in a row. According to the Sports & Fitness Industry Association (SFIA), pickleball has seen an increase in participation of 85.7% from 2021 to 2022 and a whopping 158.6% growth over three years.

Pickleball is a combination of tennis, badminton, and ping pong, and it’s played on a smaller court with a paddle and a plastic ball. It’s a fun and easy-to-learn sport that accommodates players of all ages and skill levels.

Pickleball linked to drastic increase in medical bills

The rise of pickleball as a major sport is a recent phenomenon, and one that has caught the healthcare industry off guard. While the sport is comparatively low impact, it still comes with its fair share of potential injuries.

As cited by Business Insider, a new analysis by UBS shows that this sport will cause unexpected medical costs to the tune of around $500 million this year. The study further predicts an estimated 66,750 emergency room visits and 366,186 outpatient visits attributed to pickleball for this year.

Healthcare costs have surged at an alarming rate, and the cost of hospital care has more than tripled since 2000, while other medical care services more than doubled. Insurers UnitedHealth and Humana have issued warnings regarding an unexpected surge in medical costs this year, hitting Americans’ checking accounts as well.

Seniors driving up the costs

According to UBS analysts, seniors are the major demographic driving these costs, as they are a third of the sport’s core fan base. Nearly 34,000 emergency department visits were caused by pickleball from 2010 to 2019, and 86% of those visits involved people over age 60.

More than 60% of these pickleball injuries were sprains, strains, and fractures. This number is expected to increase, as there are an estimated 22.3 million pickleball players in the U.S. this year.

Pickleball is here to stay

A significant number of adults in the United States do not meet the recommended level of physical activity, and this problem becomes more prevalent as individuals get older. One of the main obstacles to engaging in exercise is the lack of social interaction, which serves as a crucial source of motivation.

However, there is compelling evidence that shows pickleball players tend to continue participating. Unlike many other physical activities where people often give up after six months, pickleball enthusiasts consistently return to the court time and time again, largely due to the strong social element that the game offers.

Additionally, participating in pickleball can lead to improvements in overall well-being. Research published in Leisure Studies focusing on individuals aged 50 and older who were dedicated to pickleball revealed that those who took the sport seriously generally reported higher levels of life satisfaction.

As pickleball continues its rise in popularity, it is important to be aware of its potential impact on our healthcare system. While the sport has many benefits, including social and physical aspects, players should take steps to avoid injuries where possible. By encouraging safer play, and promoting alternative exercises that are easier on the body, we can help ensure that pickleball remains a beloved pastime, without costing us any more healthcare dollars than it already has.

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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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