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This month learn about credit for college grads, bouncing
back from bankruptcy and a $500 prize
that could be yours. |
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Real
life - Real money
This
spring about 1.3 million
students will graduate
from colleges and universities
across the
US. |
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Graduation
is an exciting time for
students transitioning
out of academia and into
the real world, but far
too many of these graduates
are starting their new
lives saddled with debts.
According to Nellie Mae,
the average college senior
owes $20,400 in student
loan and credit card debt.
When you consider that
this debt translates into
$280 each month and a total
of $8,700 in interest,
the importance of having
a financial plan after
college is clear.
TrueCredit is here to help!
The following five credit
management tips
aren't just for the class
of 2005,
these tips are
for anyone who needs to manage their
debt while pursuing their
dreams:
1. Know where
you stand - Before you can decide
what to do, you need to
understand exactly where
your finances stand. Gather
together all your credit
card and loan records along
with your credit reports and
credit scores. You can use this checklist to get started. Remember,
potential landlords and
employers may also check
your credit report so make
sure that everything is
accurate and up-to-date.
2. Danger signs - Negative
records such as late payments
and collection accounts
will remain on your credit
report for 7-10 years.
You can keep your future
finances healthy by spotting
issues early. Look through
your reports to see if
you have any old forgotten
credit accounts, late payments
or negative
records. Library and video
store late fees
can sometimes be sold to
collections, so keep an
eye out for this type of
negative record, too.
If you find something inaccurate,
you can dispute it.
If the negative records
are
accurate, calculate when
they will expire from
your report.
3. Create a spending
plan - A monthly spending plan
will help you understand
exactly how much you need
to pay toward your debts
and how much you can afford
to splurge. Don't worry about
trying to pay off your whole
student loan right away (fairly
low interest rates make it
okay to just cover your basic
payment each month). But
do focus on paying off your
high interest credit card
debts as soon as possible.
While you are creating your
plan, be sure to include
other expenses such as car
insurance, utilities and
security deposits that you
are likely to have after
graduation. Keep track of
your monthly expenses and
make adjustments to your
spending plan as needed.
4. Prepare for emergencies - A few preparations for
the worst case scenario can
help you avoid financial
problems in an emergency.
To start, you should build
up enough savings to cover
your expenses for 2-3 months.
If you find yourself out
of a job or unable to pay
back your debts, you should
immediately call your creditors
and lenders to explain your
situation. Most federal loan
programs have deferment and
forbearance programs that
allow you to put your debts
on hold temporarily.
5. Consider consolidating -
Student loan consolidation
rates are expected to increase
dramatically this summer.
Currently fixed at a historic
low 3.37%, these federal
student loan rates are expected
to increase into the 4-5%
range after July 1. Plus,
students who consolidate
within six months of graduation
or who sign up for automatic
payments can save even more.
If you have a loan balance
greater than $7,500 - $10,000,
you can potentially consolidate
your loans and save big.
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Congratulations to the class of 2005! TrueCredit
wishes you a happy financial future
and a healthy credit profile!
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Dear
Audrey,
My husband and I were forced to declare bankruptcy due to
a struggling business and are now wondering what we can do
to rebuild our credit. We were told by our lawyers to finance
a vehicle, only to be turned down by everyone so far! Now
I'm afraid that this move has only hurt our credit score
more.
Please help! We want to rebuild our credit now that we are
finally financially secure, but seem to only get doors slammed
in our faces everywhere we turn. We have just purchased a
piece of property to build a home, but are scared to death
to go to any bank and ask for a construction loan and deal
with the humiliation of being told no once again.
Kristy B.
Bismarck, ND
Dear Kristy,
I am glad to hear that you are working on rebuilding your
credit after bankruptcy. While the negative records from
your filing will remain on your report for 7-10 years, there
is a lot you can do to improve now. Jumping straight from
a bankruptcy filing into a new car loan is probably too drastic
a move. If you do manage to get approved for an auto loan,
it will be with a very expensive rate. In the meantime, these
unnecessary loan inquiries could be keeping your credit score
down.
Instead, I suggest that you start small by trying to open
a secured credit card that uses your savings as collateral
for the credit limit. This type of account is easier to obtain
and also helps you build up savings. Opening an account
and using it regularly each month will help rebuild your
creditworthiness. After 1-2 years of working on your credit,
you may be able to qualify for your construction loan. You
can read more about recovering from bankruptcy online in
our Credit Learning Center.
Until next month, |
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Audrey
O'Dell Newsletter Editor
Read more here
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