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Consumer Archive

Consumer

Misperceptions About Credit Scores Prevalent, Costly

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WASHINGTON (5/28/13)--The large number of Americans who know little about credit scores also have little incentive to improve or maintain their scores because they don't understand how having a low score can affect them. Lower scores can mean those individuals will pay higher finance costs and have limited access to--and increased costs of--services such as cell phones, electricity and rental housing (Consumer Federation of America May 13).

A recent survey by Consumer Federation of America (CFA), Washington, D.C., and VantageScore Solutions, Stamford, Conn., identified several misperceptions about credit scores. Between one-quarter and two-fifths of 1,022 American adults answered several questions incorrectly:

  • Forty-two percent did not know that mortgage lenders use credit scores in decisions about pricing.
  • Thirty-six percent incorrectly believed that credit repair agencies help them correct credit report errors and improve scores.
  • Thirty-one percent didn't know that credit scores of co-signers of a student loan decline with just one late payment.
  • Twenty-eight percent didn't know that applying for several credit cards at the same time can lower their credit score.
  • Twenty-six didn't know that keeping low credit card balances can raise or maintain their scores.
There was one question that tripped up almost everyone. Only 7% of respondents were aware that making multiple inquiries about getting a consumer or mortgage loan within a two-week window does not lower your credit score. Shopping around for the best rate is in your best interest.

Many job seekers are surprised to learn that potential employers check credit histories. A 2012 survey by the Society for Human Resource Management, Alexandria, Va., revealed that nearly half (47%) of employers use credit checks in hiring decisions (The New York Times May 11).

Things you can do to improve or maintain your credit score include:

  • Pay all bills on time all of the time. Payment history makes up 35% of your credit score.
  • Don't max out. Keep balances below 25% or 30% of your credit limit.
  • Pay down debt. Don't just move it around--pay it off. And don't open several new accounts rapidly.
  • Keep a healthy mix. This may include a mortgage, a credit card or two, a personal loan and perhaps a retail card.
For more information, read "New Credit Scoring System Helps Consumers" in the Home & Family Finance Resource Center.

H&FF Radio: Small-Business Owners, Health Apps

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WASHINGTON (5/24/13)--On this week's Home & Family Finance Radio, discover what makes small-business owners tick, new innovations in travel and how to manage your health with your phone.

In this episode, which you can listen to on the Internet, host Paul Berry, Washington, D.C., journalist and broadcaster, discusses these topics with special guests:

  • "The DNA of a Small-Business Owner." Terri Shapiro, communications director for Deluxe Corp., Shoreview, Minn., discusses a recent survey her company commissioned that explored what makes successful small-business owners unique. The survey found, for instance, that 86% respondents believe they can do anything they set their mind to.
  • "The Sharing Economy Reshapes Travel." Farnoosh Torabi, personal-finance journalist, author, and TV personality, New York, explains how sites like Airbnb, which allows people to rent their apartments and homes to visitors, is changing travel by providing alternatives to traditional lodging.
  • "Manage Your Health With a Smartphone." Jeffrey Rice, a lawyer and physician with Healthcare Blue Book, Brentwood, Tenn., helps you avoid the quacks and select credible health-care apps for your smartphone.
Home & Family Finance is a resource center for personal finance information at the Credit Union National Association. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide.

Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 95 million members, and is presented by CO-OP Network.

CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites.

For related information, read "Avoid the Quacks: Choose the Best Health Apps" and "Do You Need a Travel Agent?" in the Home & Family Finance Resource Center.

Three Strategies For a Long Retirement Life

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NEW YORK (5/21/13)--Thanks to healthy lifestyle and medical changes, your  chances of living to age 90 and having a better quality of life in retirement are increasing every year. While your retirement life is likely to last longer, it prompts a crucial question: Will you have enough money to cover your changing needs as long as you live (MSN Money May 13)?

Here are three strategies to help you enjoy a long, fiscally healthy retirement.

  1. Change your spending behaviors today to make sure the dollars will be there for you tomorrow. Reduce or eliminate high-interest debt such as credit-card debt. Look for satisfying, affordable vacations nearby. Research ways to reduce your housing costs.
  1. Plan for a high-inflation future--just in case. Inflation can devastate your fixed income over the course of your retirement years, and even more so as you live longer. Be ready for at least 3% or 4% inflation. Create a few contingency plans for even higher inflation. Consider diversifying your investment portfolio to include yield-sensitive holdings such as Treasury Inflation Protected Securities (TIPS) that will pay off later.
  1. Create more income. Consider part-time work or dive in and start your own small business. Added benefit: Research shows that staying engaged prolongs life.
If you're a woman, you face a two-pronged risk: If you're single, you'll probably live longer than a man your age, and on less money. If you're married, you can't count on two Social Security payments for your full lifespan; plan for several years of widowhood.

For more information, read "Four Key Steps to 'No Regrets' Retirement" in the Home & Family Finance Resource Center.

Get a Job, Control Your Spending On H&FF Radio

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WASHINGTON (5/17/13)--Wrestle your spending into submission and learn a no-excuses approach to landing a job with Home & Family Finance Radio this week.

In this episode, which you can listen to on the Internet, host Paul Berry, Washington, D.C., journalist and broadcaster, discusses these topics with special guests:

  • "Get a Job--Now!" Dana Manciagli, author and career coach, Bellevue, Wash., shares job-searching advice from her new book "Cut the Crap, Get a Job! A New Job Search Process for a New Era."
  • "Cut Spending, Enjoy Life." Kathryn Greiner, director of credit education for the University of Michigan CU, Ann Arbor, Mich., tells you how to control your spending without sacrificing the good things in life.
  • "You Gotta Have It...But Do You Need It?" Susan Tiffany, certified credit union financial counselor and director of consumer periodicals, Credit Union National Association, Madison, Wis., offers advice about how to avoid impulse spending.
Home & Family Finance is a resource center for personal finance information at CUNA. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide.

Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 95 million members, and is presented by CO-OP Network.

CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites.

For related information, read "April Financial Fitness Challenge--Gotta Have It? Check Impulse Spending" and "Do You Need a Financial Plan?" in the Home & Family Finance Resource Center.

Cheap Cars: When A Good Deal Isn't

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McLean, Va. (5/14/13)--The 10 cheapest cars in America rarely overlap with the best-selling. Given Americans' abiding love of a good deal, that finding can seem surprising until you look at how vehicles are priced.

For any model, the lowest-priced option only accounts for 2% to 5% of its overall sales, according to automakers (USA Today April 24). Most dealers never stock the bargain-basement models, citing low consumer demand. Meanwhile, shoppers looking for them say they can't find them.

Here are the 10 cheapest cars in America, according to USA Today and Kelley Blue Book. Only the Versa is a 2014 model--the rest are 2013.

  • Nissan Versa S. Sedan, $12,780;
  • Chevrolet Spark LS Hatchback, $12,995;
  • Smart ForTwo Pure Coupe, $13,240;
  • Ford Fiesta S Sedan, $13,995;
  • Kia Rio LX Sedan, $14,350;
  • Ford Fiesta S Hatchback, $14,995;
  • Chevrolet Sonic Sedan, $14,995;
  • Toyota Yaris 3-door, $15,165;
  • Kia Soul, $15,175; and
  • Hyundai Accent GLS Sedan, $15,340.
The cheapest model often means a manual stick-shift transmission, unpopular with drivers. An automatic transmission generally adds another $1,000. A modern automatic transmission that can achieve high gas mileage ups the sticker price even more. If you want amenities such as air conditioning and power windows, you're often far from the advertised rock-bottom price that got you in the door in the first place.

Instead of settling for a car that might not suit your needs, a better plan is to get pre-approval for a low-interest loan from your credit union and negotiate a better price for the car you want. Find out the dealer's cost for the vehicle, and then negotiate to no more than 2% more than the invoice price, before applying any rebate.

Also worth considering is the total price of the financed car. Depreciation is the single biggest cost of car ownership, and a cheap car will depreciate faster than a more expensive one. This spring Kiplinger.com, the online personal finance magazine, compiled the 10 cheapest 2013 cars to own, factoring in depreciation, financing expense, and other often hidden costs to compile a five-year total cost of owning a vehicle.

According to Kiplinger, the Nissan Versa remains the least-expensive option. Based on a market price of $12,615--which is the average transaction cost and includes rebates--Kiplinger estimates you would lose $7,199 to depreciation and pay $721 in interest with a five-year loan at 2.76% and a 15% down payment. Factor in fees and taxes, insurance, maintenance, fuel and repairs, and Kiplinger assesses the true five-year cost for buying the cheapest new car in America at $27,405. The editors figure you can recoup the cost of the car, minus depreciation, at the end of five years.

For related information, read "Find the Best Low Cost, High Value Car" and "The Best Cars for Stages of Your Life" in the Home & Family Finance Resource Center.

H&FF Radio: Safeguarding Cash, Virtues Of Auto-paying

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WASHINGTON (5/10/13)--This week Home & Family Radio explores whether auto-paying your bills is a good idea, using tools to protect your cash and get ting organized.

In this episode, which you can listen to on the Internet, host Paul Berry, Washington, D.C., journalist and broadcaster, discusses these topics with special guests:

  • "Protect Your Cash." Luke Reynolds, chief of outreach and program development at the Federal Deposit Insurance Corp., Washington, D.C., discusses how to protect your valuables and the most secure locations for your money.
  • "Bill Paying--Set It and Forget It?" Stacy Rapacon, a personal finance writer for Kiplinger, Washington, D.C., explores the pros and cons of auto-paying your bills.
  • "Get Organized, Save Money." Susan Fleischman, a professional organizer and owner of Clutterfree, Chicago, shares 20 ways staying organized can save you money.
Home & Family Finance is a resource center for personal finance information at Credit Union National Association. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide.

Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their 95 million members, and is presented by CO-OP Network.

CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites.

For related information, read "May Fitness Challenge--Benchmarks Help Gauge Financial Progress" and "Offering Help for Hoarders" in the Home & Family Finance Resource Center.

Pension Advance: A Dangerous Choice

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NEW YORK (5/7/13)--Use future pension funds today! Convert your pension into cash! It sounds too good to be true--and it is. Offers known as pension advances are targeting retirees, primarily those with public pensions such as members of the military, veterans, teachers, firefighters, police and others (New York Times.com April 27).

Touted as advances, pension advances actually are short-term loans that require borrowers to sign over part of their monthly pension check in order to receive cash against their pensions. Polished websites disguise the fact that the product is a loan, according to Forbes (April 29). The companies operate largely outside of state and federal banking regulations. (See related article, "Retirees' Pension Advances Have High Rates" in Monday's News Now).

Pension advances are similar to payday loans in that interest rates are exorbitant relative to conventional loans--ranging from 27% to an astronomical 106%. To qualify for an advance, borrowers often must take out life insurance policies that name the lender as the sole beneficiary. As with other high-interest predatory loans, advances often trap users in a vicious debt cycle almost impossible to escape. Long-term costs often are hidden from the borrower.

By the time borrowers realize the transaction details, it's too late. One retired marine needed some fast cash; he agreed to sign over $353 of his $1,033 monthly disability pension for five years in exchange for $10,000 in cash up front from a pension advance company. The terms, including fees and finance charges came to an interest rate of more than 36%. Another veteran received a $42,000 loan at an interest rate of 26.8%.

If you're in a tight spot and need money, don't fall for scams that can evaporate your life savings--visit your credit union. The professionals there can suggest loan products with fair rates and terms that can help you get back on track.

Another option is to contact a National Foundation for Credit Counseling member agency certified counselor. Call 800-388-2227 to be connected to an agency in your area, or visit DebtAdvice.org.

For more information about unscrupulous lending practices, watch the video "Avoid Payday Lenders" in the Home & Family Finance Resource Center.

Student Loan Tips, 'Suckers List' On H&FF Radio

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WASHINGTON (5/3/13)--This week Home & Family Finance Radio helps you avoid being a sucker while giving you advice about trading stocks and college borrowing.

The show, which you also can hear later via the Internet, features Paul Berry, Washington, D.C., journalist and broadcaster, discussing these topics with special guests:

  • "10 Student Loan Tips." Rick Bialobrzeski, communications director for GreenPath Debt Solutions, Detroit, Mich., shares some of the nonprofit credit counseling organization's best advice about student borrowing.
  • "Failing to Plan = Planning to Fail." Sam Seiden, chief education, products, and services officer for Online Trading Academy, Irvine, Calif., discusses how to be successful at trading stocks online.
  • "Don't Be a Sucker." Lyn Chitow Oakes, chief marketing officer for the identity-protection firm TrustedID, Palo Alto, Calif., tells listeners what a "suckers list" is, how to stay off it, and what to do if you find yourself on one.
Home & Family Finance is a resource center for personal finance information at Credit Union National Association. The radio show is sponsored by CO-OP Network, the national credit union ATM network; Cabot Creamery Cooperative, maker of award-winning cheddar; and the Defense Credit Union Council and member credit unions, serving those who serve the country worldwide.

Home & Family Finance airs Sundays at 3 p.m. ET on the Radio America Network. The show also is carried on American Forces Radio Network. The one-hour program devoted to consumer finance issues is brought to you by America's credit unions and their more than 95 million members, and is presented by CO-OP Network.

CUNA and Radio America are podcasting Home & Family Finance through iTunes, Podcast Alley, Odeo, and other popular podcast library sites, as well as on Radio America and CUNA's websites.

For related information, read "Decide What to Pay for Growth Stocks" and "ID Fraud Claims 12.6 Million Victims in 2012" in the Home & Family Finance Resource Center.