Pay your accounts on time. Lenders are looking for a proven track record of making timely payments. Payment history determines about 35% of your credit score. Keep your balances low. About 30% of your score is determined by what the industry refers to as your "credit utilization ratio," which is the amount you owe in relation to the amount of credit available to you. If that percentage is more than 50%, your score will be lower.
Open a credit card account. While many Americans are turning to prepaid credit cards or debit cards to help them better manage their finances, this can work against your credit score. Without any credit history, you could be considered "unscoreable" and may have difficulty in obtaining credit.
Don't open too many credit lines in a short period of time. Each time you apply for a loan or credit card, the lender will make an inquiry into your credit score, which typically knocks points off of your score. Hold on to older, unused accounts. The longer an account has been open and managed successfully, the higher your score will be. Don't default on your payments. If you default on a loan -- such as when you file for bankruptcy or a bank forecloses on your home -- it can knock up to 100 points or more off of your credit score. Maintain a diversified credit mix. If you hold an auto loan, a home mortgage, and credit cards that are well managed, you will generally have a higher credit score than someone whose credit consists mainly of finance companies.
Beware of credit repair companies. The Consumer Federation of America warns consumers away from these companies, saying that they overpromise, charge high prices, and perform services, such as correcting credit report inaccuracies, that consumers could do themselves by simply contacting the lender and the credit bureaus.
The information in this communication is not intended to be legal advice and should not be treated as such. Each individual's situation is different. You should contact your legal professional to discuss your personal situation. 2014 Wealth Management Systems Inc. All rights reserved. Reproduction in whole or in part is prohibited without express permission of Wealth Management Systems Inc.
Look for clues. Are your parents having a hard time managing their finances? Have they stopped paying their bills? Are they overextending themselves with purchases or charitable contributions? Talk to your parents about their situation. Let them know that you are willing to help them maintain a certain level of independence, but that they may need assistance. Get a second opinion. Consider speaking to their primary care physician, or bring in a geriatric care manager, who can help you assess the mental clarity of your loved ones. You can find a local care manager at www.caremanager.org or at www.eldercare.gov. Assess their finances. Go through your parents' tax records, bank and investment statements, and credit card accounts. Be sure you have their account numbers and online passwords and keep a record. If they have a financial advisor, set up a meeting. Check over their investments. Are they suitable for them or do they need rebalancing? Bring in additional family members, if necessary, and set up a plan. Consider getting a durable power of attorney, which would allow you (or someone else) to make financial decisions for them if they can no longer do so. Check to see that your parents have a will and that it has been updated to meet all of their wishes. Also determine if they have a health care proxy or life insurance policies. If you do take over your parents' finances, be aware of the following:
Build on already established contacts and expertise. Seniors have a distinct advantage over younger entrepreneurs in their experience and long-established business network, which can give them a competitive advantage in virtually any business.
Start small. When starting up a new business in retirement, many begin with a small consultancy and gradually work their way into a full-blown business. This will give you time to assess whether you're willing or able to take on another fulltime career.
If you co-sign for a loan or credit card, you become responsible for paying it off if your parents cannot or if they die. Instead, ask your parents to grant you third-party access to their accounts. You could even arrange to have an alert sent to you if their charges go above a certain amount. Instead of opening a joint bank account, consider having a joint signature on the account instead. This way you'll be able to sign checks to pay their bills, but the account remains in their names. You can also request to have alerts sent to you if there are any lapses in payments.
The information in this communication is not intended to be legal advice and should not be treated as such. Each individual's situation is different. You should contact your legal professional to discuss your personal situation. 2014 Wealth Management Systems Inc. All rights reserved. Reproduction in whole or in part is prohibited without express permission of Wealth Management Systems Inc. 1Source: MetLife, "The MetLife Study of Elder Financial Abuse," June 2011. 2Source: Certified Financial Planner Board of Standards, "2012 Senior Americans Financial Exploitation Study," August 2012.
Don't bet the farm. If you're retired, you probably rely on personal investments for a portion of your income. Consider your income needs before investing a portion of your nest egg in a new business and think twice before taking on any personal debt.
2014 Wealth Management Systems Inc. All rights reserved. Reproduction in whole or in part is prohibited without the express permission of Wealth Management Systems Inc.