Prevent mney mistakes today, and save big bucks tomorrow.
Who would think that something as innocent as a $5 library fine or one late mortgage payment could leave a mark on your credit score? Seemingly minor slipups can possibly derail your financial future. Learn how to fix eight common errors now so they don’t harm you later.
HOW IT HURTS: If you stick to making minimum monthly payments on a balance of $3,000, it will take 18 years to pay it off (assuming a 15 percent interest rate). In that time, you will have spent $3,229.26 in interest!
Break the minimum payment habit:
HOW IT HURTS: It can knock 100 points off your credit score overnight, affecting your ability to get the best interest rates or a car loan.
If you don’t have the money: Call your lender rather than just not paying. Most banks have a loss-mitigation and hardship department that can work with
you to find another payment arrangement for up to six months.
If you’re forgetting to pay: Automate regular (weekly, monthly, even quarterly) payments through your bank or try mycheckfree.com, a highly rated free bill-paying site.
HOW IT HURTS: Your funds will earn less than 1 percent interest and won’t come close to keeping up with inflation.
Maintain about $700 in a basic savings account so you have immediate access to cash, and put extra funds in an FDIC-insured
online savings or money-market account.
Tip: Look into saving at smartypig.com. You fund the online savings account with automatic deductions and get one of the highest interest rates available.
HOW IT HURTS: You could have to pay the whole fee to your doctor. And even a dispute that is only $20 leaves a big dent in your credit score—to the tune of 100 points or more.
Send in claims right after a procedure, and know your insurance company’s “timely filing limit.”
If you were late and are responsible for the entire payment: Check out billadvocates.com for help.
If the claim was denied unfairly: Contact the Patient Advocate Foundation (patientadvocate.org), which offers personalized free advice for situations when a legitimate claim has been struck down.
HOW IT HURTS: This move increases your monthly premiums, and the company could drop you as a customer.
Plan on paying out of pocket for all repairs within a few hundred dollars of your deductible.
If you must file a claim:
HOW IT HURTS: Many libraries and municipalities turn over their unpaid accounts to collection agencies.
Take care of all fines right away, and make sure the payments clear. If the library or city agency doesn’t receive them, your
account will be marked as delinquent. Also, follow up with the original creditor or agency so you can clear your name.
HOW IT HURTS: You have to pay stiff penalties if you are younger than 59½, and you lose out on substantial future earnings.
The better strategy is to roll over your account into an IRA or a new employer’s 401(k) plan, so your money will continue
to grow, tax-deferred.
Do your research: At 401k.fidelity.com, use the Take Home Pay calculator to find out how much your contributions will deduct from your paycheck.
HOW IT HURTS: You damage your credit rating and pay extra interest and penalties. Plus, the IRS might garnish your wages and tax refunds until you are paid up.
Ask your loan provider about a deferment, which means you don’t have to make payments and the government may cover the interest
during a set period of time. If you don’t qualify, ask about forbearance, which lets you stop paying temporarily (but interest