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Home Equity Basics from Member One

Your home improvement to-do list is a mile long, but you’re lacking the funds to get anything done. Sound familiar? Since the likelihood of stumbling upon a pot of gold is none, consider tapping into your home equity—the difference between what your property is worth and what you still owe on your mortgage. Read on to learn more about how to leverage your home’s hidden value.

Do the math. Home equity is calculated by looking at the value of your home and subtracting the amount you owe on any mortgages. Let’s say your home is valued at $200,000, and you owe $150,000 on your mortgage. That means you have $50,000 in equity you could potentially use to fund a renovation.

Know the difference. With a home equity loan, you receive the money you’re borrowing in a lump sum payment. It usually has a fixed rate and is often best for large, one-time expenses like a new roof. A home equity line of credit (HELOC) operates more like a credit card in that you can draw money as needed from an available maximum amount. This is best for ongoing expenses that require spending flexibility.

Shop around. You have to apply for a home equity loan or line of credit through a financial institution that offers it. As with any loan, shop around for the rate and features that fit your financial situation. It’s important to understand that committing to a home equity loan or line of credit means you’re using your home as collateral—if you don’t repay the loan, it could go into default, and you could risk losing your home. Make sure you understand the terms and only borrow the amount you can afford.

Budget accordingly. One of the most common ways to use a loan or line of credit is for renovations because they add even more value to your home. You can also use it for things you might not expect like college tuition, debt consolidation, or unexpected medical costs. Whatever you decide to fund, make sure it fits your budget. If your income is unstable and you can’t keep up with the payments, it’s probably not a good idea to incur more debt. If you don’t need to borrow much money or you’re just going to use this for basic day-to-day expenses, it might be wise to consider different options—such as a credit card—or reevaluate your spending habits.

Save Smarter: Avoid Financial Scams

Being a victim of fraud can be devastating. It’s not just the loss of someone’s hard-earned money that makes it so upsetting; it’s also the breach of one’s privacy and personal information. Here are some common scam tactics and ways to protect yourself and your money.

Skimming devices. These typically appear on gas pumps or ATMs and capture information from the magnetic strip on credit and debit cards. One way to protect your information is to check for obvious signs of tampering like an open or broken box, different color material, or graphics that aren’t aligned correctly. Avoid anything that seems questionable. Another tactic is to go inside a building to pay or withdraw money. Criminals need privacy to install skimmers and are less likely to do so if they can be easily seen.

Fake checks. Criminals will attempt to cheat you out of thousands of dollars by writing you a check for more than is due or claiming you’ve won prize money. You’re then asked to deposit the check and return part of the money. The trick? This is a bad check, and you’re now liable for all the money withdrawn from your account. As a rule of thumb, don’t accept checks or money orders as forms of payment from people you don’t know. Stick to cash or payment services like PayPal or Venmo.

Romance scams. In this scam, criminals use a dating service, online ad, or social media to establish a relationship as quickly as possible. After the criminal gains the victim’s trust, they could propose marriage, make plans to meet in person (which rarely happens), and eventually ask for money. To avoid this scam, be wary of who you communicate with online, especially those you haven’t met in person. Never give out your account information to anyone online or over the phone, no matter how legitimate it may seem.

Synthetic identity theft. This type of fraud is accomplished by combining real and fake information to create a fictitious identity. Typically, the criminal will use a social security number (SSN) and pair it with a fake name then use this to obtain credit, open deposit accounts, and obtain driver’s licenses and passports. To protect your identity, don’t carry your social security card unless you really need it. Keep any paperwork that contains your SSN in a safe place and shred any unnecessary documents that contain the number.

Presented by Member One Federal Credit Union

Make Your Money Work for You!

Presented by Member One Federal Credit Union

From a young age, you’re told to save money for the future. But when it comes time to actually put learning into practice, many of us just don’t know where to begin. A savings account is a great start, but are you aware of how easy it can be to earn more on the money you already have? Here are five tips to get going with investing.

Do your research. You can read books and online articles, listen to podcasts, and even attend classes to learn more about investing. While it’s important to arm yourself with knowledge, nothing beats face-to-face advice, especially if you’re new to investing. Meet with your financial institution to see what they offer and to get that personal, expert guidance.

Start with low-risk options. Money market accounts and share certificates are examples of low-risk investments that are available at most financial institutions. These can be good ways to jump-start your investment goals because the chances of you losing any money are minimal.

Save for retirement now. Whether it’s a long way off or could happen in a few years, it’s never too early (or late) to think about retirement savings. One of the best ways is to invest in your employer’s retirement package. Speak to the human resources department to understand how the package works and if your employer is willing to match contributions. If they do, max it out so you don’t leave any money on the table.

Budget for investing. This is where setting a budget comes in handy because it can help determine how much you can afford to allocate toward investments. Five percent of your take-home income is a good place to begin. You might need to make some adjustments or take money from your discretionary fund to get to that five percent, but don’t take this amount from your fixed expenses like bills, emergency fund, or savings goals.

Give it time. Keep in mind that there are many paths to building wealth. It generally takes years of disciplined and strategic financial planning to get there. If you have dreams of retiring, start saving as much as you can as early as you can. Set a goal and keep that in mind throughout your saving and investing journey. You’ll be making some sacrifices now, but it will be worth it when you retire someday.

 

Don’t Lose Sight of Your Money

Millions of people have embraced the convenience of managing their finances online. If you haven’t yet taken the plunge into this digital land, you may wonder how it works, if it’s safe, and why it could be better than traditional methods. Even if you’re savvy online, these five tips could help make it a little easier to manage your money while you’re away from your local branch or your home.

Sign up for online banking. Check in on your accounts from the comfort of your couch, the convenience of your office chair, or when you’re miles away from home. Online banking gives you around-the-clock access and is a great way to monitor activity, check balances, and make transfers, as well as providing other useful features that you perhaps thought had to be done in person at a branch. Contact your financial institution for instructions on how to sign up. 

Get electronic statements. Let’s face it—account statements from your financial institution clutter up your countertop and eventually end up in the shred pile. Stop the cycle and sign up to receive them by email instead. That way, you can opt to look them over and move on, or print them out yourself. Plus, it’s faster than waiting on the mail, and you’re helping the environment by reducing waste.

Enroll in online bill pay. Never forget to pay a bill on time again with online bill pay. This can especially come in handy when you’re away from home. You can schedule automatic payments at the same time each month from any account.

Set up digital wallets. This is a feature on your phone, tablet, or smart watch that allows you to enter your credit, debit, and reward card information to make payments at eligible vendors. Payments are made by hovering your device over the payment terminal, then entering a code or using fingerprint recognition to confirm. It’s more secure than carrying your cards and can be shut down if your device is lost.

Notify your financial institution. Before you hit the road, hit up your financial institution to let them know your plans, including your destination and travel dates. Nothing could ruin a vacation faster than a lack of funds, and doing this helps keep your accounts safe and avoids interruptions in your credit or debit card services while you’re out of town or the country.

Presented by Member One Federal Credit Union

Member One: Credit Score Quick Guide

It’s one of the most important numbers linked to your identity: your credit score. But are you fully aware of why it’s so significant, and what constitutes a good credit score? Read on for a brief explanation of what it is and tips for improving it.

What is it? Your credit score is a number that ranges from 300 to 850 and, along with repayment history, is an indication of your creditworthiness. Anything above 700 is generally viewed as good credit and signals to potential lenders that you’re more likely to pay back your debts on time.

Why should I care? A credit score helps determine whether you’re approved or denied for a credit card or loan and your interest rate. On-time payments have a big impact on your score, and just one or two late payments can significantly lower it. If you’ve ever had a bill go to collections, declared bankruptcy, or had a foreclosure, your score will go down. The number of loans in your name matter and the more accounts you have (in good standing), the better, because it shows that multiple lenders have approved you.

How do I find out my score? The three major credit-reporting agencies—Equifax, Experian, and TransUnion—are required by law to provide you with a free credit report every 12 months. Keep in mind that this is just the report and not the actual score. In order to receive your score, you typically have to purchase it. Visit MyFICO.com to buy your official FICO score. Also, check your monthly credit card statement as some lenders now include your credit score as an added service.

What are some quick ways to improve it? One of the best ways is to consistently pay your bills on time. Other ways include paying down a credit card balance to improve your utilization rate, and keeping lines of credit open with zero balances. Both of these strategies show lenders that you’re able to manage debt and aren’t biting off more than you can chew.

As a general rule of thumb, you should review your credit report along with your score at least once a year. Not only is it beneficial to keep yourself informed and aware, it could help protect against fraud or identity theft.

Presented by Member One Federal Credit Union

 

Warm Up to Responsible Spending

With warm, sunny days upon us, it’s time to plan for more than just your tan: summer spending. Vacations, airline tickets, dining out, and entertainment—it adds up. If you haven’t budgeted for these expenses in advance, a quick swipe of your credit card takes care of it. But if responsible credit card use isn’t your strength (or you just need a refresher), these tips could help curb the temptation to overspend this summer.

Be selective. There are several factors to look at when picking a credit card. First, you’ll want to see what your limit is. If you don’t think you can handle the freedom of a credit card, start with one that has a lower limit, like $1,000. Additionally, look at the credit card’s annual percentage rate or APR. That interest will add up if you’re not planning on paying off the total each month, so shop around for a low APR. Finally, look out for cards that charge annual fees just for keeping them open.

Monitor your balance. You should keep credit card payments to 10 percent of your monthly take-home income. For example, if your monthly income is $2,000, your monthly credit card payment should not be more than $200. This doesn’t mean your balance should not exceed $200, but make sure your minimum payment is no more than that. Keep in mind, however, that paying off the entire balance each month is in your best interest financially.

Know the benefits. By making purchases with your credit card and paying the balance off each month, you’re proving to lenders that you’re a responsible, creditworthy consumer. It boosts your credit score and will help you in the future if you ever want to get a loan—or another credit card.

Stick to a budget. It’s important to set parameters for yourself when using a credit card. One simple way to do this is to use the credit card for one specific purpose, like gas or groceries, so it’s easier to keep your spending in check. Another way is to get a card with a low limit. This forces you to keep your spending under a certain amount.

Smart credit card use doesn’t have to be a mystery or limit your fun this summer. Follow these simple tips and your poolside lounge session (while possibly chasing the kids) will be that much more relaxing.

Presented by Member One Federal Credit Union

Home Buying and Renovation Budget Prep

So, you want to buy a house. Or, you’re considering a renovation. Looking at homes and upgrades is exciting, but don’t get ahead of yourself. While HGTV makes it look easy, purchasing a home or getting a second mortgage actually takes a lot of planning and preparation. Here are a few ways to get yourself ready:

Know your budget. You should spend no more than 25-28 percent of your monthly take-home income on a mortgage. Look at your monthly paychecks (after taxes) to see what that percentage would be so you aren’t looking at homes out of your price range. If you’re considering a home equity product (also know as a second mortgage), make sure the extra monthly expense keeps you in that 25-28 percent range.

Save the right amount. Traditionally, your down payment should be 20 percent of the purchase price to avoid paying more in interest and private mortgage insurance (PMI). If the home you want is $200,000, you should have $40,000 saved. Additionally, be prepared to pay closing costs, an inspection fee, appraisal fee, and a lender’s fee. There are loans that don’t require 20 percent down, but you’ll pay more in interest over time and PMI could be required.

Plan for future costs. If you have enough money to comfortably buy a home now, don’t forget about future expenses. Are you planning on starting a family soon? According to the USDA, a middle-income married couple spends an average of $727 a month on a child. Can your budget handle that with a mortgage? What if something breaks? You’re now responsible for home repairs and must plan for those unexpected expenses.

Home Equity Loans or Line of Credit. These options are for people who already own a home; they can be used for renovations, college costs, or even a vacation. When choosing a lender, you’ll want to look at their closing costs, interest rates, and fees. You should also consider if you want a lump sum up front (home equity loan) or a revolving loan that works like a credit card (home equity line of credit). And keep in mind that you’re essentially adding to your mortgage payment, so make sure you’re financially prepared.

Buying or making upgrades to a home should be exciting, but don’t let the thrill of the hunt overshadow the financial preparation. Do your homework and get your ducks in a row; when you’re ready, your dream house will be there.

Presented by Member One Federal Credit Union

The Art of Avoiding the Scam

As technology evolves to secure our identities, so has scammers’ creativity and resourcefulness to steal it. While we may think we’re savvy enough to avoid becoming a victim of identity theft and fraud, the reality is that we’re all susceptible to the threat. Secure yourself with these helpful tips.

Don’t give out personal information unless you’ve initiated contact. Scammers will contact you by phone, mail, and even email requesting personal information. Never give out that information unless you’ve initiated contact or know exactly whom you’re dealing with.

Avoid logging on to personal accounts on public computers. This can make your information accessible to the next person who uses it. Additionally, accessing your checking account via public Wi-Fi puts your information at risk. Only use your personal computer on a private, trusted Wi-Fi signal to access any information that people could use to do you harm.

Create strong passwords. Make it something challenging for others to guess by interchanging E with 3, switching between upper and lowercase, and adding special characters. For example, if you wanted to make your password “animal”, a better alternative might be @N!mA1. That’s much harder to guess and still easy to remember.

Check your credit report annually to look for any discrepancies. The three major credit reporting agencies—Equifax, Experian, and TransUnion—are required by law to provide you with a free credit report every 12 months. To request a free copy, visit www.AnnualCreditReport.com or call toll-free 1-877-322-8228. Be cautious of websites that advertise a “free” credit report. They often require you to sign up for a monthly subscription fee in order to receive your report.

Secure your debit and credit cards. You can sign up for digital wallets, which help add a layer of security to your debit and credit cards by encrypting the card information. You can also sign up for purchase alerts where you’re notified via phone and/or email if a certain parameter, such as a dollar amount on a transaction, is hit. It’s also a good idea to let your financial institution know if you’ll be traveling to prevent your card from becoming locked due to unfamiliar transactions.

Being proactive and staying on top of your credit and finances goes a long way toward protecting yourself from scammers; however, if you find you’re already a victim, visit https://www.ready.gov/cyber-attack to learn what your next steps should be.

 

Article provided by Member One