How to start a good credit history

via How to start a good credit history, clarionledger.com

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Credit card debt among Americans is sky-high right now. Back in May, the Federal Reserve noted that we’d reached a dubious milestone: Americans’ credit-card debt had reached the $1 trillion mark, the highest since 2008. The average household carries a little more than $16,000 in credit-card debt; some lower and some much, much higher.

Debt can be crippling. Many families, for whom the cost of living has risen out of proportion to their income over the past several years, find themselves living paycheck-to-paycheck, with little in the bank and often having more “month than money.” Credit cards often provide a deceptively convenient way to take care of the immediate problem, while passing the bill to the uncertain future. But as balances rise, so do finance charges. It’s a little like digging a deep hole around yourself, and finding the sides getting higher as you try to climb out.

Of course, if you could pay for everything with the cash you have, you wouldn’t need credit. While that approach works great for those of us who can make that happen, many Americans don’t have the knowledge, circumstances or discipline required.

So, what are the options? Other than carrying out a cash-only existence, you can be a victim of credit or make it work for you. While many young adults appear to be avoiding credit cards (perhaps after seeing the previous generation struggle with them), many financial experts say that using credit responsibly is a learned habit, and it’s best to learn it while you’re young.

My own experience with credit started at a tire shop in McComb. When I got my first paycheck from a part-time job, one of the first things I did was to go to the tire shop and get new tires for my old car. The tires cost more than my meager paycheck, and the owner of the shop suggested I buy the tires on credit at zero interest. Despite my lack of credit history, he extended the credit because he knew my family. I was a little reluctant at first, but it didn’t take me long to pay off those tires, and I showed up like clockwork to make the payments. I still remember the feeling of accomplishment I had when I plunked down the final payment.

Establishing credit is different today. The complicated credit-scoring system looks at whether credit has been offered and used and whether you’ve met your obligations. The resulting credit score isn’t sympathetic to your life events, nor does it care about how great a person you are, or consider your feelings. It boils everybody down to a number.

But, it is possible to make the system work for you. The “Cashlorette” (Sarah Berger) wrote recently on her blog about how to establish a good credit history for millennials. Berger notes that it’s crucial to show you can use credit in the first place.

  • First, she advises, establish a habit of paying your balances in full, every time.This will show future creditors that you are serious about your responsibilities. “Link a small, fixed expense to your credit card; one you know you can pay off every time, like your Netflix subscription,” Berger advises. “This is a simple way to slowly build credit, without having to stress over accidentally overspending.”
  • Pay attention to your utilization ratio. While this sounds complicated, it’s really not; it’s just the percentage of available credit you’re actually using. Keeping this number around 30 percent gets you the best score. For example, if you have a credit line of $1,000, keeping your credit balances below $300 is considered acceptable utilization of credit. (Be sure to include all your credit cards in this equation, not just one.)
  • Apply for the right card. There’s a plethora of cards out there, offering all kinds of “rewards” and “incentives”. But keep in mind these things are there to encourage you to use the card, so choose wisely.
  • Avoid store credit cards. While it’s tempting — and a little bit of a status symbol — to pull out a credit card from your favorite clothing store, such cards often have the highest interest rates in the industry.
  • Don’t look at your available credit as a license to spend. For most purchases, use cash or a debit card. If you want to make a purchase, delaying the instant gratification and saving up for it puts the power in your hands, and you’re far more likely to appreciate it as well.

Check out Berger’s full blog post here: http://bit.ly/2w3nZ7h.

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Millennials shooting for financial independence

via Millennials shooting for financial independence, clarionledger.com

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Perhaps more than any generation in history, millennials have been the subject of intense scrutiny. The millennial generation (loosely defined as people born between the 1980s and early 2000s) has been studied endlessly, stereotyped mercilessly and subjected to low expectations. While some of the common beliefs about millennials are probably true, many are likely not.

In an article in Forbes magazine in September, writer Caroline Beaton identified six prevailing myths about millennials that should be retired. Among them, Beaton suggested, are that they can’t live without their parents; that they’re chronically unemployed; that they’re lazy; that they’re sex-crazed marriage-phobes; that they’re born entrepreneurs; and that they shun the traditional workplace and just want to work from home.

Statistics, however, don’t seem to bear out all those preconceptions. In fact, most millennials are a lot more like previous generations than we previously thought. For example, research has indicated that, while millennials are living at home much longer, a lot of those are in college and many are living in college dorms (which are counted as “home” by the U.S. Census Bureau). Another example: While you wouldn’t have to look far to support a belief that millennials are lazy, look closer and you’ll find millennials putting their noses to the proverbial grindstone as they start their careers, some working longer hours than even their parents.

 

And in one area, many millennials are holding themselves to standards of financial independence that exceed their parents’ expectations. Bankrate.com commissioned a study of millennial attitudes about when they should be expected to become financially independent. When asked the age someone should be able to pay their cellphone bill, buy a car and cover their housing costs, millennials were more likely to give a much lower age than their parents.

For example, a majority of millennials think they should be expected to pay for their own housing at age 22, pay for their own car at 20 ½ and pay their own cell phone bill at 18 ½. In all three cases, millennials’ average response is about a year and a half earlier than what their parents feel is appropriate, noted the study’s authors.

“Millennials are often stereotyped as being entitled,” said financial columnist Sarah Berger, the “cashlorette” (cash+bachelorette, get it?) at Bankrate.com. “It’s refreshing to see that millennials really do have high expectations of gaining financial independence and getting off their parents’ payroll.”

There were a few regional and political differences. Republicans, on average, believe someone should be able to afford their own car a few months prior to their 20th birthday. That’s almost three years earlier than the average Democrat’s response. As for when they should be responsible for their own cellphone bills, the average answer from millennials was 18, while their parents felt their kids should pay their own cellphone bills around age 20.

Midwestern parents in general favored closing the “bank of Mom and Dad” for housing costs at 22 ½, two years earlier than for Northeastern parents (24 ½). Southern parents were at the lower end of the scale, saying they planned to help with housing until the age of 23.

But these are really just statistics. Individual results may vary, as each child is different and unique. I know parents whose kids left the financial “nest” just after high school, while others are still paying most of their kids’ bills well after they’ve left college. Some of that is probably due to the parents’ unwillingness to cut the apron strings, but the situation is often more complicated than it would appear at first glance. Most parents I know are generous to a fault with their kids (even to the point of enabling their continued dependence).

This seems clear: We parents are likely to bear the fruit of what we sowed when our kids were growing up, plus a generous helping of whatever unique traits God gave them. They learn our habits — good and bad — from watching us, but what they do with that knowledge is as unique as they are. As with any generation, this one will have its share of successes, its share of failures, times they’ll make us proud and times they’ll disappoint us. Chances are, they’ll one day have similar concerns about their own kids’ generation, and maybe they’ll realize we gave them our best.

Millennials differ from parents on car choices

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Source: Millennials differ from parents on car choices, clarionledger.com

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Remember back to when you were just starting out and considered getting your first car? While most of us probably had a vehicle in high school and college, and a lucky few were presented with a new vehicle upon graduation, the vast majority of us started out with a banged-up beater that had seen better days.

For me, it was a 1972 Ford Gran Torino. My mom and dad had bought the car used; by the time I got it, the car was 8 years old and had high mileage. But that didn’t stop me from falling in love with it. I took great care of it all through high school, until I said a wistful goodbye a few years — and many miles — later.

There is a special relationship between young people and their first car, and when they finally get the chance to buy a vehicle on their own, they usually know what they want. But a new study from Autolist.com indicates car-shopping millennials (loosely defined as those born from the early 1980s through the late 1990s, or ages 25-34), have wildly different preferences than their parents (Generation Xers) when it comes to buying those first vehicles.

Millennials appear to be thinking more about the environmental impacts of their vehicles and care somewhat more about features, according to the survey. However, they care less about price, reliability and brand than the previous generation. And about half of millennials said they planned to hold on to their vehicles for five years or less, contrasting sharply with their parents’ generation, most of whom said they planned to keep their vehicles much longer.
The generations also differed somewhat in what they considered their favorite makes and models. The Ford Mustang was the only favorite make and model both groups named (when asked what they’d consider their favorite performance car model). For trucks, millennials preferred the Chevrolet Silverado 1500, while Gen Xers preferred Ford F-150s. For a small car, millennials tended to choose the Honda Civic, while Generation X preferred the Honda Accord. When asked about their SUV preferences, millennials chose the Honda CR-V, while the older generation chose the Toyota RAV4.

The study is just the latest in the mixed bag of news for the auto industry. While some of those trends portend well for automakers, others could spell trouble down the road. Last year, the University of Michigan found that just 60 percent of today’s 18-year-olds have driver’s licenses, compared with 80 percent in the 1980s. Many millennials have come to view cars less as a status symbol and more like just a way to get from Point A to Point B. As a result, services like ride-sharing and personal transportation options — such as scooters and electric bikes — are becoming more attractive to millennials. Those trends, however, are more pronounced in densely packed urban areas; preferences of millennials in a largely rural state like Mississippi are probably more like their parents’.

Still, it’s obvious things are changing. Whether all this data mean millennials are truly different from past generations remains to be seen; it could be that they’re just hitting life’s milestones later. However, it’s also possible that how Americans view, purchase and use automobiles is undergoing a major shift. The age of the autonomous vehicle is about to dawn, and together with a generation with changed expectations, the automotive landscape will likely be unrecognizable in just a few years.