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5 Tips for Rebuilding Your Credit Scores After Your 20s

5 Tips for Rebuilding Your Credit Scores After Your 20s

If you’re anything like me, your early 20s were not your most financially sound years. With a low-paying job, rent and bills to pay, and plenty of shiny gadgets tempting you at every turn, credit cards often seem to magically make it all work… until they don’t anymore.

Sadly, once you get your act together and want to start making adult purchases such as cars and houses, those foolish financial missteps can come back to haunt you. Thankfully, there are many ways to help repair your credit scores, which in turn will allow you to secure better financing on those large, milestone purchases your more mature mind is now focused on. Here are 5 suggestions to help you get there.

1. Consider Debt Consolidation

Not to be confused with debt forgiveness or bankruptcy, debt consolidation simply refers to the idea of moving all of your outstanding debts to one place in an effort to make paying them off easier. There are a few reasons why this could be a good idea, not the least of which is the path to financial freedom it provides you. Additionally, depending on how you choose to consolidate, it could serve to boost your credit scores.

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The two most popular forms of debt consolidation are personal loans and balance transfers, both have their pros and cons. First, personal loans can be good for boosting your credit scores because they will move your debt from revolving lines of credit to installments. That’s significant because your maxed out credit cards will carry more weight than installment loans when it comes to your credit utilization ratio. Since credit utilization/available credit makes up 30% of your FICO scores, paying off your credit cards with a loan should give you boost.

Sound good? Well, there are a couple of snags you should know about. As you’re undoubtedly aware, banks aren’t really in the business of lending you money for free. Because of this, you’ll want to ensure that the interest rate and APR (annual percentage rate) you’re offered on a loan doesn’t exceed what you’re paying on your credit card(s). On top of that, many lenders will charge what’s called an origination fee—a percentage of your loan amount that you pay to the lender and don’t get back. For these reasons, it’s a good idea to do the math or use a personal loan calculator when exploring your options.

Another form of debt consolidation is a balance transfer. Typically this is done by opening a new credit card with a 0% introductory rate and then transferring the debts from your other cards to your new one. Although this might save you a good amount of money in interest if you’re able to pay down the entire debt quickly, it could end up hurting even worse if you let that introductory offer end. Additionally, be aware that most cards charge you a balance transfer fee – as high as 5% of the amount you are transferring. Lastly, opening a new card will actually ding your credit temporarily since it’s a new credit inquiry, but the added credit availability will help you down the road.

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2. Keep Your Cards Open

Regardless of what method of debt consolidation you use (or don’t use, for that matter), you may be surprised to learn that closing your paid off cards is actually a terrible idea. Sure, it might feel good to call up your credit card company and tell them where to go, but closing your account can hurt your credit scores big time.

Part of the reason for this goes back to the idea of credit utilization. If you close your accounts, you’ll have far less available credit, which is a disadvantage in the eyes of FICO. Plus, a lesser (but still important) factor affecting your scores is your length of credit history. Unfortunately, when you close an account, the time you held that card no longer gets added into this average. It’s a much better idea to leave your cards open and just use them responsibly.

3. Try A Secured Credit Card

Didn’t get the “don’t close your cards” memo until it was too late? If you’ve really tanked your credit, it may be difficult to get approved for a new credit card at first. Even more frustrating, without a credit card, rebuilding your scores can be tricky. That’s where secured credit cards come in.

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What makes secured cards different from the ones you’re familiar with is that they require a deposit. The size of that deposit will depend on the card issuer and the credit limit you’re seeking, but it’s typically a few hundred dollars. Since you’re giving the card issuer collateral, these cards are far easier to obtain than unsecured ones, making them a good choice for those who are nearly out of options.

4. Pay Your Bills On Time

This may seem obvious, but it’s a huge help. Although any overdue payments you’ve made in the past will stick to your credit report for seven years (much like swallowed gum), putting those behind you and establishing a clean streak will serve you well. Additionally, while you will still see those errant payments on your report, their damage to your scores will diminish with time, so don’t fret too much.

5. Monitor Your Credit

Even if you abide by all of these tips in hopes of repairing your credit scores, how will you know if any of your efforts are paying off if you don’t bother to check? Thanks to modern technology, keeping up with your credit scores is now easier than ever, and often free.

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One place you should start is AnnualCreditReport.com, which provides you with your Equifax, Experian, and Transunion credit reports free once a year. The bummer here is that, in order to actually view your scores, you’ll have to pay. However, reviewing your report is extremely important because you may catch errors that are dragging your scores down unfairly.

As far as your scores are concerned, some credit cards now provide you a FICO score on your statement or on their website. If not, you can also try sites like Credit Karma to get a rough idea of what your scores look like. I say “rough idea” because Credit Karma utilizes the Vantage model for calculating credit scores as opposed to the more common FICO model. Because of this, you may see discrepancies, but at least you’ll be in the ballpark.

Yes, it’s true: adulting is hard. Alas, many of us make some major financial mistakes in our 20s that affect us as we attempt to be real adults a decade or so later. The good news is that, even if you’ve trashed your credit scores in the past, they do change and can recover. By paying off your debts, looking for secured forms of credit, paying on time, and keeping an eye on your credit, it will only be a matter of time before those dark fiscal days are finally behind you.

Featured photo credit: Pymnts.com via pymnts.com

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Published on November 8, 2018

How to Answer the Tough Question: What are Your Salary Requirements?

How to Answer the Tough Question: What are Your Salary Requirements?

After a few months of hard work and dozens of phone calls later, you finally land a job opportunity.

But then, you’re asked about your salary requirements and your mind goes blank. So, you offer a lower salary believing this will increase your odds at getting hired.

Unfortunately, this is the wrong approach.

Your salary requirements can make or break your odds at getting hired. But only if you’re not prepared.

Ask for a salary too high with no room for negotiation and your potential employer will not be able to afford you. Aim too low and employers will perceive as you offering low value. The trick is to aim as high as possible while keeping both parties feel happy.

Of course, you can’t command a high price without bringing value.

The good news is that learning how to be a high-value employee is possible. You have to work on the right tasks to grow in the right areas. Here are a few tactics to negotiate your salary requirements with confidence.

1. Hack time to accomplish more than most

Do you want to get paid well for your hard work? Of course you do. I hate to break it to you, but so do most people.

With so much competition, this won’t be an easy task to achieve. That’s why you need to become a pro at time management.

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Do you know how much free time you have? Not the free time during your lunch break or after you’ve finished working at your day job. Rather, the free time when you’re looking at your phone or watching your favorite TV show.

Data from 2017 shows that Americans spend roughly 3 hours watching TV. This is time poorly spent if you’re not happy with your current lifestyle. Instead, focus on working on your goals whenever you have free time.

For example, if your commute to/from work is 1 hour, listen to an educational Podcast. If your lunch break is 30 minutes, read for 10 to 15 minutes. And if you have a busy life with only 30–60 minutes to spare after work, use this time to work on your personal goals.

Create a morning routine that will set you up for success every day. Start waking up 1 to 2 hours earlier to have more time to work on your most important tasks. Use tools like ATracker to break down which activities you’re spending the most time in.

It won’t be easy to analyze your entire day, so set boundaries. For example, if you have 4 hours of free time each day, spend at least 2 of these hours working on important tasks.

2. Set your own boundaries

Having a successful career isn’t always about the money. According to Gallup, about 70% of employees aren’t satisfied with their current jobs.[1]

Earning more money isn’t a bad thing, but choosing a higher salary over the traits that are the most important to you is. For example, if you enjoy spending time with your family, reject job offers requiring a lot of travel.

Here are some important traits to consider:

  • Work and life balance – The last thing you’d want is a job that forces you to work 60+ hours each week. Unless this is the type of environment you’d want. Understand how your potential employer emphasizes work/life balance.
  • Self-development opportunities – Having the option to grow within your company is important. Once you learn how to do your tasks well, you’ll start becoming less engaged. Choose a company that encourages employee growth.
  • Company culture – The stereotypical cubicle job where one feels miserable doesn’t have to be your fate. Not all companies are equal in culture. Take, for example, Google, who invests heavily in keeping their employees happy.[2]

These are some of the most important traits to look for in a company, but there are others. Make it your mission to rank which traits are important to you. This way you’ll stop applying to the wrong companies and stay focused on what matters to you more.

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3. Continuously invest in yourself

Investing in yourself is the best investment you can make. Cliche I know, but true nonetheless.

You’ll grow as a person and gain confidence with the value you’ll be able to bring to others. Investing in yourself doesn’t have to be expensive. For example, you can read books to expand your knowledge in different fields.

Don’t get stuck into the habit of reading without a purpose. Instead, choose books that will help you expand in a field you’re looking to grow. At the same time, don’t limit yourself to reading books in one subject–create a healthy balance.

Podcasts are also a great medium to learn new subjects from experts in different fields. The best part is they’re free and you can consume them on your commute to/from work.

Paid education makes sense if you have little to no debt. If you decide to go back to school, be sure to apply for scholarships and grants to have the least amount of debt. Regardless of which route you take to make it a habit to grow every day.

It won’t be easy, but this will work to your advantage. Most people won’t spend most of their free time investing in themselves. This will allow you to grow faster than most, and stand out from your competition.

4. Document the value you bring

Resumes are a common way companies filter employees through the hiring process. Here’s the big secret: It’s not the only way you can showcase your skills.

To request for a higher salary than most, you have to do what most are unwilling to do. Since you’re already investing in yourself, make it a habit to showcase your skills online.

A great way to do this is to create your own website. Pick your first and last name as your domain name. If this domain is already taken, get creative and choose one that makes sense.

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Here are some ideas:

  • joesmith.com
  • joeasmith.com
  • joesmithprojects.com

Nowadays, building a website is easy. Once you have your website setup, begin producing content. For example, if you a developer you can post the applications you’re building.

During your interviews, you’ll have an online reference to showcase your accomplishments. You can use your accomplishments to justify your salary requirements. Since most people don’t do this, you’ll have a higher chance of employers accepting your offer

5. Hide your salary requirements

Avoid giving you salary requirements early in the interview process.

But if you get asked early, deflect this question in a non-defensive manner. Explain to the employer that you’d like to understand your role better first. They’ll most likely agree with you; but if they don’t, give them a range.

The truth is great employers are more concerned about your skills and the value you bring to the company. They understand that a great employee is an investment, able to earn them more than their salary.

Remember that a job interview isn’t only for the employer, it’s also for you. If the employer is more interested in your salary requirements, this may not be a good sign. Use this question to gauge if the company you’re interviewing is worth working for.

6. Do just enough research

Research average salary compensation in your industry, then wing it.

Use tools like Glassdoor to research the average salary compensation for your industry. Then leverage LinkedIn’s company data that’s provided with its Pro membership. You can view a company’s employee growth and the total number of job openings.

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Use this information to make informed decisions when deciding on your salary requirements. But don’t limit yourself to the average salary range. Companies will usually pay you more for the value you have.

Big companies will often pay more than smaller ones.[3] Whatever your desired salary amount is, always ask for a higher amount. Employers will often reject your initial offer. In fact, offer a salary range that’ll give you and your employer enough room to negotiate.

7. Get compensated by your value

Asking for the salary you deserve is an art. On one end, you have to constantly invest in yourself to offer massive value. But this isn’t enough. You also have to become a great negotiator.

Imagine requesting a high salary and because you bring a lot of value, employers are willing to pay you this. Wouldn’t this be amazing?

Most settle for average because they’re not confident with what they have to offer. Most don’t invest in themselves because they’re not dedicated enough. But not you.

You know you deserve to get paid well, and you’re willing to put in the work. Yet, you won’t sacrifice your most important values over a higher salary.

The bottom line

You’ve got what it takes to succeed in your career. Invest in yourself, learn how to negotiate, and do research. The next time you’re asked about your salary requirements, you won’t fumble.

You’ll showcase your skills with confidence and get the salary you deserve. What’s holding you back now?

Featured photo credit: LinkedIn Sales Navigator via unsplash.com

Reference

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