In this episode of BW’s Smart Money podcast, hosts Sean Pyles and Sara Rathner discuss tips for avoiding holiday shopping pitfalls and improving credit scores. They cover topics such as intentional spending, minimizing waste, and prioritizing experiential gifts over material items. Additionally, credit writer Amanda Barroso joins the discussion to provide strategies for credit score recovery, including writing goodwill letters and disputing errors with credit bureaus. The hosts also explore how renters can report on-time payments to credit bureaus and the importance of credit freezes for families. Be sure to listen to this episode on your favorite podcast platform. I am reaching a point in the holiday season where I am starting to feel overwhelmed by the excessive consumerism that comes with it. I do enjoy the holidays and giving meaningful gifts, but I am wary of contributing to the environmental impact of mass consumption. It’s important to consume more intentionally and reduce waste during this time.
One tip is to look for secondhand items before buying new ones, especially for children’s toys. There are often gently used items available that can make great gifts. Antiquing is also a great way to find unique, well-constructed furniture that has more character than modern pieces.
I also follow the three-year test before making a purchase, considering where the item will be in three years. If it will likely end up in a landfill, I reconsider buying it. It’s important to have a plan for giving away items you no longer need, rather than letting them collect dust.
Instead of giving physical gifts, consider giving experiences or consumable gifts like food or homemade items. These gifts not only reduce waste but also show thoughtfulness and care for the recipient. Giving gifts that can be enjoyed and then consumed can be a more sustainable and meaningful way to celebrate the holidays. I may not be a fan of hot sauce, but I do take pride in my ability to make delicious rosemary brown butter chocolate chip cookies using rosemary from my own garden. This is my go-to recipe when I need to bake a large batch of cookies to give away.
If you want to send me some cookies, Sara, feel free to do so. I would be happy to receive them.
When it comes to curbing impulsive shopping habits, I find it helpful to wait a few days before making a purchase. Adding items to my cart and then doing some research, such as reading reviews on Reddit, helps me make informed decisions. This recently prevented me from buying shearling-lined sandals that had negative reviews about the quality of the material.
Reading reviews and unsubscribing from marketing emails are effective ways to resist temptation and avoid unnecessary spending. Building self-control and saving money are key to building wealth in the long run.
Remember, “Wealth is not what you have, it’s what you keep.” Invest your money wisely and avoid spending on depreciating assets. However, if you come across a timeless piece like a high-quality sweater that you will enjoy for years, it’s okay to treat yourself.
It’s important to set boundaries for yourself to avoid impulsive spending and focus on saving for the future. If you have any financial questions or issues, feel free to reach out to us at the Nerd Hotline for assistance. Amanda is a personal finance enthusiast who has spent over a decade addressing various financial issues affecting Americans. She has worked as a writer at the Pew Research Center and as a policy analyst at the National Women’s Law Center. Welcome back to Smart Money, Amanda.
I’m delighted to be back here with you both.
Let’s dive into our first question from Abigail, who emailed us about missing mortgage payments due to an auto draft issue with her mortgage company. Despite rectifying the missed payments, her credit score has taken a hit. What are the implications of such negative marks on credit reports and scores?
Abigail’s situation is indeed frustrating. Multiple missed payments not only damage your score but also remain on your credit reports for up to seven years. Missing consecutive payments affects your score more severely, especially for individuals with good or excellent scores who have more to lose.
Given the circumstances, what advice do you have for Abigail to improve her credit score and potentially dispute the negative marks?
Firstly, Abigail should contact her mortgage company to address the address discrepancy and ensure such errors do not recur. She can also consider sending a goodwill letter requesting the removal of the late payments from her credit report. Additionally, obtaining a written explanation from the lender and disputing the late payments with the credit bureaus can help rectify the situation.
As for rebuilding her credit, Abigail should focus on making timely payments, maintaining low credit utilization, and monitoring her credit reports regularly. By following these steps, she can gradually improve her credit score and financial standing. The two most significant credit scoring factors are payment history and credit utilization, so maintaining consistency in these areas can greatly benefit your credit score. It is important to be vigilant with auto payments for mortgages or credit cards to avoid negative marks for missed payments on your credit reports.
For renters like Samuel looking to have their rent payments reflected in their credit score, there are free or low-cost rent reporting services available such as Self and Piñata. Experian Boost is another free service that rewards on-time rent payments and other positive financial behaviors.
Credit freezes are a quick and free way to protect your credit from fraudulent activity. Parents can also freeze the credit of children under 16 to prevent identity theft. It is essential to freeze your credit with all major bureaus — Experian, Equifax, and TransUnion — to ensure comprehensive protection. Scammers might utilize children’s Social Security numbers to establish fraudulent accounts, a discovery that may not occur until your child applies for college or attempts to open their first credit card. To freeze your child’s credit, you will need to provide extensive documentation, including copies of birth certificates, Social Security cards, and a utility bill or bank statement with your identifying information. This is necessary to prove your authority to protect children from identity theft. Equifax and Experian offer child freeze request forms that should be completed and submitted with the required documentation via certified mail. While TransUnion does not have a form, a downloadable letter is available for your convenience.
It is essential to understand that paying off the balance in full does not erase the record of credit card usage. Credit card issuers keep a record of transactions and payment history, which lenders report to credit bureaus monthly. Credit bureaus create credit reports, while credit scoring companies like FICO and VantageScore calculate scores based on payment history and credit utilization. Having a balance on your credit card, whether from the current month or carried over to the next, does not improve your credit score. Payment history and consistency in repaying borrowed money on time are crucial factors in credit score calculations. Carrying a balance, even a small one, can negatively impact your credit score by increasing credit utilization. If your balance exceeds the recommended 30% threshold, it could have a negative impact on your financial situation. given sentence in a different way:
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