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Money Management And Finances For Returning Citizens

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If you have a history of managing your money well, you may have a better chance of getting a job, a car, a house and other things. Managing your money means paying your bills on time, sticking to a budget, building good credit and staying out of debt.   There are several parts to managing your budget and finances.  Here are some guidelines.

Checking and Savings Accounts

Your first step when you have an income is to open up a checking account if the terms of your parole allow it. This is a bank or credit union account that allows you to write checks and/or use a debit card so you can pay your bills easier. It also helps protect your money from being lost or stolen.

  • Open an account with a bank or credit union close to your work or home.
  • Aim for a free checking account that has no minimum balance (the amount of money you have to keep in the account to get the service), low initial deposit and no monthly fees.
  • Some banks have “second chance” programs for people who have been turned down for checking accounts before and are listed in ChexSystems (for writing bad checks, having lots of overdrafts, etc.) There may be a minimum amount you need to deposit and other restrictions, but this may be a very good way to get a checking account.
  • Some nonprofit organizations may help you open an account or help you save.

To open an account, just walk into the bank. You will generally have to provide:

  • Your first and last name and address
  • Social Security number
  • Driver’s license or State ID
  •  If your driver’s license or State ID was issued in the last 60 days, you may need verification of address such as pay check stub, recent utility bill or other official correspondence (SSI, unemployment, etc.) with your name and current address.

 

Budgeting

As soon as you have income coming in, you should create a budget to help you pay your bills. A budget lists all of your expenses and how much you can spend on each item such as rent and food.

  • Check with your bank or credit union, local library or local extension service to see if they offer free budgeting classes.  Or call 2-1-1 and ask about budgeting or financial literacy programs.

Try to go easy on your expenses until you can establish that you have enough money to pay for everything. Don’t buy new cars or expensive clothes, don’t spend a lot of money going out to eat, don’t buy extras like cable/DISH and watch your phone expenses until you know you can afford it.

Pay your bills before you spend money on things like clothes and entertainment.

  • Make a list of all the bills you have to pay and the dates they are due.
  • If you are paying your bills by mail, mail them at least one week before the due date.
  • Don’t pay attention to “grace periods.” Just make it a habit to pay your bills at least a week before the due date.
  • Make paying credit cards or bank loans (including car loans) a high priority.
  • Nonpayment can affect your credit.
  • Paying your rent or mortgage should also be a priority.
  •  Stay up to date on your insurance.
  • Stay current on your utilities.
  • Work with an agency that will help you budget. Call 2-1-1 for more information about these programs.

Debt

If you are having trouble paying your bills, there are agencies that can help you set up a budget and work with your creditors to arrange payment plans. There are even agencies that can help with a gambling problem if that is what is causing the debt.

Credit

When you buy things using “credit,” a company gives you a loan that you are promising to pay back a little at a time. You are borrowing someone else’s money. When you get a loan to buy a car, you are using credit. When you buy something at a department store using a credit card, you are also using credit.

It is important for you to build a good “credit history” if you ever want to get a home loan, auto loan or get good interest rates on your credit cards. A credit history is simply a record of how you use credit.

There are people who have a bad credit history because they do not pay their bills on time, and there are people who have no credit history because they never had any loans or credit cards.

If you have never had any credit, it is very important to start building your credit history. Without a credit history, it may be hard to get a car, a job, rent, or start phone service and other services. You may be turned down or you may be asked to pay a high interest rate. The interest rate is the amount you are being charged to borrow that money.

 

Tips on Building a Credit History:

  • Before you apply for credit, make sure you have steady, verifiable income.
  • Try to stay at one job and live at one address for as long as you can.
  • Before you apply for any credit card, make sure that the lender reports to a credit bureau. If not, you will not be building your credit history!
  • Get a card with NO ANNUAL FEE if possible.
  • Watch out for high interest rates. Shop around for the best rates before you decide to apply. READ THE FINE PRINT.
  • If you think you cannot get a credit card on your own, think about getting a co-signer – someone who will be responsible for paying off the card if you don’t.
  • Open a bank account. This makes you look better to a lender.
  • Only apply for the credit cards whose requirements you think you meet — there are usually minimum income requirements. Getting turned down a lot looks bad.
  • Don’t apply for a bunch of credit cards at once or obtain more credit cards than you truly need.
  • Secured credit cards are a last resort, but are an option. These cards require you to pay a deposit to get the card – the deposit could be a few hundred dollars. If you don’t make your payments, you may lose your deposit AND still have to pay your balance. These cards often have fees and higher interest rates. Try to find the lowest fee you can. After a few months of making payments on time on the secured credit card, you may be able to get a regular credit card.

 Maintaining Good Credit:

  • To avoid paying a lot of interest, it is best to pay off the balance in full and on time every month.
  • At the very least, you must pay the minimum payment in full and on time every month.
  • Don’t pay attention to “grace periods.” Just make it a habit to pay your bill at least a week before the due date.
  • If you think you need help understanding your options or you need help managing your credit, contact one of the organizations listed below. There may be a fee for some services.

 

Credit Reports

A credit report is a detailed history of how you pay your bills (whether they are on-time or late) and how you manage your debt, loans and credit. In addition, public information such as judgments, bankruptcies and delinquent child support payments are included.

You should review your credit report periodically to make sure everything is accurate. It is not unusual for mistakes to occur, and you want to take care of those so they don’t affect your ability to get a job, rent an apartment, buy a home or get a credit card. Landlords, employers (with your permission) and others with legitimate business purposes can get a copy of your report.

The report may include a “credit score,” which is a number that is used to predict how credit-worthy you are. The higher the score, the better. You may benefit from talking with a credit-counseling agency if you think you need help managing your credit. Here are helpful things to know:

  • There are three companies (TransUnion, Equifax and Experian) that maintain credit reports and each company may have different information.
  • You can get a FREE copy of your credit report once every 12 months (ONLY through the Annual Credit Report Request Service). You can request all three reports at once so you can compare them, or you can space them out so you can keep track of changes - as long as you don’t request the same report more than once in a 12-month period. However, your free copy does not include your credit score.
  • You can also get a free copy of a report that was used to take an “adverse action against you” such as denying you employment, credit or insurance,as long as you request it within 60 days of receiving notice of the action. The notice will give you the name of who to contact to get the free copy.
  • If you are unemployed and intend to apply for employment in the next 60 days OR you are on welfare, you can also get a free copy of your credit report.
  • If you find something that is wrong on your credit report, contact BOTH the company that produced the credit report and the company that provided the original information (such as a credit card company) to dispute the information.
  • Generally, if you dispute something, the credit reporting company must begin to investigate it and make a note in your file or delete the error within 30 days of receiving your original request. They don’t have to FIX the error within 30 days, just note that they are working on it.

To get a FREE copy of your credit reports once every 12 months, contact the following. DO NOT call any other advertised service; they are usually trying to get money out of you, even if they say it is free.

 

Annual Credit Report Request Service          877-322-8228

PO Box 105281, Atlanta, GA 30348-5281 www.annualcreditreport.com

If you need a report more often than that, or you want a report with your credit score, contact the following. There is a fee for these services unless you qualify for a free report based on the points mentioned above.

TransUnion          800-888-4213          www.transunion.com

Equifax                800-685-1111           www.equifax.com

Experian              888-397-3742          www.experian.com

 

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