Mentor

Author: it-teaam

  • What is a CD?

    What is a CD?

    A CD is a certificate of deposit that you keep at a bank. When people ask “how do CDs work,” the elements of a certificate of deposit are quite simple. You deposit funds with a bank for a set number of months or years, during which time you cannot access to the withdraw the funds without paying a penalty.In exchange for leaving your funds with the bank, the banks pay you an interest rate.

    The best certificate of deposit will pay a higher interest rate the longer the term of your certificate of deposit. Most CDs have fixed interest rates, rather than variable interest rates, so you will always know the yield you will earn with a certificate of deposit.

    Most CDs are FDIC-insured by the Federal Deposit Insurance Corporation for up to $250,000.

    [refinance_student_loans_table]

    When do you need a certificate of deposit?

    A certificate of deposit makes sense if you want to earn a high-interest yield that is higher than a high yield savings account. However, you have to be ok not accessing any of the funds for the entire duration of your certificate of deposit. Otherwise, you will pay a penalty, which defeats the purpose of a certificate of deposit, which is to earn interest.

    Therefore, you can think of a certificate of deposit as a way to earn a guaranteed return on your funds. While you cannot access your funds, the bank will use your funds to make loans or make other investments during the duration of your CD term. Therefore, the bank is essentially borrowing funds from you, and using your funds temporarily while paying you a borrowing cost represented by the interest rate.

    The Best CDs are a low risk option with a low reward to help reach your savings goals.

    How are the best CDs different than the best savings accounts?

    When people ask “what is a CD account,” they also like to understand the difference between a certificate of deposit and savings accounts.

    Here are the primary differences:

    Certificate of Deposit: If you want to know how CDs work, a certificate of deposit is a savings tool and financial product that pays you a yield for leaving your money deposited with a bank. The bank will pay you a higher yield than a savings account in exchange for you not having access to your funds for the CD term. If you compare a savings account and CD, you will find that you cannot withdraw funds from a CD without paying a penalty. Therefore, if you are looking for liquidity and want access to your savings, then a savings account makes more sense. If you don’t need the funds and want to earn a higher, fixed return, then a CD may make more sense. Both a savings account and CD typically earn less than investing in the stock market based on historical average returns, although the stock market comes with more relative risk.

    Online Savings Account: An online savings account offers a highyield,typically has no monthly fee and provides access to funds when you need them. The best savings accounts can offer higher annual percentage yield (APY) because the bank saves costs by not having additional or any physical branches to support online saving accounts. The primary difference between a savings account and a certificate of deposit is that the funds from a CD cannot be accessed during the term of the CD. A savings account is a great option if you are comfortable with mobile and online banking, and need access to your funds on a regular basis.

    How do you find the best CD accounts?

    You can find the best certificate of deposit here on Mentor. Mentor not only helps you understand what is a CD and a certificate of deposit definition, but also includes our list of the best certificate of deposit for you.

    Then you can open a certificate of deposit directly through Mentor with one of our partners. It’s easy to apply for a certificate of deposit. All you will need to provide is basic information such as you name, Social Security Number, driver’s license and other contact information.

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  • 401(k) Rollover Guide

    401(k) Rollover Guide

    What is a 401k rollover?

    A 401k rollover means that you take your 401k retirement plan with you when you leave your employer, and transfer your 401k balance to a new or existing retirement account. Under the 401k rollover rules, you can transfer your 401k balance to a Traditional IRA, for example, or roll over the 401k to a new employer. Therefore, you have several 401k rollover options.

    The best option is do a 401k rollover to an IRA because you will have more investment options with an IRA. The 401k rollover rules allow you to leave your 401k with your old employer, but you would not be able to contribute any more funds to the old 401k plan. Therefore, with a 401k rollover to an IRA, you have more control and flexibility compared with leaving your old 401k with your former employer.

    [refinance_student_loans_table]

    How do you rollover a 401k?

    If you want to know how to roll over a 401k, the process is simple.There are three primary 401k rollover options:

    1. 401k Rollover ToTraditional IRA
    2. 401k Rollover To Roth IRA
    3. 401k Rollover To New Employer

    401k Rollover to Traditional IRA

    With this 401k rollover to IRA option, you convert your old 401k to a Traditional IRA. Under the 401k rollover rules, you can keep you investments tax-deferred and have much more flexibility and investment options than you likely have in your employer-sponsored 401k plan. The goods news is that a Traditional IRA may also have lower fees than after your 401k rollover compared with your old 401k.

    401k Rollover to Roth IRA

    With a rollover 401k to Roth IRA, you convert your old 401k to a Roth IRA. In this 401k rollover, you will have to pay taxes on the 401k rollover to IRA because Roth IRAs are funded with after-tax dollars. Since your old 401k was funded with pre-tax dollars, you have to do a Roth IRA conversion, which means you pay income taxes upfront and convert your old 401k to a Roth IRA. The process is simple and a popular strategy, and your earnings will grow tax free thereafter.

    401K Rollover to New Employer

    This process moves your old 401k from your previous employer to your new employer. Contact your new 401k administrator with your new employer to initiate the transfer process.

    When investors ask “how do you rollover a 401k,” they also ask which of the 401k rollover options most people prefer. While it is based on your personal preference, the 401k rollover options that many investors prefer are the 401k Rollover to IRA or Rollover 401k to Roth IRA.

    Why should you rollover a 401k?

    There are several reasons to do a 401k rollover:

    1. Lower Fees
    2. More Investment Choices
    3. Robo-Advisor Options

    Lower Fees

    401k plans tend to have high administrative fees and may use higher cost mutual funds. These higher fees in your 401k means you earn lower investment returns. When you do a 401k rollover to an IRA, there are often lower (or no) costs for an IRA.

    More Investment Choices

    With your employer’s 401k plan, you likely were limited to several investment options. With a 401k rollover to IRA, you have much more flexibility to control your investments and select the investment choices that meet your specific investment goals. With a Traditional IRA or Roth IRA, you can invest in stocks, bonds, mutual funds, ETFs and other investment options. In comparison, a 401k plan typically does not permit you to purchase individual stocks. With a 401k rollover to Roth IRA or Traditional IRA, you also may get access to lower cost mutual funds and ETFs, which means you can potentially earn higher net returns.

    Robo-Advisor Options

    One of the popular 401k rollover options is to roll over your 401k to a Traditional IRA or Roth IRA with a robo-advisor. Robo-advisors are great options for investors who don’t want to manage their investment portfolio. For a lower annual cost, a robo-advisor will automate the management of your portfolio using computer algorithms based on your risk and return preferences.

    Where is the best place to rollover a 401k?

    When it comes to the best place to rollover a 401k, you have several options. We already addresses that you have 401k rollover options to an IRA or to a new employer. To roll over  a 401k to a new employer, you can contact your 401k plan administrator. Let’s focus on a 401k rollover to IRA, whether it is a Traditional IRA or Roth IRA.

    A rollover 401k to Roth IRA or a 401k rollover to a Traditional IRA is a simple process. You can open an IRA retirement account online in minutes. If you want to manage your investments through a self-directed IRA, you can choose the best online broker to set up a Traditional IRA or Roth IRA. If you want your IRA to be managed by someone, you can choose from the best robo-advisors to provide an automated portfolio service that uses computer algorithms to invest in low-cost investments.

    You will be asked to enter basic contact information and then fund your account with the balance from your old 401k. Your new online broker or robo-advisor can help facilitate the transfer and 401k rollover.

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  • What Is An IRA?

    What Is An IRA?

    General Questions

    What is an IRA?

    An IRA is an individual retirement account that helps you save and investment for retirement.

    Retirement accounts such as an IRA enable you to fund your account with cash and receive tax benefits over time. You can use the cash in your IRA investment account to invest in stocks, bonds, mutual funds, ETFs and other investments. When you retire, you can withdraw these funds to help fund your retirement.

    [refinance_student_loans_table]

    How do you choose the right IRA?

    There are two main types of IRAs: a Traditional IRA and a Roth IRA. The main difference between a Traditional IRA and Roth IRA are the tax benefits.

    • Traditional IRA: A Traditional IRA is the most popular form of IRA. When people ask “what is an IRA account,” this is the IRA retirement account of which they think. With a Traditional IRA, you contribute money each year that is tax deductible in your year of contribution. If you control your IRA investment with a self-directed IRA, you can then invest those funds.Your IRA investment can grow tax deferred, meaning you do not pay taxes when you sell your IRA investment for a profit. Rather, you pay taxes in retirement when you withdraw those funds. Therefore, a Traditional IRA makes most sense if you believe your tax rate is higher in the year you contribute to your Traditional IRA than it will be in retirement when you withdraw those funds.
    • Roth IRA: With a Roth IRA, you contribute funds on an after-tax basis. This means that you do not receive a tax deduction in the year of your contribution. You can invest those funds through a self-directed IRA like you would with a Traditional IRA. The benefit of a Roth IRA is that you do not pay any taxes when you withdraw your retirement funds, and you can enjoy the profits of your IRA investment tax-free. A Roth IRA makes sense if you have a lower tax rate now than you will in the future. Roth IRA retirement accounts are not available to everyone, and are limited by your annual income.

    What are the benefits of an IRA?

    There are many benefits of an IRA

    • Save For Retirement: Ability to save for retirement and supplement retirement income
    • Tax Benefits: Ability to take advantage of tax benefits, including tax-deferred or tax-free growth
    • More Investment Options: More flexibility than employer-sponsored investment options
    • No Income Limitations: There are no income limits to enroll in a Traditional IRA
    • Multiple Retirement Accounts: You can open a Traditional IRA account even if you have another retirement plan. However, you may not be able to take advantage of tax deductions.
    • Estate Planning: You can pass your IRA investment account to your heirs
    • Bankruptcy Protection: Your contributions to your Traditional IRA are shielded from creditors.

    You should aim to contribute the maximum amount permitted by law to your IRA each year. As you come closer to our retirement, you may want to adjust your IRA investment choices to reflect your personal and financial preferences, goals and risk profile.

    How do you open an IRA?

    Opening retirement accounts is a simple process. You can open an IRA retirement account online in minutes. If you want to manage your investments through a self-directed IRA, you can choose the best online broker to set up an IRA retirement account.

    If you want your IRA investment to be managed by someone, you can choose the best robo-advisors to provide an automated portfolio service that uses computer algorithms to invest in low-cost investments.

    You will be asked to enter basic contact information and then fund your account through a wire transfer, check or bank transfer. You can also roll-over your 401(k) from a previous employer.

    How much can you contribute to an IRA?

    With a Traditional IRA, you can contribute $5,500 per year. If you are 50 or older, you can contribute $6,500 per year.

    How do you withdraw from an IRA?

    You should not withdraw from your IRA before you retire, or you could face a penalty. At 70 ½ years old, you must take mandator withdrawals from your IRA.

    Beginning at age 59 ½, you can withdraw funds from your IRA investment account to pay for certain expenses.

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  • How To Get Approved For A Credit Card

    How To Get Approved For A Credit Card

    What is the best way how to get approved for a credit card?

    If you want to know how to get approved for a credit score, you need to plan accordingly. While applying for a credit card is easy, there is no guaranteed credit card approval. However, here are 5 steps to take so you maximize your chances to get approved for a credit card:

    1. Understand your credit score

    Your credit score is one of the most important components that help you to get approved for a credit card. The major credit bureaus will evaluate your financial responsibility and borrower risk, which can determine whether you get approved for credit cards, student loan refinance, auto loans, personal loans and mortgages.

    There are three major credit bureaus that evaluate your credit score. The three major credit bureaus are Experian, Equifax and TransUnion. These credit bureaus will calculate a three-digit credit score for you based on your credit worthiness. The most common credit score is called the FICO credit score, which ranges from 300-850.The higher your credit score, the better chance you can get approved for a credit card.

    This table can help you see if your credit score is considered good or bad, and see your chances to get approved for a credit card:

    FICO Scores and Credit Ratings

    There is a separate credit model known as the Vantage Score model, which was developed by the three credit bureaus to compete with the FICO model.

    2. Understand how your credit score is calculated

    In addition to knowing your credit score, it is important to understand how your credit score is calculated. When you understand how your credit score is calculated, you will be in a better position to know how to get approved for a credit card.

    Here is the breakdown and components that generate your FICO score:

    FICO Score Breakdown

    The sooner you focus your financial habits around these 5 categories, the sooner your credit score will increase. A higher credit score can help you get approved for a credit card.

    3. Make on-time payments

    Make sure to make all your payments on time for all your debt obligations. As you can see from the FICO breakdown, your payment history is the top component of your credit score. When you make on-time payments in full, you demonstrate to lenders, financial institutions and credit bureaus that you are a responsible borrower who will repay your debt obligations. Similarly, do not miss any payments because that will hurt your credit score.

    4. Reduce your debt outstanding

    If you’re hoping for guaranteed credit card approval, your best bet is to keep your debt outstanding low.If you have less debt, credit card companies view this as a positive because you have fewer debt obligations to repay. It is ok to have other debt outstanding, as most people have a student loan, auto loan, mortgage or personal loan outstanding in addition to a credit card.

    Your credit score also evaluates credit utilization. Credit utilization is the percentage of your debt outstanding compared to your total credit outstanding. For example, if you have a $5,000 credit card balance and a $10,000 credit line, then your credit card utilization is 50% (=$5,000 / $10,000).Try to keep your credit card utilization as low as possible, typically below 30%. Therefore, you do not want to max your credit cards.

    If you have outstanding credit card debt, you should consolidate credit card debt with a low interest personal loan. A personal loan can help you save money with a lower interest rate and also diversify your credit mix.

    5. Minimize your debt-to-income ratio

    Another way how to get approved for a credit card is to minimize your debt-to-income ratio. As its name suggests, a debt-to-income ratio is the amount of all your debt expressed as a percentage of your total income. Your debt includes your monthly debt payments from all debt sources such as student loans, credit cards, personal loans, auto loans and mortgages. Your income is your monthly income from all sources, including your salary, investments and dividends, for example. There are two ways to lower your debt-to-income ratio.You can either increase your income or lower your debt, or both.

    6. Compare the best credit card offers

    There are many options if you want to get approved for a credit card.

    There are rewards cards such as cash back cards and travel rewards cards that help you earn rewards for every dollar you spend. Want cash back in your pocket or free hotel nights and free flights? Then, cash back credit cards and travel rewards cards could be best for you.

    If you have existing credit card debt, then you may want to compare 0 percent APR cards. Balance transfer credit cards help you transfer your credit card balance to a new credit card, often with 0% APR interest for a certain time. With 0 percent APR cards, you have time to manage your credit card debt and work to pay it off faster without paying interest for a certain time.

    At Mentor, you can compare credit cards and find the right credit card for you based on your personal preferences.

    What’s the easiest credit card to get approved for?

    It would be ideal if there was one, single credit card that was the easiest credit card to get approved for. If you have strong credit and income, you will likely have several credit cards to choose from such as rewards credit cards and cash back credit cards.

    What if you have bad credit? It would also be ideal if there was an instant approval credit card for bad credit. While there are no 100% guaranteed credit card approvals, you do have options. If you have bad credit, the closest thing to guaranteed credit card approval is a secured credit card.

    A secured credit card is the easiest credit card to get approved for if you have bad credit. With secured credit cards, credit card companies will request a security deposit equal to your credit line. For example, many credit cards for bad credit require a security deposit from $200 – $1,000. If you have bad credit, a secured credit card is the easiest credit card to get approved for because of the security deposit. A security deposit provides comfort to the credit card company to show you are a less risky customer. If you do not pay your credit card balance, the credit card company can draw on your security deposit to ensure your credit card balance is repaid.

    Secured credit cards can help you build credit. One of the best ways to establish credit and improve your credit score is to make on-time payments and pay in full. Over time, with good financial habits, you can increase your credit line and even qualify for rewards credit cards and cash back credit cards.

    At Mentor, you can compare the best-secured credit cards and best credit cards for bad credit.

    How is your credit score calculated?

    Based on the FICO credit model, there are several major components to calculate your credit score. Your outstanding debt, missed and late payments and account delinquency can also factor into your credit score. The sooner you establish credit and have good financial habits, the sooner your credit score can increase.

    FICO Score Breakdown

    These are the categories that comprise your credit score. If you want to know how to get approved for a credit card, focus on these areas starting with payment history and credit utilization as the two major categories.

    How do you apply for the best credit cards for bad credit?

    When it comes to the best cards for bad credit, there are some clear steps to take to get approved for the best credit cards for poor credit. Here are some to keep in mind:

    1. Start with secured credit cards

    You will need to put down a security deposit, but secured credit cards are a great tool to build credit. Plus, they are easier to get approved for than unsecured credit cards.

    2. Know your credit score

    Your credit score is the key to your financial future. With credit cards for poor credit, you can assess which cards match your credit profile. This way, when you apply for credit cards for people with bad credit, you will know which ones you are likely to be approved for.

    3. Skip rewards credit cards

    If you are wondering how to get a credit card with bad credit, your best bet is to avoid rewards credit cards. Focus on the best credit cards for poor credit. Once you rebuild credit, you can broaden your credit cards by applying for rewards credit cards.

    What not to do when you apply for credit cards

    If you want to know how to get approved for a credit card, make sure to avoid these 10 things:

    1. Fail to check your credit report for errors

    How it hurts you: If you don’t check your credit report for inaccuracies, then you are not applying with your best foot forward. A correct credit report is essential if you want to get approved for a credit card.

    2. Open multiple credit accounts at once

    How it hurts you: Credit bureaus don’t want to see you open multiple credit accounts at once. If you need multiple types of credit, there is no problem in opening multiple accounts. It is typical to have installment loans such as personal loans and student loans as well as revolving credit such as credit cards. Just don’t open too many at once.

    3. Close multiple credit accounts at once

    How it hurts you: Similar to opening multiple credit accounts at once, you don’t want to close multiple credit accounts at once. One component of your FICO score is your average account age, which measures how long your accounts have been open and active. The longer your average account age, the better for your credit score.

    4. Keep a high credit utilization ratio

    How it hurts you: Your ability to manage your debt outstanding relative to your credit limit matters to credit bureaus. Be responsible and maintain a low credit utilization ratio that indicates you are a responsible borrower.

    5. Fail to pay your monthly balance

    How it hurts you: When it comes to your credit score, your payment history is top priority. Always pay your balance in full each month. Otherwise, interest will be charged and it will adversely impact your payment history.

    6. Miss payments

    How it hurts you: Similar to paying in full, you should make on-time payments each month. Don’t skip any payments because it shows you are not responsible with borrowing and repayment. Lenders may also believe you cannot be trusted to repay your debt obligations.

    7. Fail to have any credit

    How it hurts you: Your goal should be to build credit and establish a credit history. A strong credit profile will help you obtain financial products and can be reviewed by prospective employers and landlords. While you shouldn’t borrow debt for the sake of borrowing, having access to credit that you repay in a timely manner can help improve your credit score.

    8. Fail to diversify your credit mix

    How it hurts you: Credit bureaus like to see that you have a diverse credit mix. This means that you have a mixture of installment loans such as student loans and personal loans that you pay back monthly. Credit bureaus also like to see you can pay revolving credit of varying amounts each month. The more that you repay your balances in full each month and on time, the more trust lenders and financial institutions will place in you.

    9. Fail to be honest on a financial application

    How it hurts you: Always ensure that the financial information that you provide on a credit card application reflects your accurate income, debt and other pertinent information. Your credit profile can be adversely impacted if you provide a fraudulent application, which can restrict your access to credit.

    10. Fail to improve your credit score

    How it hurts you: If you have excellent credit, you will have your choice of credit cards from cash back cards to rewards cards. However, with bad credit or no credit, it is important you work to raise your credit score. You can take proactive steps to increase your chances for credit card approval. Now that you know how to get approved for a credit card, you can work to make on-time payments, limit your debt-to-income, minimize your credit utilization, diversify your credit mix and increase your account age, among other strategies.

    Are there instant approval credit cards for bad credit?

    If you are looking for instant approval credit cards for bad credit, there are several things to know about instant approval cards:

    1. What are instant approval credit cards?

    Instant approval credit cards are credit cards in which you apply for a credit card online and you can receive an approval decision within minutes. Instant approval credit cards are good for people who need a decision quickly for access to credit for an immediate purchase such as travel or an emergency – or for people who just want to know whether they are approved. Once approved, it may take several days for your credit card to arrive in the mail.

    2. How do you get approved for instant approval credit cards?

    You can apply online directly for a credit card. When you apply for a credit card online, the credit card company will check your credit. The stronger your credit, the higher likelihood that you will be approved for instant approval credit cards. You may be approved for instant approval credit cards for bad credit, but it may depend on other factors such as your monthly cash flow and debt-to-income ratio, among other factors.

    3. What should you know before your apply for instant approval credit cards?While it is hard get guaranteed credit card approval, having good to excellent credit can certainly help you get approved for a credit card. You should compare credit cards to find the right credit card for you. If you are looking for instant approval credit cards for bad credit or looking for the best student cards if you have no credit, you can still get approved for instant approval credit cards such as secured credit cards.

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  • How To Build Credit

    How To Build Credit

    How to build your credit score

    If you want to know how to build credit fast, then you need to understand how to establish credit in the eyes of the three major credit bureaus. The three major credit bureaus are Experian, Equifax and TransUnion.

    These credit bureaus will calculate a three-digit credit score for you based on your credit worthiness. The most common credit score is called the FICO credit score, which ranges from 300-850.

    The best way to build credit is to understand that FICO scores are based on the following components:

    1. Payment history = 35%
    2. Credit utilization = 30%
    3. Account age = 15%
    4. Inquiries = 10%
    5. Credit Mix = 10%

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    Payment history

    Payment history shows all your previous payments and whether you have paid on-time. The best way to build credit is to make on-time payments and avoid late payments.

    Credit utilization

    Debt utilization is the amount of debt outstanding as a percentage of your credit limit. For example, if you have a $10,000 credit limit and a $5,000 outstanding credit card balance, then your debt utilization is 50%. If you want to know how to increase your credit score, you should maintain a credit utilization below 30%.

    Account age

    Account age is the average age of all your credit accounts. The best way to build credit is to have multiple credit accounts that are outstanding for a long period of time.

    Credit inquiries

    Credit inquiries occur whenever you apply for new credit, including a mortgage, student loan, credit card or personal loan. Soft credit inquiries do not impact your credit score, whereas hard credit inquiries do. Therefore, you should try to limit the amount of hard inquiries within a short period of time. The good news is that you can often apply to multiple lenders within a short period of time for the same product such as to refinance student loans, for example, and it will only count as one hard credit inquiry.

    Credit mix

    Credit mix represent the different types of credit that you have, including student loans, credit cards, mortgages and auto loans.

    How To Build Your Credit With Good Financial Habits

    If you want to know how to build credit fast, there are several good financial habits to practice. Here are some helpful strategies on how to build your credit:

    1. Don’t pay interest: Pay your bills on-time 100% of the time.
    2. Don’t miss payments: Don’t skip any payments, since missed payments can hurt your credit score.
    3. Avoid opening too many accounts: While having a diverse credit might seem like the best way to build credit, don’t open too many credit accounts at once. Too many new accounts can lower your average account age.
    4. Increase your account age: Want to know how to increase your credit score? Keep your credit accounts open and active for as long as possible, since average account age is one component of your credit score.
    5. Check your credit reports: If you want to know to improve your credit score, check your credit reports at least annually to ensure there are no errors are discrepancies.

    Best way to build credit

    If you want to know how to establish credit, there are several smart strategies:

    • Credit cards
    • Secured credit cards
    • Personal loans
    • Student loans
    • Authorized signature
    • Rent

    How to build your credit with credit cards

    The best way to build credit can be with a credit card. Credit cards are a form of revolving credit, which means you borrow funds, repay those funds throughout the month and borrow again.

    First, you can build credit fast if you make on-time payments. If you want to know how to build credit score with credit cards, then your on-time payments will be reported to the three major credit bureaus. On-time payments signal that you are a responsible borrower who repays debt obligations, which is viewed positively by credit bureaus.

    Second, if you keep these credit accounts open and active, you can increase the average age of your credit accounts, which is an important way to how to improve your credit score.

    Third, you can build credit faster if you keep credit card utilization low, which means you don’t have to spend your full credit limit each month.

    How to establish credit with secured credit cards

    Another way how to build credit fast is with secured credit cards. Secured credit cards are credit cards that require a security deposit, which will equal your credit limit. A typical security deposit for secured credit cards can be $200 – $1,000. When you want to know how to build your credit score, you make charge your credit cards and make repayments each month. So long as you repay on-time and in-full, you can work to increase your credit score. With on-time payments, you can build a track record and payment history with your credit card issuer. Your security deposit also gives comfort to the credit card company to show you are a less risky customer.

    If you miss a payment or have a late payment, your credit card company will deduct the payment from your security deposit. However, if you pay on time and do not miss payments, you can demonstrate your financial discipline with secured credit cards. Over time, you can increase your credit line and even qualify for credit cards with rewards programs and cash back programs.

    How to establish credit with personal loans

    Another best way to build credit is through a personal loan. A personal loan is a type of installment loan that is one way how to increase your credit score. With a personal loan, you receive a lump-sum payment of the amount you borrow, and then you pay back the personal loan in monthly installment payments. The typical repayment period for the best personal loans are one to five years, although some personal loan companies may allow for shorter or longer time periods. You can receive funding in as soon as 24 hours.

    Personal loans are a popular strategy for credit card consolidation. If you have existing credit card debt, you likely need to know how to improve your credit score. Credit card consolidation can help you raise your credit score fast if you use credit card consolidation as an engine to pay off credit card debt faster. When you consolidate credit card debt, you combine all your existing credit card debt into one loan. This personal loan has a lower interest rate than your credit card debt, which saves you money each month. Your payments are simpler because you can make one monthly payment instead of multiple monthly payments. The goal is to pay off your credit card debt more quickly with personal loan interest rates that are lower than credit card interest rates.

    For example, let’s assume that you have $20,000 of credit card debt at 15% interest. Based on your credit score and other factors, let’s assume that you could obtain personal loan interest rates from several personal loan companies for 7%. This means that credit card consolidation could help you cut your interest payments by more than 50%.

    How to establish credit with student loans

    Another best way to build credit is through student loans.If you have student loans, make sure to do at least two things. First, make your full student loan payments on-time each month. Your student loans are reported to the major credit bureaus, so making on-time payments is the best way to build credit. Second, you can lower your interest rate when you refinance student loans. You can check your new, personalized interest rate for free with no impact to your credit score in just minutes. To be approved for student loan refinancing, you do need to be employed (or have a full-time job offer) and have good to strong credit.If you cannot qualify for student loan refinancing given your credit score, you can get a qualified co-signer such as your parents to help you get approved to refinance student loans.

    How to establish credit as an authorized signer

    Another way how to establish credit is by becoming an authorized signer on someone else’s credit card. For example, you could become a signer on your parents’ rewards credit card. You can both benefit when you use their rewards credit card because they can earn rewards, and you can build your credit score. When you are an authorized user, your parents are responsible if you don’t repay your debt obligations so make sure to make one-time payment in full each month.

    How to establish credit with rent

    If you want to know how to build your credit, you can use your rent payments to demonstrate your ability to make regular, on-time payments. Ask your landlord to report your on-time payment history to the major credit bureaus, which is another best way to build credit. You can also ask your utility company to report your payment history as well, which is another way how to raise your credit score.

    How to establish credit when you don’t have a credit history

    You may not have a credit history, but you still want to know how to establish credit and how to build credit fast. Here are some strategies on how to build your credit score:

    • Get a co-signer. If you want to know to build your credit, you need access to credit. Having a qualified co-signer can help you get approved for student loan refinance, credit cards and personal loans, for example.
    • Get a student credit card. Student cards are credit cards for college students to help them build credit and gain access to short-term financing. Student credit cards are best for college students with limited or no credit history as well as limited income. Most importantly, the best credit cards for students are a smart way how to establish credit and how to build credit fast.
    • Share your payment history. Ask your landlord and utility company to share your on-time payment history with the three major credit bureaus (Experian, Equifax and TransUnion), which can show that you are a responsible borrower.

    Frequently asked questions on how to build your credit

    What are the major types of credit?

    Consumer credit typically appears in four different forms:

    Revolving Credit.  Revolving credit is a form of open-ended credit, which means you borrow and repay up to a certain credit limit. An example of revolving credit is a credit card. You can carry a balance and repay revolving credit when you choose to, but will incur interest charges if you pay past your balance due date.

    Installment Credit. Installment credit is your typical monthly payment loan such as a personal loan, student loan, auto loan or mortgage. With installment credit, you borrow an amount of debt, and repay the loan with interest each month in installments.

    Charge Cards. Charge cards are similar to credit cards, but you have to repay the balance in full each month. Therefore, charge cards are different than revolving credit, which allows you to carry a balance and pay interest.

    Service Credit. Service credit occurs when someone bills you for goods and services, and you pay each month for the credit extended to you. Examples include your monthly rent, cell phone bill or utilities bill.

    Why is it important to build your credit?

    Your credit score, in many respects, is as gateway to your financial future. If you want a credit card, personal loan, auto loan, student loan refinance or many other financial products, you need to know how to establish credit and how to build credit fast.

    Today, even landlords and employers will check your credit to ensure that you are financially responsible and a trustworthy individual who meets their obligations. It is advantageous for you to have access to credit even if you don’t plan to need it immediately.

    Should I borrow money to build credit?

    You don’t have to go into debt simply to build credit. In other words, you don’t need to take out a mortgage simply if you want to raise your credit score.

    However, you should have a mix of installment loans with fixed monthly payments (such as personal loans) and revolving credit accounts (such as credit cards). Credit bureaus like to see a good credit mix and a history of on-time payments. Therefore, if you can borrow on your credit card and repay the balance in full each month, this is a good way how to improve your credit score.

    But, don’t take out a loan and pay interest if you’re trying to find out how to establish credit.

    Will having more credit help my credit score?

    If you want to know how to build credit fast, the best way to build credit is to be a responsible borrower. When you are a responsible borrower, you may have multiple credit accounts such as student loans, credit cards and personal loans. Credit bureaus reward borrowers who are financially responsible and make on-time monthly payments in full.

    When you repay your monthly balance on-time and in-full, you signal to the three major credit bureaus – Experian, Equifax and TransUnion – that you are trustworthy. When you manage your credit responsibly, credit bureaus are more likely to reward you with a higher credit score.

    The more access to credit you have, the lower you also can keep your credit utilization ratio. When you have a lower credit utilization ratio (such as less than 30%), you demonstrate to credit bureaus that you are more financially responsible.

    Therefore, managing multiple credit accounts, making on-time payments and keeping a low credit utilization can be great strategies how to raise your credit score fast.

    How long does it take to improve my credit score?

    It’s never to too early to start building credit, particularly if you want to learn how to build credit fast. The best way to build credit is to develop a track record of financial responsibility. By borrowing credit and making monthly payments in full and on time, you can signal to lenders that you are a responsible borrower.

    If you want to know how to build credit fast, you can typically build your credit in 1-2 years if you want to have an average or good credit score.

    To build an excellent credit score, it could take many years (e.g., 7+ years) to increase your credit score.

    Follow these tips if you want to know how to improve your credit score:

    • The longer your accounts are open and active, the longer your average account age, which help boost your credit score.
    • Focus on reducing your credit utilization, which you can do by spending less or getting more credit.
    • If you have credit card debt, consolidate credit cards into a personal loan to cut your interest payments.
    • Always make monthly payment in full and on-time, and you will develop a longer, positive payment history.
    • Never miss a payment
    • Start building a credit history as early as possible, even if you are in school. Student cards a great option for students to start building credit.

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  • Will California Offer Free College?

    Will California Offer Free College?

    If California Assembly Democrats have their way, California college students may benefit from the nation’s most ambitious plan to date for students to avoid student loan debt.

    The Degrees Not Debt program, which California Democratic lawmakers proposed Monday, would assist nearly 400,000 University of California and California State University students pay for tuition and living expenses – with the ultimate goal to help students avoid student loan debt.

    According to student loan debt statistics from Mentor, the average student loan debt per graduate in California is $22,191. Student loan debt per capita in California is $4,160 compared with the average student loan debt per capita in the U.S. of $4,920.

    According to the California Assembly Democratic Caucus, the program would be implemented over five years and cost $1.6 billion.

    “It’s by far the most comprehensive and wide-reaching proposal in the country,” Lupita Cortez Alcalá, executive director of the California Student Aid Commission, told the Los Angeles Times.

    The plan also increases grants to community college students and would make the first year of community college tuition-free.

    Students would still have access to Pell Grants, Middle-Class Scholarships, and other university scholarships. Students whose parents earn more than $60,000 per year would be expected to help pay for college, and students would be expected to hold a part-time job to help cover college costs.

    The remaining tuition costs – about $33,000 at University of California schools and $22,000 at California State schools – would be covered by the program.

    According to the California Legislative Office, more than 60% of Cal State students and approximately 50% of University of California and community college students have their tuition fully covered by existing California aid programs, which total about $2 billion.

    The latest California proposal differs from other tuition-free college proposals in New York, San Francisco, Oregon and Tennessee by providing more assistance to cover living expenses for college students.

    At University of California schools, for example, living expenses can account for about 60% of college costs. However, this proposal would not cover the cost of living expenses for community college students.

    Democratic lawmakers face an uphill battle to gain the support of California Governor Jerry Brown, a fellow Democrat. Brown has been opposed to increased spending so the likelihood of including the proposal in the state budget, which is due this June, remains slim.

    California legislators have proposed over 30 bills this year to make college for affordable for Californians. This latest proposal comes after University of California regents this January approved a 2.5% tuition increase and California State trustees are considering a 5% tuition increase.

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  • Free College: San Francisco Offers Tuition-Free Plan

    Free College: San Francisco Offers Tuition-Free Plan

    San Francisco Mayor Ed Lee announced at a press conference yesterday that, starting next fall, the community college will be tuition-free for all San Francisco residents through the City College of San Francisco.

    As first reported by the San Francisco Chronicle, San Francisco would become the first city in the nation to make community college free to all city residents. Any student who has lived in San Francisco for at least one year – regardless of income – is eligible.

    “To California residents who are living in San Francisco, your community college is now free,” Lee said at the press conference.

    The announcement follows a plan introduced by New York Governor Andrew Cuomo to provide free tuition to New York residents whose families earn less than $125,000 per year to any of New York’s state universities (State University of New York, or SUNY), city colleges (City University of New York, or CUNY) or community colleges.

    However, the New York and San Francisco plans differ in several ways. While Cuomo’s tuition-free plan is income-based and includes all New York public universities, city colleges and community colleges, the San Francisco plan only applies to community colleges. Unlike Cuomo’s plan, the San Francisco plan will cover tuition for both full-time and part-time students and provide $500 for books and supplies for full-time, low-income students (whose tuition fees are currently waived) and $200 for part-time, low-income students.

    San Francisco will fund tuition through Proposition W, which San Francisco voters approved last November. Proposition W imposes a transfer tax on properties that sell for $5 million or higher. The expected annual cost is $5.4 million, which the mayor committed to spend for the next two years. Of that total, $2.1 million is designated for tuition and $3.3 million for student expenses for current students as well as a 20% increase in enrollment.

    Argus Institutional Headcount estimates that the City College of San Francisco serves approximately 60,000 students (about 36,000 of whom are considered credit headcount) each year, down from a high of over 100,000 students from the 2002-2003 academic year. According to the San Francisco Examiner, the school lost about one-third of its enrollment due to an issue regarding accreditation, which has since been resolved and last month was re-accredited for seven years.

    Mentor can help you learn more about student loan options:

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  • 5 Student Loan Questions For U.S. Education Secretary Betsy DeVos

    5 Student Loan Questions For U.S. Education Secretary Betsy DeVos

    If you have, or will have, student loans, the name Betsy DeVos is someone that you should know.

    DeVos is President-elect Donald Trump’s nominee for U.S. Secretary of Education and, if confirmed by the U.S. Senate following her confirmation hearing on Tuesday, will have significant impact on your student loans over the next four years.

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    Who Is Betsy DeVos?

    DeVos is a billionaire businesswoman, philanthropist and former chairwoman of the Michigan Republican Party. She is the daughter-in-law of Richard DeVos, the founder of Amway. DeVos is also the chairwoman of Windquest Group, a privately held operating group of companies that invests in technology, manufacturing and clean energy. Before she was nominated on November 23, 2016, DeVos supported Jeb Bush, Carly Fiorina and Marco Rubio in the Republican primary.

    DeVos is a strong proponent of charter schools and school vouchers (which allow students to attend private schools with public funding) and believes in increased choice within the education system. Her detractors, including teachers’ unions such as the National Education Association, believe that DeVos wants to privatize the education market. Further, they note that unlike previous education secretaries, DeVos lacks the requisite experience for the role because she has never: been an educator, directed a state department of education, attended public school or had children who attended public school.

    Why Did President-Elect Trump Pick DeVos?

    “Betsy DeVos is a brilliant and passionate education advocate,” Trump said in a statement after nominating DeVos. “Under her leadership we will reform the U.S. education system and break the bureaucracy that is holding our children back so that we can deliver world-class education and school choice to all families.”

    While DeVos’ public views on charter schools and school vouchers are well known, there is more to learn regarding her position on student loans.

    Here are five questions that would help provide more insights for current and prospective student loan borrowers:

    Student Loan Questions

    1. What role should private banks play in student loans compared with the federal government?

    Trump has called for the potential reduction of the federal government’s role in student lending and a corresponding increase in the role of private lenders in the issuance of federal student loans. He has criticized the amount of “profit” that the government generates from student loans, which may signal a reduction of interest rates for federal student loans.

    If both the federal government and private lenders originate student loans, this would mark a return to the pre-2010 era when the federal government issued student loans and private banks issued federally-backed student loans. In 2010, the Obama administration began originating all federal student loans through the Direct Loan program.

    • Would the federal government lower student loan interest rates for federal student loans?
    • What is your perspective on the private sector expanding its role in student loan refinancing?

    2. What is the proper amount of risk sharing between the federal government and universities with respect to student loan defaults?

    While universities set tuition rates, the federal government currently takes all the risk when a student defaults on his or her federal student loans.

    • Is this fair? Should colleges and universities assume a portion of this risk?

    Trump has also called on colleges and universities with large endowments to help lower the cost of tuition (or face potential loss of tax exempt status).

    • Do you agree?
    • How would this be measured?

    3. What is the future of the Public Service and Teacher Loan Forgiveness Program?

    The federal government currently provides student loan forgiveness for public servants and teachers who meet certain qualifications. Public servants, for example, can have 100% of their student loans forgiven after 120 eligible on-time monthly payments.

    • What are your perspectives on the Public Service and Teacher Loan Forgiveness Programs?
    • Do you believe that these should remain standalone programs?
    • Or do you believe that they should be combined into a single income-based repayment program for all student loan borrowers?
    • Do you believe that public servants and teachers who are now in repayment will be grandfathered in under the current programs as these programs are presently constructed, since they borrowed with the expectation of entering public service and qualifying for loan forgiveness?

    4. What immediate relief, if any, do you think should be available for the millions of borrowers who are afflicted by the student loan crisis in this country?

    Last October, Trump proposed an income-based repayment plan that allows borrowers to cap their monthly student loan payments based on their income and then have their student loans forgiven after a certain period of time.

    Under Trump’s plan, if you are a student loan borrower, your monthly student loan payments would be capped at 12.5% of your income. After 15 years of monthly payments, your remaining student loan debt would be forgiven.

    Today, the standard federal government student loan repayment period is 10 years. Under the Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE) income-driven repayment plans, you pay 10% of your discretionary income each month toward your federal undergraduate student loans for 20 years, at which point any remaining balance on your federal undergraduate student loan is forgiven. Under REPAYE, if you have graduate school student loan debt, the repayment period is 25 years before your remaining student loan debt is forgiven.

    • In addition to shortening the student loan repayment period, are there other immediate relief measures for student loan borrowers that can be implemented to lessen their financial burden?

    5. What do you think of New York Governor Andrew Cuomo’s plan to offer free college tuition?

    Earlier this month, Cuomo introduced a plan to provide free tuition to New York residents whose families earn less than $125,000 per year to any of New York’s state universities (State University of New York or SUNY), city colleges (City University of New York or CUNY) or community colleges.

    New York would be the first state to offer free tuition at all its public colleges and universities.

    • Do you think this plan should be a model for other states to follow?
    • If not, do you believe that there are alternative plans that can achieve greater impact?

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  • College For Free? New York Offers Free College Tuition

    College For Free? New York Offers Free College Tuition

    One issue that Democrats and Republicans can agree on is our nation’s student loan crisis, which impacts over 40 million borrowers who are holding over $1.3 trillion in student loan debt.

    During the 2016 election, the presidential nominees proposed several solutions to help tackle student loan debt:

    1. Donald Trump: President-elect Trump has offered a student loan debt repayment plan that allows borrowers to cap their monthly student loan payments based on their income and then have their student loans forgiven after a certain period of time. Among other proposals, Trump has also called for universities with large endowments to spend more of their endowment funds on students for tuition, housing, and other costs – or the universities would potentially lose their tax-exempt status.
    2. Hillary Clinton: Democratic nominee Hillary Clinton proposed a free college tuition plan as well as a student loan repayment and student loan forgiveness plan. Among other proposals, Clinton also called for student loan refinancing for 25 million Americans and a three-month moratorium on all federal student loan payments.

    Now, New York Governor Andrew Cuomo has offered his take on student loan debt relief: free college tuition.

    Today, with Senator Bernie Sanders (I-VT) at La Guardia Community College in New York, Cuomo, a Democrat, announced a proposal to offer free tuition at all of New York’s public colleges.

    The Plan.  The plan, which requires approval by the state legislature, would provide free tuition to residents whose families earn less than $125,000 per year to any of New York’s state universities (State University of New York or SUNY), city colleges (City University of New York or CUNY) or community colleges. The tuition would be provided through the Excelsior Scholarship and supplement existing state and federal loans and grants. Under the existing New York State Tuition Assistance Program (TAP), eligible New York residents can receive up to $5,165 toward tuition.

    “A college education is not a luxury – it is an absolute necessity for any chance at economic mobility, and with these first-in-the-nation Excelsior Scholarships, we’re providing the opportunity for New Yorkers to succeed, no matter what zip code they come from and without the anchor of student debt weighing them down,” Cuomo said in a statement.

    If approved by the state legislature, New York would be the first state to offer free tuition at all its public colleges and universities. Cuomo wants to implement the plan starting this fall with a three year, gradual roll-out. The income threshold would be $100,000 in 2018, $110,000 in 2018 and $125,000 in 2019.

    Tuition Cost.  New York has the largest public university system in the country, with 440,000 students across 64 campuses. According to the State University of New York, tuition for state residents is $6,470 for the current academic year. Tuition for the current academic year for residents at City University of New York schools and community colleges is $6,330 and $4,800, respectively.

    Plan Cost. Cuomo, a potential presidential candidate in 2020, estimates that the program could help 940,000 families and individuals. Once fully implemented, Cuomo estimates the program could cost $163 million, although more details on how to fund the program are needed, including if it will be funded by taxpayers through new taxes or be funded from existing state resources. New York spends about $10.6 billion per year on higher education.

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