Will Paying Off My Car Loan Help My Credit Score?

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Credit-Score-325x222There are a lot of different kinds of credit out there. One of the most common forms is the auto loan. Though we are all itching to pay off our long-term debts and own something free and clear, there are a few precautions to know about before racing to get that statement to read zero.

To determine if paying off your car loan will help your credit score, it is important to understand several factors that go into your credit score.

Multiple facets of FICO

First, it’s important to understand the components that make up your FICO credit score. There are five key elements that are used to makeup that all-important number:

  • 35% of your score is weighted toward your payment history
  • 30% is weighted toward the amounts owed on your credit cards
  • 15% is devoted to length of credit history
  • 10% is generated by new credit
  • 10% comes from types of credit used.

The relative importance of each category depends on the consumer themselves.

If you have an auto loan that you’ve been diligent about paying, you’ve benefitted from that 35% devoted to payment history. By paying it down, you are also contributing to that 30% element of amount owed, since theoretically you are decreasing your credit utilization rate. However, if you’ve been increasing the balance on other forms of credit, that may cancel out some of that good behavior.

If you have a 3 to 5 year car loan, you also have length of credit history going for you. The new credit category doesn’t really apply in this scenario.

Types of Credit

But what’s interesting is the 10% weighted to types of credit used. On a positive note, a car loan alters the types of credit you have, assuming you have things like credit cards or even a mortgage.  However, if you pay it off, you may eliminate this type of installment loan as a type of credit used (this is a very different type of credit than a credit card).

Your ability to pay installment accounts, in addition to others, demonstrates that you are responsible and diligent enough to plan your finances around all these different types of credit.

The Biggest Factor

Weighing against all this, however, is a large factor that requires you to look more holistically at your credit lifestyle. A general rule of thumb is that if you can pay off a debt of any kind, in full, do so (with the exception of a mortgage).

How to Plan for Your Child’s Financial Future

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Piggybank family isolatedIn this economy and time period, every parent shares a mutual fear. You think to yourself, “What if my son or daughter isn’t financially stable in their lifetime?” You may be nervous that your child will not be able to pay off college loans or purchase a home when they are older. You might also be worried that your child will struggle to meet car payments, or that they won’t be able to save up money in case of emergencies or for when they grow older.

Read the tips below to learn how you can relieve your fears and help prepare your children for their financial future.

  • Teach financial responsibility. It’s natural to fear that your children will take on too much debt or be unprepared for financial emergencies when they reach adulthood. But you don’t have to wait until they make a mistake to prepare them to be financially responsible. It’s important to remember that it’s never too early to start talking to kids about money and saving. When your kids are young, you’ll want to start with simple conversations about money (sharing tips about your purchase decisions with them when you shop), and as they get older introducing more complex money matters (such as the value of having an emergency fund and saving for unexpected events).
  • Use an allowance as an educational tool. An allowance is an ideal way to teach about responsible spending and saving. Provide your children with the opportunity to save and spend their allowance as they please (with some guidance). This flexibility will allow them to learn early on that spending money as fast as they earn it can have consequences. Depending on the age and maturity of your child, you may choose to share with them a financial mistake you made in the past and how you recovered from it.
  • Plan for college. As college tuition increases, many parents worry about how their children will afford to attend, or how you as a parent can possibly save enough to pay for your child’s college education. As parents, consider beginning to save into a 529 Plan early in your child’s life. When it comes time to make college decisions, help your child evaluate the tuition and other college expenses (travel home, club dues, entertainment costs, etc.) for each college he or she is considering. Make sure to educate yourself on current student loan lending practices and options and help your child determine a realistic amount of student loan debt he or she can take on if necessary.
  • Prepare for life’s big purchases. Even for young adults with a responsible mindset, a lack of financial knowledge can be detrimental for large purchases like a car or home. As a parent, you can offset this concern by being open to discuss these things as your child grows older and begins managing their own money.
  • Reframe your money mindset. Changing the way you think about money can go a long way to alleviating your financial fears for your children and, at the same time, help your children learn to make smart financial decisions. The real question you should ask isn’t, “Can we afford this?” but rather, “Do we need this, and if so, is this the best deal we can get on it, and should we wait and buy it when we have saved the money for it?” These may seem like small differences, but they aren’t. How our children think about money will make a huge difference in their ability to wisely manage it and consequentially will have a huge impact on their quality of life.

Visit First Financial’s website resources tab to view a list of free financial calculators and resources that you and your children can utilize to help save for college and future big ticket purchases like a car, home, and how to save money.

The 10 Commandments of Saving Money

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saving moneyThere are thousands of savings tips that can help you grow your nest egg. Whether they involve brown-bagging it to work or using coupons at the supermarket, these are generally useful savings habits that can give you a leg up on ending each month in the black.

But there are only a few super-sized savings rules that can truly transform your finances. Rules so big they deserve to be etched in stone. So, here are the “The Ten Commandments” of saving.

1. Thou Shalt Know Where Thy Money Goes

When generals go to war, they need an overview of the battlefield. Maps, exploration and data show them where the enemy is susceptible. In the battle for savings, the first thing you have to know is where your money is going.

Sites like Mint.com allow you to connect all your bank accounts, credit cards and loans to cloud-based software so you to track your finances on one screen, in real time, with just the click of a button. They also analyze your expenses and highlight areas where you might be wasting money. Best of all, it’s free.

2. Thou Shalt Eliminate Debt with Extreme Prejudice

Debt is bad, but it’s the interest on that debt that’s like kryptonite to your savings goals, and the sooner you eliminate it, the sooner you can become a savings Superman.

Moving debt from high-interest instruments, like credit cards, to lower-interest instruments, like a line of credit, is a start. Consolidation loans can be a help as well, but the easiest way to get out of debt fast is to take the interest expense you save and put it directly toward your debt’s principal amount.

First Financial’s Visa Platinum Cash Plus Credit Card has one of the lowest APRs around! It’s a good idea to check the APR on your current credit cards to see if it’s time to switch.  You can apply for a balance transfer by stopping into any branch or by calling 732.312.1500, Option 4.*

3. Thou Shalt Read the Fine Print

Most people would be shocked at the amount of money that they waste on service charges, convenience fees and annual dues hidden in financial contracts. If that low-interest credit card charges you $99 annually no matter if you use it or not, is it really that great of a deal?

Make sure if you transfer a balance to a lower-interest credit card that there is not a transaction fee attached. And if you rarely or never use that credit card with the annual fee, think about applying for a card that better suits your financial well-being.

4. Thou Shalt Pay Attention to Timing

At the risk of sounding like a ’60s folk-rock star, to everything there is a season, and waiting for the right season to purchase big-ticket items can save you a bundle. For example, car dealers will discount their inventory when the new model year arrives to free up room on their lots, so If you are in the market for a new car, that’s the season to buy.

Many big-box retailers and department stores have semi-annual sales where you can pick up appliances, electronics and home goods at a discount. The key is to fight against the urge for instant gratification on your purchases.

5. Thou Shalt Keep an Eye on Interest Rates

Even if you are able to pay off your credit cards and loans, the one debt most people can’t pay off is their home mortgage, which is why you should watch interest rates. When interest rates move down, it can be an opportunity to refinance your home loan and save money on your monthly mortgage payment.

But remember, if you just take the money you save and spend it, you’re not saving at all. Earmark the difference between your new mortgage payment and your old one for your bank account, or if you plan to live in your home for the life of the loan, put the extra toward your principal and own your home sooner.

6. Thou Shalt Find Money in Thy House

Most people would be surprised to learn just how much money they have laying around their house. Those books you’ve already read can be sold on Cash4Books or Amazon.com, and your old phones and mobile devices can be sold to companies like Gazelle.

Cleaning out the clutter in your home doesn’t just feel good but provides you with an opportunity to feed your piggy bank by having a garage or yard sale. And what about those figurines you inherited or your comic book collection? Do you still really want them? If not, try listing them on eBay.

7. Thou Shalt Use Technology to Find Deals

The Internet makes saving money so easy that your grandmother would likely throw her coupon box at your head if she knew. Sites like Groupon and Living Social will send deals on goods and services in to your inbox, and apps like Out of Milk can alert you to store sales just by driving by them.

The Internet also is a great resource for finding free activities for you and your family to do on weekends, holidays and school breaks.

Subscribe to our First Scoop Blog and receive free, fun financial education straight to your inbox – at the beginning of each month we post a budget-friendly activity list for that month in Monmouth and Ocean Counties, NJ!

8. Thou Shalt Not Forget to Prioritize Your Retirement

This is a tough one, because it’s hard to save money now that you don’t expect to use for 30 or 40 years. But like it or not, there is going to come a time when your earning years are over and we will all need a retirement fund to bankroll the golden years. So if you don’t want yours to be bronze years, you have to make retirement saving a priority.

The good news is that you have many years to accumulate those funds and to let them grow, which means that small amounts of savings directed toward it can go a long way. For example, you can take a percentage out of every saved dollar, say 25 percent, and earmark it for your retirement. This is an easy and painless way to create both a short-term and long-term savings fund.

To set up a no-obligation appointment with our Investment & Retirement Center to go over your retirement and investment portfolio or to get started with one, call 732.312.1500 or email mary.laferriere@lpl.com or maureen.mcgreevy@lpl.com.**

9. Thou Shalt Not Try to Keep Up With the Joneses

A huge part of winning the saving game is changing your mindset about how you think of money and what its function is. Too often we get caught up in the game of keeping up with the Joneses and buy things we don’t really want — and certainly don’t need — just to keep up appearances.

What many people don’t take into account is that that boat, RV, ATV, third car or giant flat screen that their neighbor bought probably comes with a loan or a high-interest credit card payment. Before making that next impulsive purchase, ask yourself if you really want it and if it will bring you that same warm fuzzy feeling that a full savings account will.

10. Thou Shalt Act Like Thy Don’t Even Have It

We can’t spend what we don’t have, so the more you act like you don’t have it, the more you will be able to save it. Have retirement and college savings funds automatically deducted from your paycheck before you ever see it. Schedule a “secret” payment from your checking account to your savings account each week.

When you come across found money — like a rebate, an overpayment refund or even $20 in your pants pocket — just act like you never had it and put it right into your savings. With practice, you can get pretty good at this, so much so that if you have an unexpected windfall — say from an investment or an inheritance — you’ll forget it even happened. Only your savings account will know.

*APR varies up to 18% for purchases, when you open your account based on your credit worthiness. The APR is 18% APR for balance transfers and cash advances. APRs will vary with the market based on the Prime Rate. Subject to credit approval. Rates quoted assume excellent borrower credit history. Your actual APR may vary based on your state of residence, approved loan amount, applicable discounts and your credit history. No Annual Fee. Other fees that apply: Cash advance fee of $10 or 3% of the total cash advance amount—whichever is greater (no maximum), Balance transfer fee of $10 or 3% of the balance—whichever is greater (no maximum), Late Payment Fee of $29, $10 Card Replacement Fee, and Returned Payment Fee of $29. A First Financial membership is required to obtain a Visa® Credit Card and is available to anyone who lives, works, worships, or attends school in Monmouth or Ocean Counties.

**Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

Summer Vacation Scams: Possible Hazards of Hoteling

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Customers paying at the hotelBooking a hotel stay for a summer vacation? Before you check in, check out how scammers can try to take advantage of travelers.  Always be aware and on the lookout for possible scams!

The late night call from the front desk.

You think you’re getting a late night call from the front desk telling you there’s a problem with your credit card and they need to verify the number, so you read it to them over the phone. But it’s really a scammer on the line. If a hotel really had an issue with your card, they would ask you to come to the front desk.

The pizza delivery deal.

In another scam, you find a pizza delivery flyer slipped under your hotel door. You call to order, and they take your credit card number over the phone. But the flyer is a fake, and a scammer now has your info. Before you order, make sure you check out the business (ensure it’s a franchise or reputable), or get food recommendations from the front desk.

The fake Wi-Fi network.

You search for Wi-Fi networks and find one with the hotel’s name. But it turns out it’s only a sound-alike and has nothing to do with the hotel. By using it, you could give a scammer access to your information. Check with the hotel to make sure you’re using the authorized network before you connect. Read more tips on using public Wi-Fi networks.

Other things to be cautious of when staying at or booking a hotel stay:

  • Always lock your car, and don’t leave anything valuable in your vehicle and/or visible.
  • Try to park your car as close to the front office of the hotel as possible.
  • Don’t leave anything valuable in your room unless there is a secure way to do it (like an in-room safe).
  • Check your credit card statement after your stay to make sure it’s accurate.
  • Be weary of hotel booking websites – there have been instances of advertisements claiming that for booking a hotel room you can receive a complimentary gift card from a known retailer. When clicked on, the scammers will oftentimes ask for a credit card number and more personal info.

Haven’t booked your trip yet? If you’re thinking of getting a vacation rental, take a moment to read up about rental listing scams. And check out these other travel tips, including tell-tale signs that a travel offer or prize might be a scam.

First Financial Holds Groundbreaking Ceremony for Freehold/Howell Service Center

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Press Release

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Pictured above, left photo: The First Financial Board of Directors and staff prepare to cut the ribbon to commence the groundbreaking of the credit union’s newest branch alongside Gordon Holder (Board Chair, center) and Issa Stephan (President/CEO, far right).

Pictured above, right photo: Howell Township officials attend the ceremony. From left to right: Paul Schneider (Howell Planning Board), Issa Stephan, Jeffrey Filiatreault (Township Manager), Town Councilman Robert Walsh, and Gordon Holder.

First Financial Federal Credit Union (http://www.firstffcu.com/) held a groundbreaking ceremony on June 24, 2014 at the site of the credit union’s soon to be newest branch at 389 Route 9 North (next to the Howell Park & Ride) in Freehold, NJ 07728.

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Pictured above: Some First Financial Corporate Office staff with Issa Stephan and Gordon Holder.

In attendance were several Howell Township officials including Township Manager Jeffrey Filiatreault, Councilman Robert Walsh, Paul Schneider of the Howell Planning Board, along with Howell Chamber of Commerce Executive Director Susan Dominguez, the First Financial Board of Directors and Supervisory Committee, President/CEO Issa Stephan, realtor Marshall Kern, builder Mitch St. Lawrence, and members of the First Financial Corporate Office staff.

The ceremony kicked off the construction of the credit union’s newest branch, which will be a primary banking location for approximately a quarter of the credit union’s 20,000 members. First Financial’s newest branch will feature many important banking conveniences such as a drive thru, drive up and walk up ATMs, and more.

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Pictured above: Issa Stephan and Gordon Holder showcase the First Financial Member Experience.

Brief remarks were made by Issa Stephan and Gordon Holder at the ceremony. In regard to the building and future opening of the credit union’s latest branch location, Mr. Stephan stated, “We look forward to bringing the Howell and Freehold community a high-tech banking facility featuring modern convenience. Member experience is extremely important to us, and our first priority is achieving our members’ financial dreams by defining their financial goals and lifestyle, empowering them with financial education, helping them to plan their retirement, and more – and our newest branch will be a key vehicle in helping us to fulfill this promise with our membership.”

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Pictured above: Some of the First FInancial Board of Directors and Supervisory Committee from left to right – David Graf, Laurita Carr, Issa Stephan, Gordon Holder, Elizabeth White, Karen Fiore, and Catherine McLaughlin.

More photos from the ceremony are available by following First Financial on Facebook at www.facebook.com/firstfinancialnj.

9 Steps to Drastically Reduce Your Spending

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scissorsIf money is tight and you need to scale back your budget, here are some strategies to start saving right away. Putting even one of these ideas into practice should give your finances some breathing room, but if you adopt most or all of them, as long as your income remains steady, worrying about your budget will hopefully become a thing of the past.

1. Clip discretionary spending. Take a hard look at your budget. Can you cut back on cable or dining out? It sounds basic, but those expenses add up. A LivingSocial “Dining Out” survey of 4,000 Americans found that the average household frequents restaurants and fast food outlets 4.8 times a week. If that sounds like a lot, maybe it is. A Visa survey of 1,005 adults found that on average, American consumers are eating lunch at restaurants almost twice a week, spending about $10 each time. Either way, a moratorium on dining out may save you close to $100 a month – or perhaps much more, depending on your habits. Meanwhile, ditching cable could net you an extra $90 monthly – the average bill for a U.S. household, according to The NPD Group, a market research company.

2. Negotiate. If you don’t want to get rid of cable or your cell phone (another budget crusher), you might be able to talk down your current price, especially if you give your provider’s customer service representative the notion that you’re considering bolting for the competition. Even if you can’t leave your electric company for an alternate provider, ask if the utility has a program to help you lower your costs.

3. Grocery shop smarter. According to the U.S. Department of Agriculture, the average family of four with teens spends $1,258 at the grocery store. An adult male or female spent between $300 and $400. So if you’re spending more than that, you could probably do a lot better. Strategies that are often cited (because they work) include: Don’t shop when you’re hungry, take a shopping list, look at the unit price as well as the actual price tag, bring coupons, and shop at deep-discount grocery stores.

4. Preplan your week. Much of what we spend is a result of not thinking about what will be coming up throughout the week. We often have no clue what to make for dinner, so we rush out and grab fast food. We forgot about the birthday party or wedding on Saturday and rush out to buy a gift, spending way more than intended. And when it comes to grocery shopping, preplanning meals and clipping coupons should save you money.

5. Lower your gas expenses. Sites like gasbuddy.com and gaspricewatch.com will find the most inexpensive gas in your neighborhood. And, of course, you can always combine errands, take public transportation or a bicycle, and drive less. According to the California Energy Commission, commuters would save an average of 30 percent on their fuel costs if, instead of driving alone to work, they carpooled, took a bus, rode a bicycle or walked. Considering that the average household spends $2,912 on gasoline, according to the latest data from the U.S. Energy Information Administration, a 30 percent savings could equate to more than $70 a month.

6. Reconsider your insurance. You may be in the market for a downgrade. For instance, if your car is getting up there in years and you’ve paid it off – and especially if it hasn’t retained anything close to its original value – both comprehensive and collision insurance may be a waste of money. Collision insurance protects your car if you’re in a wreck, liability protects you if you damage another driver’s car, and comprehensive insurance covers your car if it’s damaged by something other than an accident. Usually you buy collision and comprehensive insurance together, but you don’t have to. As your car’s value goes down, you may want to reexamine your policy.

7. Give up a vice. Sure, we’ve all heard the cliché about giving up your daily latte, but you may have a different vice. The average consumer spends more than $1,200 a year on beer, according to Survey Analytics. And according to the American Lung Association, the average retail price of a pack of cigarettes in the U.S. is $5.51. So do the math. If you’re a pack-a-day smoker, you’ll save $167 in one month if you give up this vice, and in a year, you’ll save a little over $2,000. Take an honest look to see if you have something, from a serious vice to a relatively innocuous habit (like soft drinks), that you can cut back on.

8. Pay down debt. True, your debt may be the reason you can’t save money. But according to the personal finance site nerdwallet.com, the average household has $7,123 in credit card debt. If you owe a lot and can pay off any revolving debt – without turning around a few weeks later and incurring more – you’ll eventually save money.

For instance, say you have $500 in debt, and just to make the numbers easy, you pay 10 percent interest on your credit card. If you don’t pay the balance off, you’ll accumulate $50 in interest, and the next month, you owe $550. And if you do nothing else, the next month, you’ll owe $605. The bottom line: Get rid of your debt, especially the fast accumulating kind, and you’ll have more money left over every month.

9. Get your finances better organized. This isn’t just budgeting – it’s looking at when your bills need to be paid and having a system for keeping your financial life on track.

Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling, points out that we’d probably all save more money, pretty quickly, if we stayed on top of our finances. For example, a late credit card payment means you’ll pay a late fee, all because you misplaced the credit card statement.

“You get a late fee, a negative mark on your credit report, your credit score potentially goes down, and you become a greater risk in the lender’s eyes,” Cunningham says. “And then there’s the gym membership that’s on automatic pay and you haven’t seen the gym in six months. How about habitually picking up fast food on the way home from work because you’re too tired to cook? Buying snacks on break out of the vending machine and paying twice as much for the same thing you could have brought from home? All of these could add up to over $100 a month or over $1,000 a year. Now that’s real money.”

Article Source: Geoff Williams for Money.USNews.com, http://money.usnews.com/money/personal-finance/articles/2014/03/07/9-steps-to-drastically-reduce-your-spending