Montana 1st CU Blog

People who consolidate their credit card debt with a debt consolidation loan can improve their credit rating over the long term if they consistently make their payments on time within a period of two years.

First, you should know that your score may experience an initial dip when you begin the process of consolidating your debt.
If you consolidated your credit cards with a debt consolidation loan and are making regular payments on time, potential financial lenders will observe that all your credit card debt has been paid and you are managing the debt consolidation loan responsibly.

More financial lenders are willingly to extend credit to you, thus giving you an opportunity to rebuild your credit. As long as you continue to manage your credit responsibly and within your realistic financial means, your credit rating will continue to improve.
A debt consolidation loan will not improve your credit rating over the short term as it takes a minimum of two years of consistently paying back the debt consolidation loan before you will begin to see increases in your credit rating. It takes commitment and time to rebuild your credit rating. Now that your credit cards are paid in full with the debt consolidation loan, keep your credit card charges to a minimum, paid in full, and on time. This will reflect positively on your credit rating as well.

It’s getting more difficult to stay afloat…follow these helpful tips to keep your house running smoothly as we transition to a growing economy again:

1) Know what you spend. Carry a small spiral notebook for a month and write down everything you buy with cash or debit cards. Other spending will show up in your checkbook register or credit card statement.

2) Spend less than you make. If you find that you spend more than you make, you will need to either make more or spend less. The option of using credit cards to make up the deficit is not a wise option.

3) Cut back realistically. To avoid failure and discouragement, reduce spending on extras by 50% rather than eliminating spending on extras all together.

4) Stop worrying about “the Jones’”. Many of “the Jones’” who appear wealthy are buried up to their eyeballs in debt.

5) Cultivate a “this is not a forever thing” attitude. Lead your family in thinking “We are doing now what we need to do, so we can do later what we want to do.

6) Do not carry the entire burden alone. Allow your family members to work together with you to reach the other side of the problem. The old proverb is right, “A joy shared is double joy; a problem shared is half a problem.”

7) Do not borrow to pay off debt. Borrowing to pay off debt is merely moving the debt to a different location. Digging a hole in your front yard in order to fill in the hole in your back yard has never been a good plan.

8) Pay off debt using a snowball effect. Continue to pay each debt at its current minimum payment amount. Put as much extra toward the smallest debt balance as you can. When that debt is paid off, add its payment to the payment of the next smallest balance.

9) Reduce your number of active credit cards to one or two. Debt spread out over 10 credit cards seems like less debt than the same amount of debt on one card!

10) Do not be a co-signer. Co-signing makes you 100% responsible for the debt and can easily be a fast track to damaging important relationships.

11) Sell stuff you can do without. Yard sales and Craig’s List can bring in needed monies.

12) Don’t go into debt simply for tax benefits. To pay $5000 interest on debt in order to have a $1250 tax deduction does not make sense. You will get the same deduction if you give your church or nonprofit a $1250 contribution.

13) Don’t use your home’s equity like an ATM machine. Pay off your home loan early instead of continually borrowing against it.

12) Fund your emergency savings account each paycheck. Emergencies happen, and it is better to have money set aside for them than to go into debt.

13) Be content with what you have. Try to imagine how happy you would be if you lost everything you have and had it all returned to you the next day

The Move Your Money campaign urging consumers to move their funds from large national banks to more local credit unions and community banks for better service has drifted West to Montana, reports the Montana Credit Union Network.

A segment on KFBB TV, which serves the Great Falls and Helena areas, noted “Why more Montanans trust their money to credit unions.” And in a letter to the editor of The Missoulian, a member tells why he ditched Chase to join a credit union.

On the KFBB-TV segment, Kathy Briggs, manager of Family First CU, Great Falls, explained that most people realize that their money benefits the owners of the banks, not the customers. “So they turn to a credit union where the members are the owners, and we’re not trying to generate an artificially high profit for someone who will never walk through the doors,” she said, noting credit unions “epitomize the Main Street versus the Wall Street dichotomy.”

The station interviewed Bill Garcia, who switched from a larger chain bank to Great Falls Teacher’s FCU. “I walked in the door this morning, and Julie at the desk said, ‘Hi, Bill.’ It’s just something you don’t typically see.”

He asked for a motorcycle loan and liked the personal service so much he brought his other accounts–and a few friends–to the credit union. “It’s actually uplifting. If you’re having a bad day, just come in and check your balance and you’ll feel better,” Garcia said.

Julie McCamley of Teacher’s FCU said consumers get lost in a larger institution, but the credit union strives to prevent that. “We don’t want them to be just another number. We want to know their names. We want them to be comfortable.”

In his letter to the Missoulian posted Feb. 27, Joe Splinter of Billings wrote that he moved his funds from “too-big-to-fail” Chase Bank, which received government bailouts that made him “appalled.” He moved “all my money to a wonderful, local, welcoming, caring, not-for-profit credit union right here in Billings.” He urged the state, local and county governments to put their funds in small, local banks and community-owned credit unions.

What factors impact my credit score?  Our staff get asked this question daily.  To help we have provided a brief description of credit report basics-

Doing the following typically has a positive impact on your credit score:

• Pay your bills on time. Delinquent payments and collections can have a significant negative impact on your score.
• If you have missed payments, get current and stay current.
• Pay off debt rather than shifting it to other accounts.
• Re-establish your credit history if you have had problems. Opening new accounts responsibly and paying them off on time may help in the long term.
• Apply for and open new credit accounts only as needed.
• Keep credit cards but manage them responsibly. In general, having credit cards and installment loans (and paying timely payments) may favorably impact your credit score in the long term. If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.
• Keep balances low on credit cards and other revolving credit.
• Shop for rates for a given loan within a short period of time

The following factors typically do not have a positive impact (or may even have a negative impact) on your credit score:

• Close unused credit cards as a short-term strategy to try to raise your score.
• Open a number of new credit cards, just to increase your available credit. This approach could actually have a negative impact on your score.
• If you have been managing credit for a short time, avoid opening a lot of new accounts too rapidly. Adding new accounts will lower your average account age, which could have a negative impact on your credit score, particularly if you are a new credit user.

Why is my credit score different from my Equifax, Experian and TransUnion credit scores?

• Your credit score from each credit reporting agency is based on the information in your credit file at the credit reporting agency, and the credit history information each credit reporting agency has about you can differ. This can result in your score at the other credit reporting agencies being different.
• Each of the credit reporting agencies, may use their own scoring models. These models may evaluate your credit file differently.

How is a credit score determined?

A credit score is based on information contained in your credit file. Credit scores are typically calculated using the following credit file items:

• Payment history
• Amounts owed
• Length of credit history
• New credit
• Type of credit used

Keep in mind that there are many different scoring models that can be used to calculate a credit score, and each scoring model may give more or less weight to the various items of information in your credit file.

How long does negative information stay on my credit report?

In general, negative information that is more than 7 years old from date of last activity (10 years for bankruptcies) must be removed from your file.

The positive or negative information in your credit report does not come from Credit Reporting Agencies; any positive or negative information is reported to Equifax, Transunion or Experian by others that have granted you credit, is included in public record information or reported by collection agencies. Credit reporting agencies are merely a repository for the information that your credit grantors report, collection agencies report, or is in public records.

Our staff is always available for your questions including questions about your credit rating and how it may affect your financial security.

WAYS TO OFFSET EDUCATION COSTS

College can be very expensive. To help students and their parents, the IRS offers the following ways to offset education costs:

1) The American Opportunity Credit.

http://www.irs.gov/newsroom/article/0,,id=205674,00.html

This credit can help parents and students pay part of the cost of the first four years of college.

The American Recovery and Reinvestment Act modifies the existing Hope Credit for tax years 2009 and 2010, making it available to a broader range of taxpayers. Eligible taxpayers may qualify for the maximum annual credit of $2,500 per student. Generally, 40 percent of the credit is refundable, which means that you may be able to receive up to $1,000, even if you owe no taxes.

2) The Hope Credit

http://www.irs.gov/formspubs/article/0,,id=177996,00.html

The credit can help students and parents pay part of the cost of the first two years of college. This credit generally applies to 2008 and earlier tax years. However, for tax year 2009 a special expanded Hope Credit of up to $3,600 may be claimed for a student attending college in a Midwestern disaster area as long as you do not claim an American Opportunity Tax Credit for any other student in 2009.

3) The Lifetime Learning Credit

http://www.irs.gov/individuals/article/0,,id=96273,00.html

This credit can help pay for undergraduate, graduate and professional degree courses – including courses to improve job skills – regardless of the number of years in the program.  Eligible taxpayers may qualify for up to $2,000 – $4,000 if a student in a Midwestern disaster area – per tax return.

4) Enhanced benefits for 529 college savings plans

http://www.irs.gov/newsroom/article/0,,id=213034,00.html

Certain computer technology purchases are now added to the list of college expenses that can be paid for by a qualified tuition program, commonly referred to as a 529 plan.  For 2009 and 2010, the law expands the definition of qualified higher education expenses to include expenses for computer technology and equipment or Internet access and related services.

5) Tuition And Fees Deduction

http://www.irs.gov/publications/p970/index.html

Students and their parents may be able to deduct qualified college tuition and related expenses of up to $4,000. This deduction is an adjustment to income, which means the deduction will reduce the amount of your income subject to tax. The Tuition and Fees Deduction may be beneficial to you if you do not qualify for the American opportunity, Hope, or lifetime learning credits.

For more information, see Publication 970, Tax Benefits for Education, which can be obtained online

http://www.irs.gov/pub/irs-pdf/p970.pdf

or by calling the IRS at 800-TAX-FORM (800-829-3676).

Form 8863, Education Credits

http://www.irs.gov/pub/irs-pdf/f8863.pdf

There are new laws being passed in our industry what seems like everyday.  Your statements may look a bit different and in the case of Overdraft Privilege you may have to communicate your continued interest in our services.  If you have any questions about changes that you see or have heard about, feel free to contact us directly anytime!

Working with the CUNA Marketing and Business Development Council’s Executive Committee over the past few years has taught me some valuable lessons.  Perhaps the most valuable lesson comes from Anne Legg of Cabrillo Credit Union.  Anne is one of those people who can “make lemonade out of lemons”, and I think she might even enjoy it.  When faced with one of life’s “lemons”, Anne simply thinks to her self (or says out loud), “I didn’t know that I would have this opportunity today.”  On a recent trip across Montana, not only did I get an opportunity, but it also provided a moment of clarity.

While driving, my wife (knowing that I am a political junkie) asked, “So what is this public option that people keep talking about in relation to health care?” My answer surprised even me…

“Well, think of it like a credit union.  Credit unions keep traditional financial institutions “honest” by providing the marketplace with lower fees, better service, higher rates of return, and lower lending rates.  By doing this, credit unions create an alternative and therefore competition.  As we all know from Econ 101, more competition leads to an enhanced customer experience, and better pricing for consumers in the market.  Further, a credit union is a cooperative, which inherently aligns credit union interests with member interests.  In fact, much like the “public option” credit unions were born to help farmers and small business owners obtain financing when traditional lenders shied away from them.”

So, the question remains:  Are credit unions the ultimate “public option”?  Well, in one word…YES.

IMPORTANT NOTICE TO OUR MEMBERS WITH LOANS

If you are enjoying a lending relationship with Montana 1st Credit Union you should be aware of a change that is coming this month.

Due to new Federal Regulations, the actual due date of your loan is being updated. You do not need to sign any additional forms or contact the Credit Union for this change to take affect. The loan disclosure you signed when you first obtained your loan will suffice as authority to change your due date.

For the Credit Union to remain in compliance with the new regulations, the actual due date(s) will be changed to the 28th of each month. A reminder of your payment due will be included on your monthly statement.

For you, there will be no change in how your payments are made or applied. If your loan(s) are on payroll deduction (weekly, bi-weekly, semi-monthly or monthly), your payments will continue to be applied as always. If you make your loan payment on a specific date of the month, you may continue to do so.

Making the change in this manner will (1) cause the least amount of disruption to you, our member, and (2) will help the Credit Union to control expenses associated with changes caused by the regulations, so that we may continue to offer competitive loan and savings rates.

Answers to some frequently asked questions about this change are available on our website: Montana 1st Credit Union You may also pick up a paper copy in any of our branches or request one by mail by calling the Credit Union at (406) 728-1790.

Just a note to let you all know that the date has been set for our Annual Membership Meeting…

Where:  Hilton Garden Inn Missoula

When:  6:00 PM

Thursday, July 9th

Light appetizers and beverage service will be complimentary.  Come help us celebrate another great year at the credit union.  The results from our annual board of directors election will be announced as well.  So join us for food, fun, and credit union spirit!

Some of you will remember me whining (I do that sometimes) about having to compete with mega-banks now flush with cash courtesy of the US Government.  Well it seems the boys at the American Bankers Association have the same heart burn and have been lobbying congress for support of “the little guys”.

ABA Concern Over GMAC/Ally Bank Rates Attracts Attention

ABA’s May 27 letter to FDIC expressing concern about GMAC Bank/Ally Bank’s use of above-market interest rates to fund rapid asset and deposit growth while under significant financial stress — including $13.5 billion federal support of its capital position — is attracting attention. Several news outlets have covered both ABA’s letter and Ally Bank’s response, in which CEO Al de Molina boasted that “Ally Bank has capital well in excess of FDIC requirements and is better capitalized than many of your members.”

But ABA noted that much of GMAC/Ally’s capital comes from government support, which the bank is leveraging in a questionable manner to fuel its growth.

ABA also pointed out yesterday that when the FDIC recently authorized GMAC to issue up to $7.4 billion in guaranteed debt under FDIC’s Temporary Liquidity Guarantee Program, GMAC promised to develop a funding plan “with a focus on diversifying funding and deposit sources and reducing the bank’s overall cost of deposit funding” as part of the agreement.

Yet as of June 2, GMAC/Ally — which lost $122 million in 2008 and $133.5 million in this year’s first quarter — was offering annual percentage yields of 2.8 percent on one-year CDs that were more than double the national average of 1.2 percent, and six-month CDs with a 2.1 percent APY, far above the national average of 0.94 percent.

ABA continues to press for a solution, concerned that the bank, in which the government holds a controlling interest, is engaging in risky financial strategies that could harm both it and other industry members.

Normally I wouldn’t say this to bankers, but…You go boys!