Friday, May 25, 2012

Pay a Collection Fast and Put it in your Past!

  If collection agencies can buy my debt at a discount, can I pay it at a discount? Yes, often you can pay it at a discount but it depends on the age of the debt being collected. New collections are not typically discounted as they are being collected by internal collection departments or a business is using a collection agency as a vendor to collect for them. The collection is discounted when that debt ages and gets sold to an outside agency for collection.

 Contact the collection agency and test the waters of negotiation with them. Depending on how old your debt is, they may be willing to give you a significant discount. Often debt that is two years old or more is purchased from businesses and other collection agencies at 50 cents or less on the dollar. A $500 debt may be settled for half or less.

In your negotiation, make sure they will show your debt as paid or settled for a lesser amount. Either of these is preferable to an open and unpaid collection on your credit. Open collections will be a drag on your credit score for seven years. The “point cost” on your score will remain basically the same from day one to the last day of the seven years. Paying the collection changes the debt from open/unpaid to closed/paid. Paying an open collection has an immediate positive affect on your credit score. It will bump up right away and as it gets further and further in your past your score will improve with each passing year provided you don’t incur any further bad debt.

If you agree to an amount and how your collection will be listed on your credit report, the collection agency will want payment NOW and you should be prepared to cut them a check within a day or two. But, before you write the check, GET IT IN WRITING FROM THE AGENCY! Get the mutual agreement the collection agency made faxed to you, emailed to you, or snail mailed to you. Make a copy of the agreement and file the original. Attach your check to the agreement copy and you now have a contract with the collection agency.

Word to the wise: Never send a collection agency a check before you get your agreement in writing. A member of Meriwest Credit Union was in one of my workshops not long ago and complained about a major U.S. financial company. It is the sort of company that everyone believes is one of the most honest and forthright businesses in our nation. He received a call from them for a debt of $2,400 he had built up on his card. These had been business related expenses but the business had gone under in the recession and he was not going to be reimbursed for them. The financial company called him and said that if he paid $1,200 they would show his debt as paid. He mailed the check. The next month, they called him and asked when he would mail the other half of what he owed. He said the guy last month said his debt would show as paid. The fellow at the collection department asked, “Did you get that in writing?” Always get it in writing!

Free Financial Education Class: Real World Budgeting for Teens
Wednesday, June 13, 2012 - 6:30-7:30 p.m.
Chesbro Financial Center, San Jose, CA


Free Financial Education Class: Auto Financing 101
Wednesday, June 20, 2012 - 6:30-7:30 p.m.
Chesbro Financial Center, San Jose, CA

Thursday, May 17, 2012

Teach your Children to Save! (They will thank you when they are older.)

One thing we can rely on in our lives is change. Many important financial issues come about due to change. Life changes such as marriage, divorce, and death force us to deal with finances in different ways. One of the biggest changes you will experience is having a child. Let’s talk about children’s savings plans.

To start a savings plan for your new bundle of joy you need to have the child’s Social Security number to start their account. I am a little prejudice (I am the Credit Union Guy!) so I would go to a credit union and start a savings account with the minimum balance. Typically, credit unions have very low minimums; often in the vicinity of $20 or less to open a savings account that will have no fees. This makes it easy for young parents to get started.
An important aspect is the vesting or ownership of the account. Whose name should be on it? It is a good idea for you to act as a custodian for your child’s money. A custodial account uses your child’s social security or Tax ID to establish the account rather than your own. As custodian, you have full control of the funds. Any interest earnings will be reported under your child’s name and social security. Your child cannot access the money until you decide to place the funds in their name alone.
If you are banking in the same institution as the one where you opened the child’s account, you can have an automatic transfer of funds from your checking or savings to the child’s account. But you should not start it and forget it. You need to place the dollar amount of that transfer in your budget as if it were a bill and pay it religiously as if it were one of their most important bills. This is because it is important. Studies show that children who have a college savings account from the time they are young are more likely to attend college. It serves as a college incentive to the children and to the parents.
Saving in a savings account is a good idea, but the interest rates on savings are rather low right now. Once a certain dollar amount goal has been reached in the savings account, often $100 is a good target as that is what it takes to initially fund a 529 College Savings Plan. You can transfer the $100 into a 529 and have a much wider selection of investments. You should work with your investment representative to determine your personal level of risk tolerance and select the appropriate investments. If you have younger kids you can accept a bit more risk as time is on your side. You have time to be aggressive with the investments to achieve higher yields and grow the funds. As the child ages, it is a good idea to reduce the amount of money that is at high risk and move it to investments that offer more safety (less risk). As the child gets closer to college age it is important to consider principal preservation in the investment. Moving most of the investment into a money market account at that time would be a good move so you can prevent any investment losses while the student is in college. You will need that money to pay tuition!
For more information on accounts for young people, check out the Meriwest Flow Card Page at . The Flow Card is a debit card for kids that is managed with a parent.

This week's featured article: Meriwest Credit Union: Thinking Globally, Acting Locally, Making a Difference!


Monday, May 14, 2012

7 Steps to Buying your First Car

Buying a car is often our first big expenditure and our first foray into the world of credit. Buying a car is not all about numbers, dollars, and cents; it is an emotional experience. It is that dream of rolling down the open road with the window down and our elbow resting on the door while we cruise along going somewhere in our car. That dream of buying a car is important, but equally important is the work that gets us to that point.  Your first car purchase is a major financial transaction and should not be taken lightly.

For many, a vehicle means freedom. But, it also means economic empowerment as it gives you increased job opportunities and increased earning potential. You will also have an improved quality of life. Some crosstown buses can take hours to reach their destination. With your personal car, you will have more quality time with your friends and family. Since you will be making a regular monthly payment on the loan, your car ownership is also an opportunity to improve your overall credit picture.

  1. Your first step in the transaction is to know how much of a car you can afford. Refer to your budget to see how much disposable income you have available after paying your rent and monthly bills. That is what you have available for a car payment and insurance.

  1. Do you know the condition of your credit? What's your FICO Score? First, get your free credit report at This website is managed by the three credit bureaus and the Federal Trade Commission. You can access and printout your report from all three bureaus for free once a year. Yes, NO CHARGE.

  1. As for your FICO Score, you can access that at is not free ($14.95 a month), but it will be the most accurate representation of your score that is available. If you cancel before the end of the ten day free trial, you will not be charged.
    1. Do you need a co-signer? Need to learn more about it? Check out our Co-Signer Blog from a couple of weeks ago.

  1. What have you saved for a down payment? The down payment is part of your purchase price. It determines the amount you will be financing. A significant down payment can decrease the monthly payment amount. The down payment also plays a role in determining your interest rate.   Often lenders will give you a better rate based upon larger down payments. A large down payment tells your lender that you have “skin in the game.” They will be more comfortable lending to you and providing a favorable rate if you have a personal investment in the vehicle they are financing. We offer the “You Name It!” savings account that is designed just for this sort of purpose.

  1. Once you are financially up to date, you can start researching the car you want to own.  What do you need? Good gas mileage? Sporty? Four Wheel Drive? Do you need a wagon or SUV for your family? Or is it going to be basic transportation? This is where you need to study and learn what the best and most affordable car is in your price range. Here are three excellent websites I am using to research my next vehicle purchase. Each of these has extensive information on the technical issues and the fair market prices of the car you may be purchasing.
    1. Credit Union Dealer Network
    2. No. American Dealer's Association Guide
    3. Edmunds Automotive

  1. Now we need to shop for vehicle financing. Credit Unions, banks, finance companies, and auto dealers all offer auto and truck financing. I am partial to credit union financing because I like lower rates, faster approvals, faster loan processing, and, a big reason I like them, discounted extended warranties for my car. I put a lot of miles on my vehicle. By financing my car through the credit union, I can buy the extended warranty at a huge discount over the warranty the dealer will sell. Once you have selected your lender, you should get pre-approved for a car loan. Then there is no doubt about how much car you can afford and it makes your purchase negotiation much easier!

  1. Now it's time to go to the dealership or private party and negotiate your best deal. The best negotiating tip I can give you is to stick to your budget. Dealers will try to egg you into a slightly higher payment for some options, “The premium stereo will only cost you another $15 per payment. Are you going to let $15 keep you from having the best stereo?” REMEMBER: $15 per month on a 36 month loan means you will pay the dealer $540 for that stereo. Stick to your budget and don't let the dealer try to sell you on the payment amount.

  • Meriwest Credit Union offers a full array of tools to help with your auto purchase decision. We have loan calculators, vehicle research, interest rates, and even a link to tell you the value of your trade-in.

Many of our members tell us that building their budget and getting their financing is the easy part of buying a car. It is negotiating the price of the car that seems to be the hardest part of the process. One option I have used in the past is an Auto Broker. An Auto Broker can find the car you want and often negotiate a good price for you as they bring large volumes of business to the dealership. But Auto Brokers charge for their services; sometimes well over $500 for high end vehicles. An option that some credit unions have for their members is an auto buying service or, as we call it, a Personal Auto Shopping Service or P.A.S.S.  It is an Auto Broker who works for your credit union and works for you for no charge! It's as if you have a friend in the car business.

If you are interested in our Personal Auto Shopping Service, please contact Bill Fultz at 408-365-6321. Bill has 25 years in the car business. Let Bill use his connections and expertise to get you the best deal.

Auto Sale at Meriwest Credit Union – Main Office

May 19th - 9AM to 5PM
May 20th - 10AM to 6PM
5615 Chesbro Ave, San Jose CA 95123

Get special dealer pricing and financing deals.

To get pre-approved for financing, call Meriwest Credit Union at 877-MERIWEST or online at Meriwest Credit Union Auto Loans.   

Upcoming event: Identity Theft
May 16th @ Meriwest Credit Union
Chesbro Ave. Main Office-Please RSVP with Greg Meyer at

Thursday, May 3, 2012

How do I Increase my FICO Score?

We all want a higher credit or FICO score. It helps to get additional credit, usually at better rates. How do we raise our personal FICO score? That’s a question I get every week in my workshops. Here are some of the best strategies for raising your FICO score:

  • The two simplest strategies are making your payments on time and paying down any outstanding balances. Each time you make a payment on time your score goes up. Don’t let any credit debt get near 30 days late. Also, whenever a balance is paid down, especially on credit cards, your ratio of used vs. available credit goes down, thus, raising your FICO score. Keeping your cards’ outstanding balances at less than 30% of the available balances on each will maximize your FICO Score.

  • Another tip is not to close old credit cards. If it does not have a balance, consider using the card for a small transaction once or twice a year and pay it off immediately. This will help your credit payment history and the lack of an outstanding balance on the card will improve your capacity to borrow. This relates directly to your ratio of used vs. available credit. The higher the amount of available credit, the higher your score.

    • Two things happen when we close old cards, the history they built for us over the years goes away after a short time and the available balance is removed from our overall available credit, limiting our current borrowing capacity and reducing our FICO score. Close old credit cards at your own risk.

  • Avoid too many new credit inquiries. If you are trying to increase your FICO score, avoid applying for new credit cards or loans too often, especially those at a department store. Each application you sign means a hit on your score. Multiple applications mean multiple hits. Many businesses will offer you a discount for applying for their particular card. Your credit score will benefit if you just say No!

  • Another strategy is to move your revolving debt to installment debt; essentially going from a variable account to a fixed rate/fixed payment account. You would be changing your variable revolving credit account to a fixed payment personal loan. The highest scores include both revolving and installment debt. This is what takes place when someone does a bill consolidation, changing variable interest debt to fixed rate fixed payment debt.

  • One of the easiest and most direct ways to raise your score and your credit history is to get a secured loan from a credit union that will report your loan payments to the credit bureau. These are often referred to as share loans. As you are borrowing your own money, a high FICO score is not required. Not all CU’s report to the credit bureau on these types of loans, so you have to shop for them. Essentially, one opens a savings account and takes out a loan on their money in the account. As they pay back their own money, they will build their credit score. This can also be done with a secured credit card account with your CU. Mismanage either of these programs and you will lose your deposit and possibly do damage to your credit score.

    • Banks offer savings account loans but, generally, they will not report your payment history to the credit bureau as credit unions do.

Finally, the key, the thing that will make the biggest difference for you in building your credit score -  is Time! Utilize these strategies and be patient. Rome was not built in a day, neither is your credit score. Your personal history of proper credit usage is important so take the time to do things right and make your payments on time, pay down balances, and utilize your old cards as you should to maintain them. Proper maintenance of your credit over time will result in a nice fat credit file and a high score.

Tips to understanding your FICO score

Auto Sale at Meriwest Credit Union – Main Office

May 19th - 9AM to 5PM
May 20th - 10AM to 6PM
5615 Chesbro Ave, San Jose CA 95123

Get special dealer pricing and financing deals.

To get pre-approved for financing, call Meriwest Credit Union at 877-MERIWEST or online at Meriwest Credit Union Auto Loans.