Winter is Here, Connecticut: Prepare to Counter Higher Energy Rates

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The weather is colder. Days are shorter. Nights are longer. That only means one thing – winter is here. You turned off the air conditioning and hopefully have made sure your heating system is working well.

That comes with a rub this year, and you may want to rethink your energy usage strategy in the new year. Eversource supply rates are set to double from 12.05 cents/kWh to 24.2 cents/kWh starting Jan. 1, 2023. This is an $84 per month increase for the average user. United Illuminating supply rates are also increasing from 10.6 cents/kWh to 22.5 cents/kWh, resulting in an $83.09 increase for the average user.

As inflation continues to hit wallets hard, what could Connecticut residents do to soften the impact that is expected to be felt by monthly energy bills?

One effective way to reduce energy bills is to set thermostats to 68 degrees or lower, especially on days when the cold isn’t bone-chilling and you can find warmth in other ways. You can save as much as 10% a year in heating and cooling costs by turning back thermostats 7 to 10 degrees for eight hours a day.

The downside to lowering thermostats is the cooler temperature within the house. To counter this, you may dress more warmly and use more blankets at night.  If you work at home, wearing a sweatshirt isn’t an awful thing – it is winter, after all.

You can also make the most of your wood-burning fireplaces and stoves. Fireplaces that generate a decent amount of heat that can keep heating units off for a good amount of time, saving money.  You can even have a fun slumber party with the kids and sleep in the living room with the fireplace on a weekend night.

There are other ways you can keep heat in your rooms to prevent heating units from turning on multiple times a day. Use simple physics, for instance. Heat rises, so set your ceiling fans into the clockwise motion to circulate the heat that builds up near the ceiling and send it to where it is needed most.

Your window blinds and shades can also be a valuable tool. During the day, consider opening interior blinds, drapes and/or shades to make sure sunlight warms the home. Do the opposite at night. Using insulated curtains to cover windows at night can prevent heat from escaping and cold air from coming into the home.

You can also check your doors and windows for drafts.  This can be a major source of cold air.  At the base of exterior doors, you can use a variety of draft blockers to help.  For windows, you can use window insulation tape, weatherstripping, caulk, or other similar tools to keep the cold air out.

These are only a few ways to lower monthly energy bills, but with electricity costs about to increase significantly, they are worth considering.  They will help lower the impact of the price increase and keep your family more comfortable at the same time.

If high energy bills are creating problems, don’t hesitate to visit your local bank, where experts are ready to help you with budgeting, saving, and financing projects to increase the energy efficiency in your home.

Should you wait to start saving while you’re still paying off your student loan debt?

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To pay it off or to save? If you have student loan debt, you’ve probably wondered whether you should finish paying it off before you prioritize putting away money for retirement, building a rainy day fund, and focusing on other financial goals.

The answer: both! While there’s no one-size-fits-all solution, building savings while you pay down your student debt is an effective strategy for many borrowers.

Here are four reasons why student debt repayment shouldn’t hold you back from saving:

Saving early is key to building a retirement fund.

When it comes to retirement savings, starting monthly contributions as soon as possible is key to maximizing compound interest — or returns on your investments and returns on those returns — over time.

However, 41 percent of millennials cite their student debt as the reason why they’ve delayed saving for retirement. With the average borrower taking twenty years to finish repayment, those who delay saving until their student debt is paid off will miss out on decades’ worth of compound interest.

Even waiting just five years to start saving for retirement makes a significant difference. Case in point: if you save $100 a month in a traditional IRA with a 7% annual rate of return from the time you start working at age 22 until you retire at age 65, you’ll have earned $279,914 in compound interest on top of your monthly contributions. If you don’t start saving until you’re 27, you’ll have earned $183,184 in compound interest— $96,730 less — by the time you retire.

You never know when you’re going to need to dip into your emergency fund.

The pandemic has proven that anything can happen — and building an emergency fund is one of the best ways to prepare for the unknown. Unfortunately, 43 percent of millennials say their student debt has prevented them from starting a rainy day fund.

While paying off your student debt as fast as possible can save on interest over time, you’ll likely wind up wishing you had saved that extra cash if you find yourself unable to afford manage essential expenses — like rent, utilities, groceries, transportation, childcare, and pet food — or pay unexpected bills — whether from a stay in the hospital or car repairs — in the event of an emergency.

Plus, once you’ve set aside the recommended three to six months’ worth of expenses, you’ll feel even more confident pursuing other financial goals knowing you’re covered if the worst were to happen.

Student debt isn’t necessarily bad for your credit score — and it can even help it.

Student debt does impact your credit score — but that’s usually not a bad thing.

While falling behind on your student loan payments can be detrimental to your credit score, making your required minimum payment on time each month can actually give you a boost. And because student loans appear on your credit report as installment loans — just like auto loans and credit cards — having student debt can improve your “credit mix”, which accounts for 10 percent of your score calculation. In fact, your credit score might even experience a slight drop when you finish paying off a student loan.

A good credit score has dozens of benefits, from lower insurance premiums and interest rates and perks like eligibility for premium credit cards to making it easier to rent a house or get a job. All of these factors can make it easier to set aside savings and maintain your overall financial wellbeing.

The Milford Bank can help you balance student debt repayment with savings goals.

For many borrowers, building savings while paying off student debt is easier said than done — but you don’t have to go it alone. The Milford Bank is partnered with Candidly to take the guesswork out of student debt while providing solutions to build long-term financial health.

Whether you want to find ways to lower your monthly student loan payments (and free up cash for savings), explore debt forgiveness programs, or pay down your student debt with cash back rewards and spare change, Candidly has the tools you need to reach your goals. Visit milfordbank.com/other-services/candidly/ to learn more about this value-added service and activate your free account today.

Parent PLUS loans: an overview

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With the average cost for a year of college in the US up to $35,720, it’s no wonder so many students take out loans. But the average undergraduate borrower receives just $11,836 in student loans each year — a significant gap for most.

That’s where Parent PLUS loans come in. The Department of Education allows parents of dependent, undergraduate students to take out this type of federal student loan on their child’s behalf.

Parent PLUS loans can be an easily accessible option for families to help foot the bill for their children’s college education — something that many families need assistance with. But as with any financial commitment, there are careful considerations parents need to make before taking out a PLUS loan.

Parent PLUS loans: an overview

There’s no limit on PLUS loans (regardless of income), and parents can borrow up to the full cost of attendance minus any other financial aid their student receives. While that may be helpful to some borrowers, it can also quickly lead to taking on more debt than a parent can afford.

Any parent or legal guardian of a student who is enrolled at least part-time in an undergraduate degree program at a Title IV school can apply for a Parent PLUS loan via the Federal Student Aid website. A credit check will be performed as part of the application review process — but if the parent has a negative credit history, they may still qualify if they have a guarantor.

It’s important to be aware that parents are often offered a PLUS loan without ever asking for it. Many colleges will include PLUS loans in awards letters notifying students what financial aid they’ve been offered, so carefully reviewing aid packages before accepting is a must.

Repaying Parent PLUS loans

By default, borrowers are supposed to start repaying their Parent PLUS loans as soon as the loan has been disbursed, but borrowers can request to defer payment until after their child has graduated or left school.

Parent PLUS loans will start accruing interest immediately after they’re disbursed, even if the borrower is granted a deferment. While the interest rate is fixed for life at the time the loan is taken out, the interest rate for PLUS loans is often steep — in the last few years alone, rates have climbed as high as 7.6%.

Unlike many other federal loans, the repayment plan options for PLUS loans are somewhat limited: borrowers can choose between a standard, graduated, extended, or income-contingent plan. Income-contingent repayment (ICR) could help make monthly payments more affordable and forgive any outstanding balance after 25 years, but the PLUS loan must have first been added to a Federal Direct Consolidation loan before it is eligible for ICR.

Parent PLUS loan forgiveness and cancellation

ICR plans aren’t the only way these loans can be forgiven. Parent PLUS loans can also qualify for Public Service Loan Forgiveness (PSLF), provided the borrower meets certain eligibility requirements, including working full-time for a nonprofit, government, or other public service organization.

The circumstances under which a Parent PLUS loan can be discharged are limited. Declaring bankruptcy, for example, won’t automatically wipe PLUS loans away — a borrower must demonstrate specific financial hardship caused by the loans. Otherwise, PLUS loans are usually only discharged in the event that the student’s school closes while they’re enrolled, the school commits fraud, if the borrower becomes permanently and totally disabled, or if the borrower or student dies.

Managing Parent PLUS loans

Refinancing federal Parent PLUS loans with a private lender can help ease the strain for some borrowers. In some cases, refinancing can lower monthly payments and reduce the amount of interest a borrower will pay over time. But refinancing has its drawbacks, too: once a Parent PLUS loan has been refinanced, it cannot qualify for ICR, PSLF, or any other federal benefit.

Given the high interest rates, making extra payments to parent PLUS loans to reduce the overall payoff time can be a good strategy for borrowers on traditional (standard, graduated, or extended) repayment plans.

The Milford Bank is here to help

If you’re a Milford Bank customer with student debt, whether from Parent PLUS loans or any other type of loan, you’re in luck. The Milford Bank now offers Candidly as a value-added service to help customers manage — and pay off! — their student debt. Candid.ly offers smart tools that help you move beyond your student debt, including:

  • Reassess: Find, compare, and enroll in alternative repayment plans — including income-contingent repayment — in minutes.
  • Refinance: Get pre-qualified refinancing offers from dozens of lenders
  • Round Up: Collect spare change from everyday purchases and convert it into student loan payments
  • Giveback: Pay off your student debt with cash back rewards from online shopping

Visit milfordbank.com/other-services/candidly/ to learn more and activate your free account today.

 

Are You a Renter Looking to Become a Homeowner?

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By Paul Mulligan, SVP, Retail Lending

Last year, while many businesses and industries suffered, the real estate market in Connecticut had a phenomenal year, with a 17% increase in home purchases.  The 38,641 single-family homes bought was the highest in the state in 15 years.  One factor certainly was the fact that the number of people moving into Connecticut in 2020 was more than double what the state enjoyed during 2019.

One of the byproducts of the trend was an increase in home prices, which also grew. As a result, many people may feel they are being priced out of the home market.  Renters, in particular, are feeling less confident that they will be able to buy homes.  Just over a third of current renters say they are “not very confident” or “not confident at all” in their ability to buy a home.  The majority say their lack of confidence comes from home prices being too high or an inability to afford a down payment.

But, that shouldn’t mean renters should stop thinking about buying a home.   There are many benefits to owning, including:

  • Freedom to renovate/decorate
  • Building equity
  • Potential tax benefits
  • Value could increase over time
  • Stability of ownership
  • Predictable monthly loan payment (with a fixed-rate mortgage)

There are also many variables to consider when buying a home; including location, size and type of home, features, and of course, cost.  If you’re ready to buy a home – or even if you’re just starting to consider it – one of the first things you may want to consider is your priorities?  That includes what are the must have, nice-to-have, and unnecessary features.  If you’re willing to add flexibility to your process, you should enjoy greater home selection opportunities.

In addition, your local community bank may be able to offer you better mortgage terms that may make it easier for you to get out of paying someone else for your living space and start building equity in your own home.  For instance, The Milford Bank offers highly competitive rates with no-cost lock-in, low down payment options, free prequalification to make your home shopping experience easier, decisions made locally by a bank with a long history of serving the local community, and mortgage professionals that focus on your individual needs as a local customer.

In addition, if you’re a renter looking for your first home, The Milford Bank offers a First-Time Homebuyer program within Milford, Stratford, West haven, and Orange; that includes a rate reduction from the standard rate, application fee refund on closing, and low down payment options. The Milford Bank also offers a special rate for single family dwelling purchases, regardless of location throughout the state of CT.

You may also want to consider current versus future plans.  When looking at homes and talking to your bank, consider how you might be able to expand a potential home in the future to meet additional needs or to add some of the nice-to-have features that might not be feasible initially.  You may even be able to use the equity you build in your home over the years to take out a home equity loan or line of credit to fund home improvement projects.  Alternatively, The Milford Bank offers a construction-to-permanent one closing loan option, which includes the option of a fixed rate and an interest only period of up to 12 months during the construction phase.

The bottom line is, if you are looking to buy a home – whether you’re tired of paying a monthly rent to a landlord or association or you simply want the freedom and convenience of owning your own home – don’t let your lack of confidence keep you from achieving your dream.  Talk to The Milford Bank’s local mortgage specialists, who can provide you with the information and assistance you need to make a truly informed decision to assist you in purchasing a home that fits your needs and budget.

What the Federal Student Loan Payment Freeze Extension Means For You

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By Jorge Santiago

If you have federal student loans, you probably already know that emergency payment suspension has been extended to January 31, 2022.

Between recent student loan servicer shakeups, the Covid-19 surge, and 90 percent of affected borrowers saying they’re not prepared to resume payments, the decision to extend the payment freeze beyond September (as previously scheduled) comes as a relief for many borrowers.

But do you know how to use this additional extension to your advantage? Don’t just think of the extension as extra time without federal student loan payments — think of it as extra time to plan, to save, and to get ahead.

Here are some things you can do help put your best financial foot forward until federal student loan payments resume:

Get in touch with your student loan servicer

Contact your student loan servicer to confirm your payment due date, reconnect a payment method to auto-pay your bill, and learn about any new policy changes. If you’ve moved since March 2020, be sure to update your mailing address, too.

If your loans are serviced by FedLoan, Granite State, or Navient, be advised that these servicers have announced that they will transfer their student loans to other servicers before the end of the year. With that in mind, you may want to keep an extra watchful eye out for updates about the transfer in the event that you need to take any action with the new servicer.

Make sure you’re on the best path forward

Now is a great time to explore your eligibility for new federal repayment plans and forgiveness programs.

Switching to an income-driven repayment plan, for example, could lower your monthly payment and get you on track to have outstanding debt forgiven after a certain number of years. If you work for a non-profit, government, or public service organization, you may also qualify for Public Service Loan Forgiveness, which forgives remaining loans after ten years of qualifying payments.

Consider making payments

It may sound counterintuitive, but for some borrowers, the suspension period is the perfect time to make student loan payments.

That’s because the interest rate for federal student loans is still 0%, so any payments you make during the freeze will apply directly to your principal — which can ultimately lead to paying off your student debt sooner.

Get ahead on other financial goals

The average monthly student loan payment is $393 — a major expense that often forces borrowers to delay other financial goals until their student debt is paid off. For example, did you know that more than half of non-homeowner borrowers say their student debt has delayed their ability to buy a home?

Without the expense of monthly student loan bills, now could be the perfect time to get ahead on other priorities like saving up for a down payment, making extra retirement fund contributions, opening an emergency savings account, or setting aside cash for a major purchase.

Learn how The Milford Bank can help

When it comes to student debt, you don’t have to go it alone. The Milford Bank has partnered with Candid.ly, the leading student debt repayment platform, to give customers the tools they need to help make managing their student loans easier than ever before. Visit milfordbank.com/other-services/candidly/ to learn more and activate your free account today.

Student Loans 101

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by Jorge Santiago

College is expensive. In the 2020-2021 academic year, the average private college’s tuition and fees was $35,087; public colleges averaged $21,184 for out-of-state students and $9,687 for in-state students. Multiply that by at least four years, and the total cost of a degree is one very few students — or their families — can afford out-of-pocket.

That’s where student loans come in. Student loans create opportunities for students who might not otherwise be able to afford their education, which can in turn lead to more stable, gainful, and fulfilling employment.

But student loans are just that — loans that must eventually be paid back. If you’re one of the 47.9 million Americans carrying a combined $1.71 trillion in student debt, you probably already know that repayment can be a strain. And if you’re considering applying for college loans, you should understand your options before taking on student debt.

So let’s get back to the basics. Here are four questions everyone with student debt — or considering taking out student loans in the future — should know how to answer:

What types of student loans are available?

Types of federal student loans

As their name suggests, federal student loans are offered through the federal government via the Department of Education’s Office of Federal Student Aid (FSA). Three different types of federal student loans are available: Direct Subsidized, Direct Unsubsidized, and Direct PLUS.

  • Direct Subsidized Loans are available for undergraduate students with financial need (the difference between your school’s cost of attendance and your household’s expected contribution). Interest rates are fixed for life when the loan is first disbursed and are generally lower.
  • Direct Unsubsidized Loans are available for both undergraduate and graduate students, regardless of financial need. Interest rates are fixed for life when the loan is first disbursed and are generally higher.
  • Direct PLUS Loans are available to parents financing their child’s education, and to graduate or professional students funding their own education. The application process requires a credit check, but borrowers with low credit scores can still qualify if they have an endorser or can document extenuating circumstances. Interest rates are fixed for life when the loan is first disbursed and are generally the highest rate compared to other federal student loans.

Types of private student loans

Private student loans are offered through financial institutions like banks and credit unions. The terms of private student loans are controlled by the lender, so there are lots of different options available. Private loans often entail higher interest rates and stricter eligibility criteria, but they can be a helpful tool for borrowers who have already maxed out their federal aid.

 

How does student loan repayment work?

Federal student loan repayment

If you have federal Direct Unsubsidized or Direct Subsidized Loans, your loans will be in deferment while you’re still in school and for six months after you graduate or withdraw. After this grace period ends, you’ll be responsible for making monthly payments through your loan servicer (FSA will assign your servicer — a third-party company that manages student loan billing — after your first loan is disbursed).

Direct PLUS Loan borrowers can expect a very similar process, with the exception that you must request deferment through FSA or your student loan servicer. Otherwise, you’ll have to start making payments while you are or your child is still in school.

All federal student loan borrowers will have the opportunity to select a repayment plan when they first start making payments and adjust their repayment plan later on. There are eight different federal student loan repayment plans available, including income-driven repayment plans, which cap monthly payments to a manageable percentage of your discretionary income.

Private student loan repayment

Private student loan repayment varies based on your lender’s terms. Some require payments while you’re still in school or immediately after graduating, some manage repayment through a servicer or in-house, and repayment plans vary. If you’re considering private student loans, be sure you understand the lender’s repayment policies.

Can I get my student debt cancelled, paused, or forgiven?

If you have private student loans, your options for getting your loans cancelled, paused, or forgiven are limited.

But if you have federal student loans, it’s possible — provided you meet certain eligibility requirements.

You may be eligible to have your federal student loans partially or totally cancelled if:

  • Your school closed while you were a student or shortly after you withdrew or graduated
  • You develop a total and permanent disability
  • You were defrauded by your school
  • You declare bankruptcy

You may be eligible to have your student loans paused if you apply for and are granted temporary deferment. You might qualify for deferment if:

  • You’re enrolled in a graduate fellowship
  • You’re undergoing cancer treatment
  • You’re serving in the Peace Corps
  • You’re on active military duty
  • You’re receiving welfare assistance
  • You work full-time but earn 150% below the poverty line

You may be eligible to have your student loans forgiven through special forgiveness programs if:

  • You’re a teacher
  • You work at a nonprofit organization
  • You work for a federal, state, local, or tribal government agency
  • You’ve been on an income-driven repayment plan for at least 20-25 years

How can The Milford Bank help me manage my student loans?

When it comes to student debt, you don’t have to go it alone. The Milford Bank is excited to launch a new partnership to give our customers tools that make managing their student loans easier than ever before. Stay tuned for an announcement soon!

Setting Your High School Senior Up for Financial Success

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By Tina Mason

Now that we’re in the second semester of the school year, the college applications have been submitted and high school seniors are waiting anxiously to receive a response.  Soon, they’ll take another step on the the path to their future and before you know it, parents will be be packing up cars to take them to college.

During the past four years, seniors have focused on school work and probably some extracurricular activities – sports, music, drama, or others – to prepare for the next stage of their life journeys.  Most likely, worrying about money hasn’t been a huge priority, which means you probably need to make it one now.  You don’t want to send your soon-to-be college freshman off to school without a solid financial understanding because, much like the college decision itself, understanding financial basics will have a long-term impact.

Here are a few things to keep in mind that you may want to talk about or do with your senior. (If you don’t have a senior, starting when they’re younger certainly doesn’t hurt.  If they’re old enough to have money, they’re old enough to understand banking.)

Savings and Checking Accounts

If you haven’t already opened savings or checking accounts in your child’s name, this is a good time to do it.  Your child will want access to funds and you want them to build financial awareness.  You can always add yourself to the account so you can stay involved with finances to whatever degree makes you comfortable.  Check with your local bank about rates, fees, and other benefits to determine which accounts are best for you.  That includes finding out about ATM fees.  Some banks charge high fees for using other ATMs, while others don’t.

Credit Cards

If you haven’t already, it’s also not a bad idea to open a credit card for your child to start building a credit history.  Make sure you explain how and when credit cards are to be used – and set very specific guidelines if you are paying the bills for now.  Regardless of who is managing payments, be sure to talk about how late and missed payments, balances, and other variables impact credit scores.  You may also want to warn them that college students tend to be heavily targeted with credit card offers claiming to offer unique or exclusive benefits.  Make sure they understand that, while credit cards can be valuable financial tools, they also carry risk if not managed properly, leading to debt.

Emergency Funds

While your child may not be financially independent, going off to college and living away from home does mean unexpected situations can arise.  This is a great time to help young adults understand the value of an emergency fund and you might even want to start one for them.  If they are working during school, adding just a few dollars from each paycheck, or they could dedicate a portion of birthday or holiday gifts to their funds.  It will help them learn at an early age that saving doesn’t have to be difficult, and they’ll have an emergency fund to fall back on if needed.

Budgeting

Budgeting and saving go hand in hand, so this is also a great time to make sure your children – even if they’re not yet heading off to college – about budgeting.  Most students have very limited sources of income.  The good thing is they also don’t have the same level of expenses they will have when they graduate and head off into the working world.  Teaching them to budget appropriately today will build a foundation for their financial stability in the future.

Privacy and Security

Your children have grown up in a digital world and cyber security is probably not a new topic for them.  As they enter the world of banking, it’s a good idea to highlight the need to keep all financial information secure and private.  They should never share their PINs or credit card numbers with anyone, for instance, even if they are doing it with the best of intentions, such as trying to help a friend in need.  There are many digital banking tools that make managing money convenient, but make sure you talk about appropriate password usage, two-factor authentication, which P2P apps are safe to use.

It’s never too early to start teaching children about banking and finances.  But, as you get ready to send yours off to college for the first time, they will be exposed to a new level of freedom.  Making sure they have a solid financial understanding is important and can help keep them from getting into risky financial situations and high debt.

If you have questions about which accounts are best suited for your children, contact your local bank’s staff for advice and information.

Why Mutual Banks Make Sense

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By Jorge Santiago

Mutual banks have been around since the early 1800s.  There are currently about 470 in business across the country and nearly all of them are also classified by the FDIC as community banks.  They were initially created to provide savings opportunities to the working class, something they couldn’t easily get from commercial banks that focused on business customers.  Mutual banks offered individuals a safe place to deposit funds and earn interest, with a tradition of providing quality service to their customers.  Those values remain core to mutual banks today, which lead to several benefits that are passed on to customers.

Corporate Structure

The basic idea behind mutual banks is they are not controlled by stockholders or other direct owners.  Rather, their customers – the depositors that bank with them – are considered mutual owners.  As a result, mutual banks don’t make decisions based on shareholder interests, but focus on how they can deliver maximum value to their customers and support the communities they serve.

Customer Security

Nearly all mutual banks – like The Milford Bank – are insured by the FDIC, and on average, mutual banks have a Tier 1 capital ratio (an indicator of capital security) well above the minimum level and are considered “well capitalized” by the FDIC.  In addition, mutual banks are traditionally conservative when it comes to investments and spending, looking for safe opportunities and avoiding high-risk investments.  It’s one of the reasons mutual banks were almost the only banks that successfully navigated the Great Depression and why they continue to provide a safe banking option today.

Customer Service

Mutual banks have a longstanding reputation for quality service that stems from their focus on depositor value rather than corporate ownership.  Because customers are viewed as owners, serving their needs and delivering a high level of personalized service is their top priority – including a broad service portfolio, convenience, local access, and banking expertise.

Product Breadth

Today, mutual banks offer most of the same services private customers can get from larger commercial banks.  They are investing in digital banking technologies to make banking easier and more convenient, including tools to encourage saving.  They have knowledgeable local staff ready to provide valuable banking information and advice to help customers make responsible financial decisions.

Commitment to Community

Mutual banks are localized, which means they have a vested interest in their local communities.  Not only do their employees live and work in those communities, but so do their customers.  As a result, mutual banks tend to be very active in their communities.  Many offer special events in their towns – like The Milford Bank’s annual Shred & Recycle Days and the Milford Moves 5k – and regularly support local organizations and businesses through a number of initiatives.  Mutual banks espouse community values that reflect their dedication to their customers.  The Milford Bank, for instance, supports more than 100 local organizations throughout the year with not only financial support, but also time dedicated by its team to help these community groups.

When deciding where to put your money for safekeeping, you have options.  By nature, mutual banks can offer benefits that many larger corporate financial institutions cannot.  If you want to know exactly how you local mutual bank can support your banking needs, give them a call or go visit one of their offices for some firsthand detail.  Ultimately, the most important factor is that your money is safe and you have access to the services and expertise you need, when you need it.  As a client, that’s the commitment you’ll get from mutual banks.

7 Things You Think You Know About Credit Scores, But Don’t

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By William LoCasto

When was the last time you checked you credit report?  If you’re like many people, it’s probably not frequently enough.  The good news is you can do it at least three times a year at no cost, because the three major credit reporting agencies are required to provide one free credit report a year.  In addition, your bank may offer additional services for checking you credit.

You credit scores and report will be a factor for so many decisions you make in life.  With many major financial commitments, you credit report is likely to be checked.  When you’re buying a home, your mortgage lender will look closely at your credit report.  The same goes for car loans.  Credit card companies check to determine not only whether they are willing to offer you credit, but also your card limit and interest rate.  Utility and phone companies may also want to check to determine how likely you are to pay your bills, or whether they should require a prepaid plan.  Even prospective employers often check credit reports.

The bottom line is that your credit report will play a role in most major events in your life.  This means it’s in your best interest to check you scores regularly for any anomalies, and so you know if you need to take steps to improve your score.  Checking your score is a great start, but only if you know how they actually work, which isn’t always easy.  For one thing, about a year ago, FICO (the most widely used credit scoring resource used by lenders), updated its scoring system, which could impact your score.

Aside from that, there are a number of common misconceptions about credit scores that could prevent you from improving your credit ratings.

Checking your credit report impacts your score

This is not true.  You can check your own credit score as often as you want without any impact.  However, if you are applying for credit from multiple sources, such as a car dealer, a mortgage lender, and a retail store, those credit checks could slightly dip you score.

Accessing lines of credit doesn’t impact your score

Again, this is not true.  The amount of credit you have used, compared to your available credit, is one of the biggest factors in your credit score.  A lower utilization rate is better for your overall credit.

Income changes your credit score

Yet again, this isn’t true.  Your job and income history has no impact on your credit score.  It is, however, used by lenders to determine how much they are willing to lend you.

Closing credit cards can improve your score

This is also not true.  In fact, if you close a credit card at the wrong time, you might actually lower your score because you’re reducing your available credit, which will increase the percentage of credit you’ve used.  That’s not to say you should never close credit accounts – there are often very good reasons to do so, but be aware it could impact your score.

Marriage changes your credit score

You guessed it, not true.  Credit scores aren’t like taxes; they aren’t combined into households.  Your credit score is yours alone.  Lenders, though, may ask for information about your spouse to determine your loan amount and interest rate.

You need to have a perfect score

Also false.  While it’s possible to have a perfect credit score, there’s isn’t a benefit.  Once you have reached high credit worthiness, making it perfect won’t create any noticeable benefits, other than knowing you have a perfect score.  That’s not to say you shouldn’t strive for perfection, but you also shouldn’t worry about not reaching it with your credit score – it won’t hurt you.

Poor credit is forever

This may be the best misconception of all.  Unless you have perfect credit, you can always improve your score over time.  The key is to not only understand what goes into your credit score, but to start following smart financial habits, including creating and sticking to budgets, paying off existing debt, and cutting out unnecessary spending.

There are many other questions that don’t have simple yes or no answers when it comes to credit scores.  For up-to-date information on what impacts your credit score and what doesn’t, or for advice on how you can start rebuilding your credit, talk to your bank’s experts.  Remember, you credit score will impact you for your entire life, but just because you don’t have a high score today doesn’t mean you can’t improve it.