Blackstocks.com: In the Know

What Happens to My Credit Score if I Get Rid of Cards?

The following information is curtosey of myfico.com. Please note that in this example; we assume that questioner (Erick) is asking whether to close a credit card account that is in good standing. 

Dear myFICO,

I’m trying to get my finances under control and would like to consolidate the 6 credit cards I currently have into 1 or 2 cards that have zero-balance transfer options plus lower interest rates.

What should I do with the cards I no longer want to use? I’ve heard that closing them can affect my FICO score.

Eric
Chicago, Illinois

Dear Eric,

How closing and opening credit cards affects your FICO® score is a common concern, so you’re smart to get the lowdown before doing something that could hurt your score. The short answer: we never recommend closing old or unused credit cards because this rarely helps your FICO score .

What are 401ks

401(k) plans are retirement vehicles that allow employees to save for their own retirement. This type of plan was named for section 401(k) of the Internal Revenue Code, which permits employees of qualifying companies to set aside tax-deferred funds. We at 401k Forum are proud to have the person who first developed the 401(k) plan, Ted Benna, as a member of our Board of Directors. By making this change to the Code in 1978, the government opened the door for more efficient retirement planning for all Americans. It's no exaggeration to say the 401(k) plan is the most important national retirement effort since Social Security was introduced in the 1930s.

How It Works
The 401(k) mechanism is fairly simple. The plan is set up by your employer as a defined contribution retirement arrangement. That means you are the one who pays into the plan, although your employer and the plan provider who offers your 401(k) do just about all the work.

Your 401(k) contribution is automatically deducted from your paycheck each pay period. This money is taken out and invested before your paycheck is taxed. After you have decided what percentage you want deducted from your check, and how you want to invest it, your work is pretty much done.

Once the money is deducted from your paycheck, you can't spend it, but it is yours. It grows in your personal 401(k) account. Although you can withdraw the money for certain emergencies or in some cases borrow against your investment, the money is intended to stay in your account until you are at least 59 1/2.

While the investment is growing in your 401(k) account, you do not pay any taxes on it. When you withdraw the money at retirement, you pay taxes on the amount you withdraw from your account (so you pay taxes little by little instead of being hit with one big bill).

What's a 401K and How Does it Work?

401(k) plans are retirement vehicles that allow employees to save for their own retirement. This type of plan was named for section 401(k) of the Internal Revenue Code, which permits employees of qualifying companies to set aside tax-deferred funds. We at 401k Forum are proud to have the person who first developed the 401(k) plan, Ted Benna, as a member of our Board of Directors. By making this change to the Code in 1978, the government opened the door for more efficient retirement planning for all Americans. It's no exaggeration to say the 401(k) plan is the most important national retirement effort since Social Security was introduced in the 1930s.

How It Works

The 401(k) mechanism is fairly simple. The plan is set up by your employer as a defined contribution retirement arrangement. That means you are the one who pays into the plan, although your employer and the plan provider who offers your 401(k) do just about all the work.

Your 401(k) contribution is automatically deducted from your paycheck each pay period. This money is taken out and invested before your paycheck is taxed. After you have decided what percentage you want deducted from your check, and how you want to invest it, your work is pretty much done.

Why Inquiries Matter

Why they Matter

New credit is one of the factors used to determine your credit score. In fact, new credit accounts for 10 percent of your credit score.

Hard inquiries are considered a subset of the new credit category.

According to Fair, Isaac & Co., the information about inquiries that can be factored into your FICO score includes:

• the number of recently opened accounts that you have and the proportion of accounts that are recently opened compared with long-standing accounts, by type of account;
• the number of recent inquiries;
• the time since recent account openings, by type of account; and
• the time since you last had any credit inquiries.

As Fair, Isaac & Co. writes on its Web site:

For many people, one additional credit inquiry (voluntary and initiated by an application for credit) may not affect their FICO score at all. For others, one additional inquiry would take less than 5 points off their FICO score.

Buy a Car and Save $3,000

Three Steps to Save You $3,000

According to credit.com you can save up to $3,00 when you buy a car by using these three steps:

1. Credit Check

Not checking your credit before you start shopping for a car is a huge mistake. Because your auto loan rates are directly tied to your credit scores, even a small inaccuracy on your credit report could cost you. Before you start shopping for your dream car, take an hour to check all three of your credit reports and credit scores online. You need to check all three credit bureaus because you don’t know which one a lender will use for your application. If you have a credit score above 750, you can probably qualify for the best rates available and negotiate an excellent deal on your car. If your credit score is lower, see if you can’t give it a boost before you apply for a loan.

2. Shop Online

Unless you have a perfect credit score in the 800’s and can qualify for a 0% offer, you are probably not going to get a good deal on a loan directly from the dealership. Auto loan rates and fees offered by online auto lenders are usually a lot lower than the rates offered by a dealership’s financing program.

Leaving Your Job? Keep Your Retirement Funds Safe with a 401(k)-IRA Rollover

Three years ago, R. Boeding, retired from his 35-year job with an electric company. His employer gave him a choice: take his retirement fund money ($450,000) all at once or let the company pay out fixed amounts over time from his account.

If he chose the latter and died early, his wife would only get half the amount.

"It was a no-brainer," said Boeding, who was 55 when he retired. He wanted the money so he took the lump sum, which he then rolled into an IRA.

He faced the question many retirees and job hoppers face: do I leave my money in the 401(k) or other employer-sponsored plan, cash out, or roll it into an IRA? That's a big decision and making the wrong one can be costly.

You might want to consider rolling your money into an IRA because that will enable you to continue to keep your money sheltered from tax as well as continuously invested. Here's the low-down on when and how you can take the money, and why you might want to.

When To Roll Your 401(k) Into An IRA
You can roll your 401(k) money into an IRA only in certain circumstances. Those are: when you quit or are fired from your job, or retire. You can't roll over your 401(k) funds into an IRA while you are still working for the same employer just because you don't like the investment choices in your plan.

Getting Kids Interested in Interest … and Investing!

The time will come when the kids in your life will be old enough to earn their first income - whether it be from a lemonade stand, paper route or summer job.

The first two articles of our "kids and money" series examined ways to help children become wise savers and spenders. This final article looks at introducing kids to the idea that money saved and invested - in a bank or in the stock market - can earn more money, to supplement their income. Hopefully, this will help them avoid the fate of poet e e cummings when they grow up!

Sparking Interest in Interest

There's a scene in the movie Mary Poppins where young Michael Banks refuses to give up his tuppence to the bank manager, provoking general chaos and a run on the bank. Obviously, the world's greatest nanny hadn't done a very good job of explaining interest to her charge.