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Here’s why your credit score matters – and how to improve your rating



Lenders want to lend to those with high credit scores as they are considered the least risky borrowers (Photo: Shutterstock)
Lenders want to lend to those with high credit scores as they are considered the least risky borrowers (Photo: Shutterstock)

Your credit score is one of the most important factors lenders look at when deciding to accept or reject your application, along with how much they are willing to lend you and at what interest rates.

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Whether you are looking to borrow hundreds of thousands of pounds through a mortgage or just want a £500 credit card limit, if you have a very poor credit score you’re likely to be rejected. However, if your score is excellent, you’ll not only normally be accepted but also offered the best possible interest rates.

Lenders want to lend to those with high credit scores as they are considered the least risky borrowers to lend to. On the other hand, those with a poor credit score are considered riskier and, as a result, lenders will either reject the application or charge a higher interest rate to try and mitigate their risks. If you do have a poor score you may still be able to borrow as there are some lenders who specialise in lending to those with a poor credit scores.

The good news is that you can easily see what your credit score is by checking it for free online and, if you have a poor credit score, there are ways of improving it.

How to improve your credit score

A misconception about credit scores is that only those who have not managed debt well in the past can have a poor credit score. This is not the case as someone who has never borrowed money through a finance company, such as a bank or car loan company, will likely have a poor score. The reason for this is because if you have never borrowed money there is no way of determining how responsible you are with debt and how good you are at repaying the money you owe, which results in a poor credit score.

Luckily, building up a credit history is one of the easiest ways of improving credit scores. For example, taking out a credit card, even if it has a small limit will also help to increase your credit score. If you are currently saving towards a house deposit, it would be worth considering building up a good credit history at the same time as saving to help improve your chances of being accepted when applying for your first mortgage.

If you have a very low credit score, there are credit cards available that are designed to help you rebuild your credit score. Known as credit repair cards, these cards usually have much lower maximum limits than other types of credit cards, but you should be aware that they often have high APR, which means they can be a very expensive way to borrow. If you have one of these cards, you should only borrow what you can afford to repay in full each month to avoid interest being added.

It will come as no surprise that clearing existing debts and keeping up with debt repayments will help to improve your credit score. Along with this, making above-minimum payments on credit cards and keeping your credit card balances as low as possible will also help improve your score.

If you are struggling financially and have missed payments, made late repayments or come to a repayment agreement with your lender as a result, this will likely impact your score. Although the good news is that this will not stay on your credit file forever and is normally removed after a maximum of six years. As well as this, if you have taken a mortgage, credit card or loan repayment holiday for a maximum of six months due to being financially impacted by the Covid-19 pandemic this will not be noted on your credit file.

Improving your credit score isn’t just about building up a credit history and managing existing debt, however, as there are some much more simple ways of improving your score. For example, being on the electoral roll will improve your credit score, as well as closing any accounts, cards or loans that have been fully repaid.

As well as thinking about your own credit history, if you have joint finances with a partner, for example a joint bank account, it means that you are financially linked. As a result, if your partner has a poor credit history it could impact your own credit score. Even if you split with your partner, including getting a divorce, you can still remain financially linked unless you financially disassociate yourself from your ex-partner.

Once you’ve got a good credit score it is important to regularly check your score to make sure everything is as it should be and if anything does not look right contact the credit reference agency to find out how to get it amended or it could have a negative impact on your score.

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Are Sallie Mae Student Loans Federal or Private?



When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances



Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit



Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.



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