Should You Co-Sign?


It is a question that few want to hear: “Will you co-sign for me?” Typically coming from relatives or friends with no or low credit scores, it can be a difficult request to respond to. Most people do not want to ignore a family member or friend in need, but co-signing comes with risks that make many justifiably nervous to sign on the dotted line. So, should you do it? There are many factors to consider before making a decision.

What are the risks?
One risk that you incur when co-signing is the primary applicant making the payments late or not at all. Even if the primary applicant is the one who is supposed to make the payments, late or non-payments may still be recorded on your credit report, which can lower your credit score. If the primary applicant stops paying, you may also start to experience collection activity, such as phone calls from the creditor. You could even be sued. The creditor is under no obligation to try to collect from the primary applicant before taking action against you. If he or she stops making payments, do you have the money to pay the bill? If not, co-signing may not be a good idea.

Even if the primary applicant makes all of the payments on time, you may still be affected if you are planning to apply for credit yourself in the future. When you apply for some types of credit, like a mortgage, many lenders consider how much debt you already have in deciding whether to lend to you and how much to lend to you. In general, the higher your debt payments, the less you can get. Lenders commonly include debt you co-signed for in calculating your level of debt, even if you are not the one paying it. (However, some lenders will ignore co-signed debt if you have proof that the primary applicant is making all of the payments.) This means that you may not get as much as you would have if you had not co-signed.

Why does the person need a co-signer?
You probably would not co-sign if you knew the person asking you would not make the payments, but how do you know ahead of time if he or she will? A low credit score can be seen as a sign that there is a good chance the person will not repay the debt, but it is also helpful to consider why the person has a low score. Was he not able to pay previous bills due to losing a job but has a well-paying job now? Is she still struggling with bill-paying due to purchasing an expensive house, fancy car, and luxury goods put on credit cards? A person who had problems in the past, but corrected them, is probably less of a risk than someone who continues to experience difficulties or exhibit poor financial habits. If the person has no credit score, you obviously cannot examine past credit use, but you can consider how conscientious he or she has been in other things, such as in saving money and paying household bills, when deciding if you should co-sign.

What are you being asked to co-sign for?
Is your daughter who just graduated from college asking you to co-sign for an apartment so that she will have a place to live or for a $2,000 loan so that she can buy a big screen television? Ask yourself if the person can do without what you are being asked to co-sign for. It may not make sense to put yourself at risk if what you are co-signing for is not even a necessity. The person should be able to work on building his or her credit score so that a co-signer will not be needed to get credit in the future.

Minimizing the risks
If you would like to co-sign, but have concerns, there are steps you can take to minimize your risk. One way would be to pay the creditor directly yourself and have the person send the money to you. He or she could send the payments to you late, but your credit score would not be affected as long as you send the payments to the creditor on time. Another option would be to choose a lender that allows you to see the account information on-line. This allows you to check the status of the account before the due date to see if the payment has been made, instead of waiting for the creditor to call you after the account has become delinquent. If you see that no payment was made yet, you can make it yourself.

Co-signing can help a friend or relative in need, but it comes with risks. Understanding what the risks are, and why the person needs a co-signer, can help you make an informed decision and not unnecessarily jeopardize your financial future.

Balance, Revised January 2016

Filing Your Taxes? Get the Help you Deserve

The process of filing income tax returns is, for many Americans, not a favorite annual event. A common reason people put the task off is because they know they will owe money—and can’t afford to pay. Yet not filing or filing late comes with some pretty big repercussions. Some of the drawbacks of not filing by April 15 (or August 15, if you file an extension) are:

  • Your tax bill could increase by 25% or more, due to penalty and interest charges.
  • Additional penalties and/or criminal prosecution if you continue to not file.
  • Losing the refund, if there’s one due (the deadline for claiming refunds is three years after the return due date).
  • The loss of Social Security credits that go toward your retirement (if you are self-employed and don’t file returns within three years of the due date).

If you do owe a big tax bill, don’t despair. The government wants to make it easy for you to pay. Most people are able to arrange for an installment program, where the amount owed is spread out over time. You may even be able to obtain an offer in compromise (settling for less than the amount owed). But remember, you have to file to be eligible for either option.

Another common reason for filing tax returns late or not at all is that it can be a grueling and confusing procedure. However, many people can take advantage of free tax return assistance programs. Here are some of the biggies:

Volunteer Income Tax Assistance Program (VITA) 
If you make under $53,000, the IRS has arranged for you to receive free tax preparation assistance. Specially trained volunteers set up shop in such convenient locations as libraries, schools, and shopping centers, and can help you prepare basic tax returns. Call 1-800-829-1040 or search for the location of your nearest VITA site.

Tax Counseling for the Elderly (TCE) 
Over the age of 60? Then you are eligible for the IRS’s TCE Program. Services include free tax counseling and basic income tax return preparation. For more information on TCE, call 1-800-829-1040.

AARP Tax-Aide
Whether you are a senior citizen or are a low to middle income earner, you can take advantage of AARP’s Tax-Aide counseling program (part of the TCE Program). During tax time, trained and certified volunteers help prepare taxes at over 9,000 sites across America. To locate your closest site, call 1-888-227-7669.

The Armed Forces Tax Council (AFTC)
The military is a partner in the VITA Program, so if you are in the Army, Air Force, Navy, Marine Corps, or Coast Guard, you and your family can get free tax advice and assistance within your installations. The AFTC oversees the operation and serves as the main conduit for outreach by the IRS to military personnel and their families.

The IRS wants to help. Really. They offer free, individualized advice by computer, telephone, and in person to all taxpayers, with no income or age restrictions. IRS employees help you obtain forms and publications and can answer a wide range of tax questions. Assistance is available by calling 800-829-1040.

Balance, Revised January 2016

Cold, Calculated Savings: Items to Buy in Winter


Every December you are bombarded with suggestions (some subtle, some not-so-much) for items to buy for the holidays. But what about items to buy AFTER the holidays? If you can wait a few days or weeks, you could land yourself some outrageous deals. In fact, if a loved one wants an item on the list below, you might even want to give them a gift card and advise them to pick it up when it goes on sale. That way, they not only get what they want, but they also get more money to spend on other desired items.

The period between the December holidays and Valentine’s Day is slow for the bling business. In fact, if you are planning on buying your significant other some adornment for Valentine’s Day, the prices in early January could be drastically different from what they will be a month later.

Two wheels and a seat
If you are in a cold weather part of the country, folks in your area don’t think of winter as the best time to ride with the wind in their face. As a result, they tend to not buy their new wheels then. Retailers know this and are desperate to move motorcycles and bicycles after the holidays. If you were planning on getting a set of wheels, look for special sales and other deals in the first part of the year.

A house
It’s almost an iron-clad guarantee: if there’s enjoyable or rewarding activity that you really wouldn’t want to do in winter, you can score a deal on it during January or February. That goes for buying a home too. Most people don’t want to scrape aside snow to get a closer look at a patio or deck. If you can find a property that has already been on the market for a few months and doesn’t look to be going anytime soon, you might be able to get the seller to accept a lowball offer.

Video games
Games have become a hugely popular holiday gift request for people of all ages. Retailers know this, filling their prices with helium to see how high people will jump to catch them. After the holiday a lot of the price inflation has leaked out and the cost comes back down to earth, perhaps even at the lowest level of the year.

The big electronics trade shows happen in January and February, which means new camera models are unveiled. If you can wait until after these shows are over, you can get a perfectly fine “old” model at a great bargain.

Things for next winter
Whether it’s holiday decorations or winter clothes, the “Stock-up and Stash” approach can save you a bundle, if you’ve got the room. However, avoid paying $100 per month for a storage locker so you can provide a home for your “deals.”

A vehicle
Usually by January the newer model of most every vehicle has been out for a few months and dealerships are trying to push out the last of the “old” models from their stock to make room for the new fleet.  They need to sell, so sharpen your negotiating skills!

Balance, Revised January 2016

Prioritize Your Bills: The Secret to Always Having What You Need

Many circumstances in life can derail even the best money-management plans, leaving us with less than we need to pay the bills. Increasing income and/or reducing expenses can help, but making changes often takes time. However, with a little strategic planning, you can minimize damage until you are back on your feet.

Strategic planning involves both determining which bills are most important, and trying to set up payment agreements for any other bills you are struggling to pay. Monthly obligations may include:

Mortgage or rent
Your mortgage or rent should be the first bill that you pay each month. Would you want to lose your house or be evicted because you were paying your credit cards? Probably not. However, if making payments is impossible, let your lender or landlord know; they may be willing to work with you. Is your mortgage or rent affordable long-term? If not, you may want to look for a cheaper place to live. If you owe more on your mortgage than what you can sell your house for, your lender may be willing to accept a short sale. If you have a lease, your landlord may voluntarily release you from it if you explain your hardship or find a suitable replacement tenant.

Car loan
If you have a car loan, making your payments on time is critical. In many states, a car can be repossessed after only one missed payment. Repossessed cars are typically sold at auctions for low amounts, and the lender may come after you for the remaining loan balance (the deficiency balance). If you cannot make your payments, call your lender. They may be willing to let you to skip a few payments or accept a repayment plan for delinquent payments. If an agreement cannot be worked out and you cannot resume payments, you may want to sell the car, especially if you have a spare one or can take public transportation.

Utilities. Delinquent utility payments can cause your service to be suspended or terminated, but some utilities are more important than others. You may not be able to, or want to, live without electricity or water. However, you could probably live without cable television. If a service is not needed and cannot be paid, you may want to cancel it before it is shut off. If the service is needed, call the utility company and ask about payment arrangements; you may not have to pay the full amount owed right away. You can also see if the company has any assistance programs for people facing economic hardship.

Student loans
Borrowers experiencing financial difficulties can often get a temporary suspension of payments through a forbearance or, less frequently, a deferment. What if you can’t get one? The only immediate consequence of not paying a student loan is usually credit report damage, but if you make no payments for 180 days, you are considered in default, with possible consequences including tax refund interception and wage garnishment. However, if your loans are public, you have a one-time right to get out of default with a “reasonable and affordable” repayment plan.

Credit cards and other unsecured debt
If you miss payments by 30 days or more, your credit score will likely drop. If you stop paying long enough, your accounts may be sold to collection agencies, and you could even be sued. Still, the consequences of not paying unsecured debt are less severe than not paying your mortgage or car loan, and most creditors do not take legal action right away. This does not mean that ignoring your creditors is a good idea, though. If making the required payments is difficult, contact your creditors about hardship programs (short-term arrangements that allow you to make smaller payments). When requesting a hardship program, explain why you are facing hardship, and let them know what changes you will make to be better able to afford payments in the future. If requesting a hardship program over the phone is not effective, try sending a letter.

When there is not enough money to pay for everything, it is easy to panic. Don’t. Instead, focus on what you can do. You may not be able to control everything that happens in your life, but you can choose what bills to pay first and how to deal with creditors.

Balance, Revised January 2016

Ten Great Ways to Spend an Income Tax Refund

Expecting a substantial income tax refund this year? If so, you are in the majority; over 80 percent of Americans get money back at the end of the tax year, with the average refund being close to $3,100. Rather than having those precious dollars being absorbed into your normal spending routine, get the most out of your cash.

  1. Pay down high interest loans and lines of credit. With average annual interest rates for credit cards and personal loans hovering around fifteen percent, paying off that credit card before making other investment decisions makes good sense.
  2. Fund Your Retirement Account. About 32 percent of all working Americans have no money invested for their retirement. If you are one of them, seriously consider making a contribution to a retirement account right away.
  3. Invest it. Instead of just working for money, let money work for you. If you invested one lump sum of $1,500 in the stock market, over thirty years, assuming a 12 percent return, you’d have $ 53,924! (Of course, do your research first before making any investment decisions and talk to licensed investment professionals)
  4. Open an emergency account. Most Americans don’t have money set aside for those financial emergencies that always seem to happen when there is no cash in the coffer. A large tax refund is a great start for an emergency account. Experts recommend that it should eventually total between three to six months’ worth of essential living expenses.
  5. Pay for repairs. Maintaining expensive possessions now will result in dollars saved tomorrow. Use the money to repair that leaky roof before it develops into a bigger problem; replace those dangerous bald tires with new, safe ones.
  6. Start a personal endowment. Investing in your emotional, physical, intellectual, and career growth is a wise use of money. Whether it’s paying for a gym membership or a cooking class, you’ll feel effects of this type of investment fast.
  7. Make an extra home mortgage payment (or two). Though you won’t feel the benefit immediately, doubling up on a mortgage payment now can save you months of mortgage payments later.
  8. Donate to a charity. Giving back to the community is a wonderful way of supporting a cause that you are passionate about. Even better – in many cases at least a portion of your donation is tax-deductible too.
  9. Open a College Savings Plan for your child. A four-year college education can cost upwards of $100,000. Save for your child’s college education with a college saving plan. For the most part, withdrawals are completely tax-free when used for higher education purposes.  Talk to a licensed investment professional about your different options.
  10. Plan a vacation. If you are in a fluid financial position, and can truly afford a bit of luxury, do something you’ve been dreaming of. Money is to be enjoyed as well as earned, saved, and invested. Go ahead. Book that cruise!

Although all the preceding ideas are excellent uses for a lump-sum amount of cash, remember that instead of planning for a refund, it could be more beneficial to come out even. A tax refund is an interest-free loan to the government, and money that is not in your pocket every month. If you have been getting a refund back each year, consider changing your withholding exemptions so less tax is withheld from each paycheck. While a tax refund may feel like a gift from Uncle Sam, it’s not—it’s money that you have overpaid on your income taxes. That said, some people use this as a form of saving.

Balance, Revised January 2016

New Bigger Yahoo Breach from 2013 Affects 1 Billion Users

Yahoo again has disclosed a data breach. Yes, this is indeed a new one and is much larger and separate from the one disclosed in September that affected 500 million user accounts. The hackers in this one pulled no punches and took off with information on over 1 billion users. However, information is still coming in, so that number is subject to change. If it does, it unfortunately will likely go up.

The company revealed the news this week saying an unauthorized third party stole the information, which included names, email addresses, birth dates, phone numbers, encrypted passwords, and possibly the answers to the security questions. The more information a criminal has on an individual, the better chances they have in scamming the person, opening a credit card under that person’s name or stealing their identity.

Users who have Yahoo accounts should change passwords to those accounts immediately. In addition, if those passwords are used for any other online accounts, change those as well. Always use unique passwords for all online accounts to prevent those from being re-used by cyber thieves to get into other accounts. Password reuse has been successful and has been blamed for many breaches including the UK National Lottery, Spotify, and Cici’s Pizza.  And while you are at it, change the security questions and answers for all of your Yahoo accounts.

Because phishing is one of the most successful ways that breaches occur and malware finds its way onto systems, always watch for additional spam and phishing attempts after a large data theft such as this one. Spammers use the email addresses to both send spam from those accounts and to target the email addresses. If you are not expecting an attachment or link in an email, regardless of whether or not you know the sender, always view it with suspicion. Contact the sender using the phone or a separate email (don’t reply) if you are not 100% certain it’s real and safe. And don’t provide sensitive, personal, or confidential information in email messages. This is not a secure form of communication even if it’s supposedly encrypted and anything sent this way should be considered as fair game to be read by someone else.

This data was stolen in August of 2013. The company is investigating the possibility that forged cookies were created to allow and intruder to get access to the accounts without passwords. Cookies are text files that contain information about users and websites visited. They are retained on computers to identify users, shopping cart information, and to prepare web pages that may be more useful to the end-user. They also are used to remember names and other information for the auto-fill features on a next visit to a website. They are not dangerous in and of themselves, but some people prefer to disable them due to privacy concerns.

Yahoo has not identified the source of this intrusion and is continuing to investigate and the company will be notifying affected users. It has also invalidated the forged cookies.

© Copyright 2016 Stickley on Security