Archive for category: Personal Finance

Whether you’re preparing to apply for a loan or reeling after a credit application rejection, if you are looking to improve your credit, you aren’t alone. According to Experian, about 30% of adults have scores of less than 670—the standard minimum for a conventional home loan approval. The good news is that credit scores are always in flux—and that means that your score can change for the better, with just a bit of effort.

In this post, we’ll give our best advice on how to fix bad credit, discussing tried and true credit repair strategies for short-term improvement and long-term gains. Keep reading to learn how you can clean up your credit score!

Understanding Your Credit Score

Firstly, knowing how credit scores work, what factors go into their calculation, and how your financial habits affect your score are all crucial to improving your credit standing.

What is a credit score?

A credit score is a numerical calculation based on your credit report—a history of your credit reported by a variety of creditors. These can include lenders, credit card companies, financial institutions, utility companies, and even healthcare providers. Credit scores take your payment information, as well as details about how long you’ve had accounts and how much debt you hold, and turns it into a number.

Ideally, your credit score is an accurate reflection of your tendency to pay back your debts. When paired with income data, it can help lenders make informed decisions about loan approvals. Major components of credit score calculation include your payment history, the amount of debts you owe/percentage of credit used on cards, and the length of credit history.

While there is more than one provider of credit scores, FICO is the most commonly used scoring system in the US. FICO scores range from 300 to 850, with scores above 800 being considered “excellent.”

What is a credit score used for?

Your credit score is used as an aid in determining:

• Credit card and loan approvals
• Interest Rates
• Insurance premiums
• Rental worthiness for homes and apartments
• Utility fees

Employers may also check your credit, especially if the job at hand involves financial tasks.

Assessing Your Credit Report and Score

Credit reports are available for free, and reading your own report can help you see where improvement is needed to elevate your score.

Where do you find your credit report and score?

While there are many paid services that offer to provide your credit report, score, and even credit monitoring, it’s not necessary to pay for your report.

At www.annualcreditreport.com you can request your report from each of the three main reporting agencies (Experian, Equifax, and Transunion) once each year.

While they generally contain the same information, there may be discrepancies. Requesting all three at once can give you the most definitive understanding of your credit picture. When rebuilding your credit or tracking your credit growth, you may wish to take an alternative approach. Requesting one report every four months or so can allow you to see changes in your credit history over time.

Credit reports can also be requested by phone or by mail:

1-877-322-8228

Annual Credit Report Request Service

P.O. Box 105281

Atlanta, GA 30348-5281

When requesting by mail, you’ll need to print and complete the form found on the annualcreditreport.com website. You will receive your reports by mail within 15 days of their receiving your request

Credit scores, on the other hand, are not available for free through this service. So how do you get them without paying?

• You can use the free version of credit monitoring services, such as Credit Karma, to have a good sense of your score (though it won’t be identical to the one lenders use)—but watch out for fees and upcharges.
• If you have a credit card, the credit card company may also provide a free version of your score in your online account or on your monthly statement.
• Lastly, if you apply for a loan or credit card, the company is required to provide you with the score they used to determine your approval. Request it if it is not automatically provided.

Ultimately, however, everything you need to know about improving your credit is available for free on your report.

Strategies for Credit Score Improvement

Now that you know how to obtain your credit report, how your your credit history is used to calculate your score, and how your score can affect different aspects of your life, it’s time to take a look at the methods you can use to improve your credit over time, as well as things you can do that will have the greatest immediate positive impact.

Long-Term Strategies for Good Credit

Good credit is a long-term process that requires constant engagement with responsible financial habits. Here are 5 things you can do to gradually build and maintain excellent credit and increase your chances of getting approved for a loan.

1. Pay your bills on time:

   Your payment history counts for 35% of your credit score. Do your best to pay all accounts on time or as soon as possible if you miss a payment date—but never skip payments altogether. Bills paid within 30 days of their due date will not be reported, though any late payments may incur fees.

2. Regularly review your report and address issues:

   Identity and credit card fraud often go unnoticed until an individual spots unusual activity on their credit report. And sometimes companies report issues erroneously. If you see something wrong, dispute the error right away.

3. Keep accounts open.

   It may be tempting to close that old credit card, but the longer you keep accounts open, the better it is for your score.

4. Maintain a good mix of credit.

   Having just one kind of credit can have a negative impact on your score. Having both revolving accounts (like credit cards) and installment accounts (like loans) is important, to show you are capable of handling both kinds of debt.

5. Build a savings cushion.

   Not only will this prevent you from relying on credit in the case of an unforeseen circumstance, it will also show lenders that you have resources to lean on to ensure ongoing financial stability.

How to Boost Your Credit Score Quickly

If you’re hoping to apply for a loan in the near future or just looking to make the biggest immediate impact on your credit score, here are 5 steps you can take to raise your credit score quickly.

1. No credit? Bad credit? Get a secured credit card.

   Lest you get a rejection in your application, it’s important to apply for a card that you will likely get approved for. A secured credit card from your bank, which uses an existing account for collateral, can be a great place to start with credit score building or rebuilding. But only open one new account at a time!

2. Become an authorized user.

   An alternative way to build credit is to become an authorized user on a credit card account (a spouse or family member) with a high limit and good history. It’s not even necessary for you to use the account to receive this benefit.

3. Keep your credit utilization rate down.

   Credit utilization is the amount of credit you used, vs. the amount available to you. For instance, a card with a $10,000 limit and a $2,500 balance would have a 25% utilization rate. Keep rates across accounts below 30%. To do so, either pay down higher balance and maxed out cards, or ask for a higher limit.

4. Pay off accounts in collections.

   Once you get your credit report, you may see accounts in collections. These will have an outsized impact on your score. Getting accounts out of collections as quickly as possible will minimize their impact.

5. Start paying your bills on time.

   Your most recent payment history matters more for your credit score calculation than your distant payment history. Start paying bills ontime if you have a pre-existing pattern of late payments.

Professional Credit Building Resources

Struggling to untangle credit problems? Not sure where to start? There are numerous national and local resources that can help you with your credit score repair. They include:

• Northern Shenandoah Valley Financial Education Program
• Southside Community Development and Housing Corporation Financial Opportunity Center
• Housing Opportunities Made Equal (HOME) of Virginia
• CCCS Maryland
• CESI Credit and Debt Resources
• National Federation for Credit Counseling

You may also want to consider using services like Experian Boost which can allow you to get credit for bills you pay on time that haven’t already been reported.

(Re)Build Your Credit with F&M Bank

At F&M Bank of Virginia, we want our customers to have the best chances to achieve their financial goals, whether it’s getting a good interest rate on a personal loan or buying their own home. And we know that good credit is integral to long-term financial success.

From low-interest credit cards to help you build your credit history to financial tools to protect your finances and prepare for the future. Questions about credit? We’re only a phone call or short drive away. Reach out to us at one of our branch locations throughout the Shenandoah Valley today.

When it comes to inflation, small businesses are more vulnerable to the challenges of rising prices than larger companies. Not only does it increase your cost of doing business; it may also deter your customers from spending as much as they usually would. It’s important to know that you’re not alone as a small business owner grappling with the effects of inflation. In this article, we’ll share the best inflation strategies for keeping your business running smoothly.

What Is Inflation?

Inflation refers to an overall rise in prices within a certain period of time. As prices increase, individuals’ and businesses’ purchasing power falls. For example, if it costs more to fill up your gas tank or buy a week’s worth of groceries, you have less money to spend on other things.

The federal government tracks inflation through the Consumer Price Index, which tracks prices paid for certain goods and services over time. As of March 2023, prices were 5% higher than the previous year.

The Federal Reserve’s target inflation rate is 2%–enough to keep the economy growing steadily each year without causing the kind of financial pain we’ve seen over the past year or so. That’s why the Fed has been raising interest rates, increasing the cost of borrowing money but also delivering higher interest rates for savers.

The current streak of inflation can be traced back to the beginning of the pandemic, when people stuck at home started buying more stuff than usual with the money they weren’t spending on going out. Demand for consumer goods such as furniture and more grew faster than supply, leading to higher prices. A labor shortage during the pandemic also caused many companies to increase their wages and salaries. Then the Russia-Ukraine war contributed to a spike in energy and wheat prices. With a global supply chain, disruptions in one country or industry have a ripple effect everywhere.

How Does Inflation Affect Small Businesses?

Just as a family’s budget can be squeezed by inflation, small businesses may have to make some changes as well. Unlike larger companies, small businesses may not have as much of a cash cushion either in savings or with their cash flow.

Higher operating costs (for labor, materials, services, utilities, etc.) may cut into whatever cash cushion you do have, forcing you to try and cut costs, raise prices for your goods and services, or both. Or you accept smaller profit margins to avoid passing costs onto your customers.

Inflation also causes uncertainty about the future. When prices change quickly or unpredictably, it’s harder to plan and forecast for the months or year ahead. Luckily, there are steps you can take as a small business owner to lessen any negative impacts of inflation on your business.

Budgeting For Inflation as a Small Business Owner

A solid budget provides a roadmap, with room for flexibility, for your business operations.

• Create and stick to a business budget.
• Leave room in your budget for monthly adjustments as costs rise and fall.
• Involve your employees–your budget and company’s success affect you and everyone who works for you.
• Make employees aware of changes to ensure everyone is working towards the same goal.
• Employees on the ground may also offer new insights or creative solutions.
• Overestimate your expenses. It’s better to have leftover funds than to not allocate enough.
• Don’t plan on running perfectly on budget–there will almost always be an unexpected cost.
• Understand the ebbs and flows of your market. Not every month will show growth–most businesses will have a “slow” season.

If you’re experiencing a cyclical or temporary cash flow shortage, a commercial line of credit gives you the flexibility to tap working capital when you need it, pay back what you borrowed, and use the credit line again.

Inflation-Proofing Strategies for Small Business Owners

Beyond budgeting, here’s what you can do to “inflation-proof” your business.

• Consider long-term vendor contracts to lock in pricing. That will help prevent your business costs from rising faster than inflation.
• Cut down on unnecessary expenses or switch to cheaper options, such as with office supplies.
• Communicate with your customers about any inflation-related challenges you’re facing and why you need to raise prices accordingly. Your customers will appreciate the honesty and they want to see you succeed.
• Re-evaluate your vendors. As your business changes, so do your vending needs. There may be a new vendor who can help you cut costs in your market.
• Invest in automation and technology. This can help reduce your overhead and increase productivity. For example, F&M Bank’s Cash Management services for businesses can help you automate everyday tasks such as depositing checks and more.

How to Stay Ahead of the Curve

We want to help your small business not just survive but thrive. Inflation isn’t the only curveball that life can throw your business. Here are some ideas for helping you get ahead.

• Invest in your employees. Losing experienced employees can set a business back, as well as the expenses that come with training a new hire. Focusing on retention will save you money in the long run and help protect you against the costs of recruiting and training during a time of inflation.
• Put extra money in an interest-bearing savings account. As the Fed raises rates to help fight inflation, let your extra cash work for you. It will take some time to see a gain, but in the long run you can come out ahead. For example, interest rates on Business Certificates of Deposit (CDs) are very competitive.
• Improve your Accounts Receivable Turnover Ratio. With the availability of ACH and credit card payment solutions, giving customers 30 or 60 days to pay a bill may be unnecessary. Shorter payment terms (such as 20 days), down payment requirements, and upfront payment for new clients with no credit history can result in an improved AR Turnover Ratio. You could use that increased monthly cash flow to reduce your dependency on credit cards. Depending on the increase in cash flow, improving your AR turnover may be enough to support additional staff who can drive more business.
• Build your inventory of supplies. Before price increases and shortages hit, have a stable of necessary supplies stored safely and out of the way to be prepared. This is especially helpful when preparing for a busy season such as the holidays.

F&M Bank can help your Virginia small business succeed!

F&M Bank has helped generations of small businesses in the Shenandoah Valley and we can help you, too. Check out testimonials from our business customers to see how we meet the banking needs of local businesses and help them grow. Contact us to discuss your specific pain points around small business inflation and find the right solutions to get back on track.