Can I Trust Credit Karma?

Q: I’m trying to increase my credit score ahead of applying for a large loan, so I’m considering signing up for Credit Karma to track my score. How accurate are the credit scores it shares? Is there anything I need to be aware of before signing up for this service?

A: Credit Karma is a legitimate company; however, for a variety of reasons, its scores may vary greatly from the number your lender will share with you when it checks your credit.

We have answers to all your questions about Credit Karma.

What is Credit Karma?
Credit Karma is an online credit service that operates under the principle that everyone is entitled to a free and honest credit score. To that end, the site allows you to check your credit whenever you’d like without paying any fees – a privilege that can cost you about $20 a month from its competitors. You’ll need to sign up for the service and share some sensitive information, like your Social Security number and your financial goals, but you won’t be asked for any credit card numbers or account information.

Scores are updated once a week, and the company only performs a “soft inquiry” on your credit to get the necessary information – which means your score is never impacted by it checking your credit on your behalf. Credit Karma also offers lots of credit advice, customizable loan calculators, and reviews on financial products of all kinds.

Credit Karma earns its profit through targeted ads. As you learn your way around the site and start to frequent it more often, you’ll see ads that are geared toward your specific financial situation. For example, if your credit is excellent and you’re looking for a home loan, you’ll probably find loads of ads from mortgage companies. While this may seem like a breach of privacy, it’s no different than the way much larger online platforms you likely use, including Google and Facebook, earn a profit.

How does Credit Karma calculate my score?
The online credit company uses information from two of the three major credit reporting agencies, TransUnion and Equifax, to give you a VantageScore 3.0. While this type of credit score is gaining popularity among lenders, you may not recognize it – and for good reason. The FICO scoring model is by far the most widely used credit score among financial institutions and lenders across the country, with 90% of lenders using this score to net potential borrowers.

The atypical scoring model used by Credit Karma, coupled with the absence of information from Experian, the third of the three major credit reporting agencies, tends to make Credit Karma scores differ from scores pulled by other companies and financial institutions. The credit service is usually within range and a good indicator of your overall credit wellness. You can also get a report with a thin credit history through this model, which is super-helpful for those seeking to build their credit from nothing.

How do other lenders calculate my score?
Most financial institutions use a FICO scoring model to measure consumers’ credit scores. As mentioned, this number will likely be lower than the score you see on Credit Karma, but will fall within the same general range.

It’s also important to note that, each time you apply for a specific kind of loan with an individualized lender, it will likely also use its own customized formula. For example, if you were applying for a mortgage with a home loan company, it would probably use a score that is specifically developed for mortgage loans. Similarly, if you were to apply for a car loan from an auto lender, it will use its own score designed to predict the likelihood of you defaulting on an auto loan. This can result in an even lower credit score from these lenders.

Is there any other way to get my credit score?
If you’re looking for a more relevant credit score, you have several options. You can ask a potential lender to pull your credit, though this might cost you both in fees and in a knock to your credit for the hard inquiry. You can order your free credit report with information from all three credit bureaus once a year, at AnnualCreditReport.com.

Lastly, for more frequent monitoring, you can sign up for access to your FICO score and 3-bureau credit report on Experian.com, where packages start at $19.99 a month. There are other similar services out there, but most are not legitimate or are grossly overpriced.

How does DoverPhila Federal Credit Union decide if I’m eligible for a loan?
We use the FICO model to calculate your credit score when you apply for a large loan. While this number will likely differ from your Credit Karma score, it gives us a broader picture of your credit as it includes information pulled from all three credit bureaus. We’ll also review your full financial history and trajectory to determine if you are eligible for the loan.

Here at DoverPhila Federal Credit Union, our goal is to help you achieve and maintain financial wellness. Consequently, we are far more likely to approve a loan for one of our members than a random lender who doesn’t know the first thing about you or your financial history.

If you’re trying to increase your credit score before applying for a large loan, we can help! Stop by DoverPhila Federal Credit Union today to speak to one of our free financial counselors about steps you can take to improve your credit.

If you’re ready to take out that loan, make DoverPhila Federal Credit Union your first stop! Our stress-free application process, low interest rates, and reasonable terms make us the best choice for your next large loan. We’ll help turn your dream home, car, or business into a reality.

Step 6 of 12 Towards Financial Freedom: Trim Expenses

If you’ve been following our Financial Freedom series, then you know that last month we focused on creating a budget. Now that we have a budget, let’s slim it down!

You’ve already practiced spending less thanks to Step #2 in this series. Now, it’s time to get serious about it. Take a long, hard look at the money you spend each month and find your weak spots. Maybe consider going out to eat less often. Check out the example below.

Example:
In general, a single meal costs $5 to $7 at a fast-food restaurant (average is $6).

Saving by packing

You could save over $1,000 in a year!

Now, it’s your turn. Where do you spend the most on unnecessary purchases? What’s your particular vice? You may even have several spending traps. How can you cut back on you daily expenses? Any extra money you save goes toward your debt payments.

Need a fresh perspective on trimming your expenses? Sit down with one of our free, on-staff financial counselors. Call today at 330-364-8874 and ask for Katy Steinebrey or Fred Weingarth.

Need budgeting tools? Check out our interactive library through Banzai by clicking here.

Couples and Money: Truth or Friction?

Money is one of the most sensitive topics couples face. Disagreement over spending and saving habits is one of the most frequent causes of friction in a relationship. Truthful, frank discussion and mutual financial planning can go a long way to resolve the tension.

BUDGET: A DIRTY WORD?
Does the mere mention of a budget start your teeth grinding? For many, it evokes the same enthusiasm as going on a diet – in this case, a money diet. Begin by changing your focus. Agree with your partner to create a spending plan. Agree to review it and adjust it periodically. A plan is adjustable and should suit your lifestyle, not imprison you.

The first step is to carefully track expenses. Save every receipt for a month so you have a clear picture of your spending. Be open about your spending. In a relationship, silence is not golden.

SET SAVINGS GOALS
“Pay yourself first” is the first rule of financial success. Agree to commit a percentage of your take-home pay to savings. Ten percent is a good place to start. Increase the amount as you can. Maximize contributions to retirement or 401(k) plans where an employer provides matching funds.

Need a retirement plan? Check out these savings options that are customized to your needs.

DISCUSS BIG EXPENDITURES
Agree to consult with each other about purchases that are more than a specific amount (such as $200). Keep an agreed-upon amount of cash of your own in an individual account. Each of you should have money to spend on small indulgences with no questions asked. Agree in advance on what types of expenses are personal. For example, is a magazine subscription personal or part of your overall spending plan? Deciding in advance will leave little room for argument later.

Thinking about making a large purchase? Ask yourself these questions first.

Additionally, don’t criticize each other in public about money. Keep financial discussions private. Review your plan periodically. Every year or so, sit down to determine if your goals have changed or if your plan needs adjusting. You’ll avoid the type of arguments most couples find themselves in by keeping these simple guidelines in mind.

Feeling overwhelmed? Consider sitting down with one of our free, on-staff financial counselors for a fresh perspective.

Seven Steps to a Mid-Year Financial Check-Up

It feels like you just packed away the holiday decorations yesterday, but believe it or not, 2019 is already half over. As we sail into the season of barbecues and beaches, take a few minutes to give yourself a mid-year financial checkup. A small investment of time can spur important changes that can affect your financial wellness for the rest of 2019 or even for years to come. 

Use the seven steps detailed below to guide you through your checkup. 

Step 1: Revisit Your Budget 
Remember sitting down in December and crunching all those numbers? There’s no need for such a detailed job again, but take some time to review your monthly budget. Are you sticking to the planned budget for every category? Are you overspending in some categories or under-spending in others? Do you need to adjust your allotted budget in some areas or maybe trim your discretionary spending across the board?

Review your spending over the last few months and make any necessary changes so your budget can continue working for you. Be sure to account for any significant life changes that may alter your financial needs, such as a marriage, the birth of a child, a divorce, or a job change. 

 You will avoid falling into a mindless spending trap and you will be taking proactive steps toward staying on top of your finances for the rest of 2019 by reviewing and adjusting your budget.

Step 2: Anticipate Large Expenses 
Now that you’ve updated your monthly budget, take a moment to list any large expenses you anticipate having in the next six months. This can include household appliances that may need replacing, expensive car repairs that will likely become necessary, or an anticipated medical expense that is not fully covered by insurance. 

Once you have this information in hand, determine which spending category you will take the money from to cover these expenses. Do you have a rainy-day fund that can pay for one or several of these costs? Can you use the money in your emergency fund? Make the decision about sourcing this money now so you don’t make the wrong choices when you’re stressed and pressed for time in the future. 

If you do not have enough money set aside for these expenses, build a savings plan into your monthly budget now so you have the funds available when you need them. 

Step 3: Review Your Tax Withholdings 
Review your tax withholdings to see if they need any adjusting. If taxes and numbers are not your thing, ask your accountant for assistance with this step. Your goal here is to pay the perfect amount so you’re not hit with a huge tax bill at the end of the year but also not lending the government your money interest-free. 

Step 4: Check Your Credit Score 
Your credit score is like your money grade, indicating the degree of your financial wellness and responsibility. Visit AnnualCreditReport.com for your free credit report from any of the three major credit bureaus: Experian, TransUnion and Equifax. 

If your score has gone up in the last six months, you’re doing great! Keep up the good work. 

On the flip side, if your score has dropped, review your report in detail. Are there any errors you’ll need to contest with the Federal Trade Commission? Is there a credit card bill or another line of credit you’ve been neglecting that is dragging your score down? Are you having trouble remembering to pay your monthly bills in a timely manner? Take the necessary steps to fix your score today by setting up an automatic payment on some of your bills, by lowering your credit utilization rate by paying with plastic less often, or by sitting down with one of our free financial counselors.

Step 5: Review Your Investments
Now is the time to review and adjust all of your investments. This includes your contributions to your retirement funds or savings certificates at DoverPhila Federal Credit Union. Make sure you are maximizing your contributions when possible and that your other investments are performing according to plan, adjusting as necessary.   

Step 6: Tackle Your Debt 
List every single outstanding debt you carry, including credit card debt and loans. Designate one debt to tackle first, either choosing the one that carries the highest interest rate or the one with the lowest balance. Next, work on a plan to get rid of your chosen debt, being careful not to neglect the others. See if you can trim your budget or boost your income in any way to increase your payments on this debt. Once you’ve paid it off, move to the next one on your list so you’re on your way to a debt-free life. 

Step 7: Review Your Financial Resolutions and Long-term Goals 
Which financial resolutions did you jot down at the end of 2018? What are your dreams for the future? Did you want to start socking away another $200 a month? Is your goal to retire comfortably at 55?

Take some time to review these goals and to determine whether you are indeed taking the steps necessary for making them happen. If you’ve been neglecting them for the first half of 2019, create a plan for working toward them for the rest of the year. Remember: With determination and proper planning, nearly any financial goal is possible! 

Now that you’ve given yourself a thorough financial checkup, you can kick back and enjoy the sweetness and the sunshine of the season, guilt-free. Click here for more tips and tools to help maneuver your finances in the right direction.

Step 3 of 12 Towards Financial Freedom: Negotiate a Lower APR

If the majority of your outstanding debt is credit card debt, you may be spending hundreds of dollars just on interest alone. Aside from wasting money, this keeps you from moving forward and paying down your debt.

NEGOTIATE FOR A LOWER APR
Most people don’t know you can call up a credit card company and negotiate for a lower APR. Take the time this month to do that. Explain that you are working on paying down your debt and that the interest payments are impeding your progress. You can even research competing cards and cite their interest rates in a bid for a lower APR from your current credit card company.

Lowering your interest rates will allow you to make another real step toward getting rid of debt. Click here to get the facts on credit cards and credit card debt.

Feeling overwhelmed? No worries; we’ve got you covered! Sit down with one of our free, on-staff financial counselors. They can suggest tips for saving more and spending less so you can be one step closer to financial freedom. Call today at 330-364-8874 and ask for Katy Steinebrey or Fred Weingarth.

Step 2 of 12 Towards Financial Freedom: Don't Dig Yourself Deeper

When you’ve dug yourself deep into a pit, the only way to get out is to stop digging. This month, focus on not racking up more debt. Stop using your credit cards. Skip your weekly trips that usually have you buying too many non-essentials.

Instead, start brown-bagging your work lunch and brewing your own coffee. Get into the habit of spending only on essentials so you can make real progress toward paying down that debt. Click here if you need some tips for cutting expenses.

Don’t forget to make the minimum payments on every line of credit and loan you have open. Neglecting your debt will only pull you deeper into the pit.

 Feeling overwhelmed? No worries; we’ve got you covered! Sit down with one of our free, on-staff financial counselors. They can help suggest ways of saving more and spending less so you can be one step closer to financial freedom. Call today at 330-364-8874 and ask for Katy Steinebrey or Fred Weingarth.

Want more information on managing debt? Check out our interactive library through Banzai by clicking here.

Step 1 of 12 Towards Financial Freedom: Take Stock of Your Debt

You’re determined that this will be the year you finally pay down (or pay off) that debt. Get ready, because every month, our Financial Freedom plan will have you taking another step on your journey toward living a debt-free life.

First, sit down and take stock of all your debts. Don’t let the numbers scare you; you need to do this to move forward. Get out every single credit card bill, personal loan, student loan, and any other debt you’re carrying (except your car and mortgage payments). Tally up the numbers to give yourself an idea of what you’re dealing with.

Next, organize your debt into different categories, such as credit card debt, student debt, personal loans, etc. Use a spreadsheet to list your debt, the remaining term of each loan (if applicable), the minimum payment, and the interest rate.   

Finally, designate one hour each week for working on your finances. DoverPhila Federal Credit Union has simple tools and tips to help you navigate through your finances. Click here for an interactive library

Feeling overwhelmed? No worries; we’ve got you covered! Sit down with one of our free, on-staff financial counselors. They can help simplify the first step towards financial freedom. Call today at 330-364-8874.

Five Ways to Pay Off a Loan Early

If you’re like most Americans, you owe money toward a large loan. Whether that means carrying thousands of dollars in credit card debt, having a hefty mortgage in your name, or making car loan payments each month – loan debt is part of your life.

It can all get kind of depressing—but it doesn’t have to be that way. You can pay off your mortgage, auto loan, credit card debt, and any other debt you’re carrying quicker than you thought possible with a carefully applied technique. These tricks won’t hurt your finances in any dramatic way, but they can make a big difference to the total interest you’ll pay over the life of the loan and help you become debt-free faster.

A note of caution before we explore these tricks: Check with your lender before employing any approach, as some loan types have penalties for making extra or early payments.

1. Make bi-weekly payments. Instead of making monthly payments toward your loan, submit half-payments every two weeks. The benefits to this approach are two-fold:

  • Your payments will be applied more often, so less interest can accrue.

  • You’ll make 26 half-payments each year, which translates into an extra full payment on the year, thereby shortening the life of the loan by several months or even years. If you choose this method with a 30-year mortgage, you can shorten it to 26 years!

2. Round up your monthly payments. Round up your monthly payments to the nearest $50 for an effortless way to shorten your loan. For example, if your auto loan costs you $220 each month, bring that number up to $250. The difference is too small to make a tangible dent in your budget, but large enough to knock a few months off the life of your loan and save you a significant amount in interest.

3. Make one extra payment each year. If you can’t make bi-weekly payments, but you like the idea of an extra yearly payment, accomplish the same goal by committing to just one more payment in the year. You’ll only feel the squeeze once (tax or bonus time, perhaps) and you’ll still shorten the life of the loan. You can also spread that extra payment throughout the year. Divide your monthly payment by 12 and then add that cost to your payments all year long. You’ll be making an extra payment while hardly feeling the pinch.

4. Refinance. If interest rates have dropped since you took out your loan or your credit has improved dramatically, contact DoverPhila Federal Credit Union to ask about refinancing, whether the loan is with us or not. Refinancing makes the most sense if it can help you pay down the loan sooner. You should easily be able to afford shortening the life of the loan with a lower interest rate.

5. Boost your income and put all extra money toward the loan. Cut the life of your loan short by earning more money and putting the extra cash towards your loan. Consider selling stuff on Amazon, moonlighting as a consultant, or taking on a side hustle. Even a job that nets you an extra $200 a month can make a big difference in your loan.


Triumph over your loans by using one or more of these tricks to make them shorter and pay less interest. Feel free to contact DoverPhila Federal Credit Union if you have questions about loan repayment or if you need a fresh perspective on debt repayment. Our free, on-staff financial counselors can help!

Cash Flow Budgeting: A Fast, Flexible Way to Fix Your Finances

You’ve heard it from a million places: Budget your money! Make a firm plan and stick with it. It’s the pathway to prosperity!

For many people, though, that advice just doesn’t resonate. They feel constricted by a budget. Keeping cash in separate envelopes makes them feel like they can’t have a life. It takes too much planning and too much rigid denial. They break their budget and sometimes wind up in serious financial trouble.

Other people have an inconsistent cash flow, making creating and keeping a budget difficult. Maybe they’re freelancers who work gig-to-gig. Maybe they’re in commissioned sales. Maybe their hours fluctuate from month to month. Whatever the reason, it’s hard to make a detailed plan when your bottom line changes every month.

The answer isn’t to give up on budgeting. The collective wisdom, that monitoring your expenses and income streams is the way to stability, still holds true. It might just require a different approach to budgeting: cash flow focus.

Cash flow focus is the strategy used by most businesses. They pay their fixed costs, and whatever is left is used to grow the business. You can manage your finances the same way. Just follow these four steps:

1. Automate your savings. Even if you disregard everything else in this article, implementing this one tip can be life-changing. Figure out how much of your income you can save, and then take that out as soon as you get paid. You can set up monthly transfers from your draft account to your savings account. You can also divide the money between the accounts on a per deposit basis. How you choose to do so is less important than doing so.

Like the saying goes, pay yourself first. This savings provides you the flexibility to cover big expenses or make major purchases on your schedule. It’s the single most important step in any budget, but it’s even more important with cash flow budgeting.

When you automate your savings, you remove the money you saved from consideration. You can’t spend it; you’ve already spent it on savings. The importance of this kind of savings will become more clear once you see this budget in action.

2. Pay your needs and your priorities. Make a list of your essential expenses each month. Include your rent or house payment, your car loan, and your utilities. Also include your student loan payments, your insurance, and other necessary expenses. These are your “fixed costs.” They get paid after your savings contributions are made.

Next, make a list of your priorities. Include your charitable contributions, vacation savings, and retirement account contributions. These are your “growth expenses.” They get paid after your fixed costs.

If you don’t have enough money to make these bills, you don’t need a better budget. You need to lower those bills or increase your income. No amount of spreadsheet magic will change that bottom line.

It’s helpful to automate savings for these expenses, too. That way, you never get caught short on these bills. Transferring this money to a check-only draft account can be a helpful way to ensure you don’t spend it.

3. Spend the leftovers. This message may sound peculiar for personal finance advice. Remember, though, that you’ve already automated your savings. What you’re spending here is the leftovers – the extra that’s left at the end of the month.

 Spend this money however you like – don’t worry about putting this much in entertainment and that much in travel. Just keep track of how much you’ve spent so you don’t accidentally overdraft your account.

This approach allows you to go out or indulge in a latte. You don’t have to worry about including it in your budget. Your spending habits might change as the month goes on, just like a business. If you know there’s a big outing before you get paid again, you may want to save some money for that. You don’t need to say that you can’t go because you didn’t budget for it.

4. Roll over what’s left. If you have worked in a big business, then you have seen departments desperately spending at the end of the fiscal year. Departments buy cases of pens and paper, knowing that they will lose whatever they don’t spend. Fortunately, you’re more flexible than a big business. You don’t have to spend it all. If you have money left over at the end of the month, then you have more to spend the next month.

If you have a month with slightly higher expenses, you can cover it from a previous month’s slightly lower expenses. Your spending will change from month to month, as might your income. So long as you keep the former smaller than the latter in the long run, you’ll be fine.

That’s what cash flow budgeting is about: flexibility. You don’t have to write your non-budgeted spending purposes in stone. You don’t have to mess with cash envelopes or other strategies. You can spend when you have money and save for when you don’t.

DoverPhila Federal Credit Union can help if you’re thinking about adopting a budget. A friendly, knowledgeable financial counselor can walk you through the savings tools you need. You can automate your savings, flex your spending, and build toward financial security. Members can call 330-364-8874 or stop by the credit union’s main office on Fillmore Avenue in Dover for more information.

Sticking to Financial Resolutions

Ohioans, like most Americans, entered 2019 hoping to better their finances, but many have likely already fallen off track.

In an Ohio Credit Union League 2019 consumer survey, 69 percent said their New Year’s resolution was to get on a budget. That statistic isn’t surprising; many Americans looked critically at their financial situations as they headed into 2019. Statista, a platform providing statistical data on a variety of topics, polled 2,000 people about their New Year’s resolutions in early January. The survey found financial goals were the fourth most-popular New Year’s resolution, falling just behind dieting, exercising, and losing weight. 

Americans had good intentions to get their finances in order in 2019, but that doesn’t mean they’ve necessarily stuck to their new budgets. According to research commissioned by GuideVine, a service that matches people with financial advisers, 70 percent of Americans with a budget struggle to stick to it.

And it’s not likely that making your budget a New Year’s resolution will make keeping with it any easier. According to the Ohio Credit Union League survey, 79 percent of Ohioans make incremental improvements toward keeping their resolutions each year, but fall short of keeping them. Another 14 percent have never kept a New Year’s resolution.

The average American doesn’t fare much better. According to a study of 1,450 Americans by Vitagene, 88.6 percent reported they’d likely keep their resolutions for a year or less. Another 36.6 percent of respondents said they usually keep their resolutions for a month or less, meaning they’d be off track by February.

Although your train may have gone off track, all hope is not lost. Here are some tips to help you attain your resolution of getting down to business, paying off bills, buying a house, opening an IRA for retirement, or getting on a path to better financial stability. 

  • Use a budgeting tool. A successful budget must be recorded somewhere. DoverPhila Federal Credit Union offers Banzai, an award-winning financial literacy program that has user-friendly budgeting tools such as calculators, simulated games, and an interactive library with educational articles. Consider budgeting apps such as EveryDollar and YouNeedABudget if you’re looking for more mobile options.

  • Be realistic about spending and saving. Don’t set goals you can’t realistically achieve with your budget. Trying to spend too little or save too much each month could create frustration, which will increase the likelihood that you will dump your budget altogether. Instead, map out incremental changes you can make that will add up to big financial gains over time.

  • Keep goals in mind. Reminding yourself how you would ultimately like your money to work for you can help with exercising control over impulsive spending habits. Consider making your goals visual if you have a hard time picturing your long-term goals when you are tempted to splurge. Try keeping a picture of your ideal retirement in your wallet or a list of all the reasons you want that new car stuck to the fridge. 

  • Reward yourself. It is important to keep long-term goals in mind, but rewarding yourself for small budgeting wins along the way will keep you feeling positive about your budget. The more positively you feel toward a task, the more likely you are to continue performing it. After you reach certain budgeting goals, treat yourself to a small splurge. You earned it!

  • Seek help. Consider asking for help if you are struggling with sticking to a budget. Sometimes, aid can come in the form of a family member who shares household finances. Other times, however, you may require an expert opinion. DoverPhila Federal Credit Union offers free financial counseling to members and is always happy to aid with budget set-up and maintenance.

DoverPhila Federal Credit Union is here to help you reach your financial resolutions. Call the credit union at 330-364-8874 or visit your local credit union for more information.