How to Skimm Your Life

by The Skimm

  Think of it like your personal Uber rating. But there’s more at stake than a bad ride. A credit score is a snapshot of your financial history—whether you make payments on time, whether you max out your cards, how much debt you’re in, and more.

  How do I check my credit score?

  Once a year, you can get it for free from AnnualCreditReport.com. That’s actually a site. But some credit card issuers also now offer it for free at any time of year, so check if yours is one of them. You’ll also see your credit score referred to as a FICO score. This stands for the Fair Isaac Corporation, the company whose software calculates your credit score. Experts recommend that you check it at least once a year.

  Who decides my credit score?

  Ultimately you. There are three credit reporting agencies: Equifax, Experian, and Transunion. Think of them like the test graders. And like teachers, they each might give out points a little differently. You should request a report from each of the three credit reporting agencies so you can see the differences and check for inaccuracies (more on that later).

  How do I know if I passed?

  Credit scores are on a scale from 300 to 850: 300 is very bad; 850 is very good. Here’s how everything in between stacks up.

  How exactly is my score calculated?

  There are a bunch of things that hurt and help your credit score. Here are all the pieces of the credit pie.

  Payment history: 35 percent

  Paying your credit card bill and loan payments on time is the most important thing for good credit. A payment that is 30 days late can cost someone with a credit score of 780 or higher (hi, overachiever) anywhere from 90 to 110 points.

  Credit utilization: 30 percent

  This is the ratio of how much you owe to how much you’re allowed to spend. Every time you pay with plastic, you’re utilizing your credit. So if you owe $200 and your spending limit is $1,000, then your credit utilization is…drumroll please…20 percent. You want to keep this low.

  Length of history: 15 percent

  Longer credit history increases your score, since it shows the bank you have a proven track record.

  Credit mix: 10 percent

  This is how many types of credit you have in use. The more you have, the more data points the bank has to judge you. This is a good thing if you make all your payments on time and a bad thing if you don’t.

  Account inquiries and new credit: 10 percent

  If you’re opening up a bunch of new cards in a short period of time, it’s a bad look. If a lender looks at your credit report you also get a slight penalty.

  Why do I get penalized for someone looking at my report?

  It depends who’s looking. A hard inquiry and a soft inquiry are two different things. A hard inquiry is when a lender checks specifically to approve a new credit card or a loan (home and auto included). A soft inquiry is when a potential employer does a background check. A hard inquiry will affect your credit score, while a soft inquiry won’t. Hard-knock life.

  OK, so…how do I improve my credit?

  Aside from the obvious “Pay your credit cards on time,” there are some other ways you can improve your score.

  For when something looks off in your credit report…

  Dispute it. A lot of people have errors on their credit report that they never take a red pen to. This may include a payment that you actually paid on time. Or, more commonly, a very old payment. If you miss a payment and it lowers your credit score, that’s only allowed to stay on your report for seven years. Credit card bills and student loan payments included. Meaning if it’s still there, you can get it removed so it no longer affects your credit. You can file this dispute online with your credit bureau (reminder: Experian, Equifax, or Transunion).

  For when your credit utilization is high…

  Make multiple small payments all month instead of one big lump sum at the end, to keep your balance down. Or you can call your credit card company and ask them to raise your spending limit. Make sure to ask if you can do this without a hard inquiry into your credit.

  What about my SO’s score?

  When you get married, you keep an individual credit score. But if you’re applying for a loan with someone—a spouse or long-term partner—both of your scores will be evaluated. And if your partner’s score is low, it’ll hurt your chances.

  theSkimm: Age is just a number, but credit is a number that affects your ability to buy a home or car and move on to different stages in life. Get it in check before taking big steps.

  Things That Are Yours

  theSkimm on Leasing and Ownership

  Saying “mine” to a house and a car might seem far away.

  Or you might already be actively planning for it. Whether you’re renting, buying, driving, or none of the above, there are some things you should know when it’s time to move on up.

  First things first…renters insurance.

  Because training wheels. Even if you’re not ready to buy, chances are you’re renting an apartment or house. You’ll want renters insurance to go with that. No, this doesn’t just come with your apartment. Your landlord’s insurance (for damages to the building) doesn’t extend to your stuff. You’ll need to get your own policy if you haven’t already.

  What does renters insurance cover?

  Renters insurance has your back in case of things like fire, theft, and flooding and makes it so that you don’t have to pay for all the damages. Many plans also have liability coverage—meaning coverage that protects you if you’re sued. For example, if a guest falls down your stairs or your dog bites someone in your apartment, you may be legally liable. Woof.

  How do I get renters insurance

  Do your research

  Look into policies at companies like Allstate, AAA, GEICO, and Lemonade. The value of your belongings may impact the amount you pay for a renters insurance policy (the higher in value, the more you pay). Also, if you already have car insurance (more on that later), see if that company also offers renters insurance. You may get a discount for bundling your policies. And consider upgrading your home to get a lower rate. If you update your locks or install an alarm system, this can make you pay less in the long term.

  Stalk your space

  Take an inventory of every item in your space, including electronics, art, home goods, clothing, and kitchenware. Estimate their value. Hint: Not what you paid for them, but what they are worth now. This is how you’ll approximate how much insurance you’ll need. Try to make as close of a guesstimate as you can.

  Get a quote

  Contact some insurance companies for (usually free) quotes.

  How much does renters insurance cost?

  A typical plan costs between $5 and $15 a month. So around what you pay to stream music and movies. Worth it.

  Thing to know

  ACV vs. replacement cost. Depending on what you opt for, you’ll either get the actual cash value (ACV) of your loss, or the amount of money you’d pay to replace it. So if your three-year-old laptop is stolen, will you get enough money to buy a new, updated laptop, or will you get the current price listed for your old, depreciated laptop? It’s usually a good idea to go for replacement cost.

  Moving on up…to home ownership. When should I buy a house?

  Most people say you should consider buying only if you’re going to be in the place for five years or more. More importantly, you need to be financially ready. While it seems crazy to put down that much cash money, remember that you don’t have to pay the full cost of the house up front. Enter: mortgages.

  What do I need to know about mortgages?

  A mortgage is really just a number. A VIP number that will dictate how you plan financially.

  Pretty much everyone who buys a house has a mortgage. It’s a big loan to help you swipe right on that new property. Your house then works as collateral on the loan. If you can’t pay off your mor
tgage, the bank can take back your house. This process is known as foreclosure or “something to avoid.”

  How much is a mortgage loan?

  Typically, 80 percent of the cost of the house. So a lot. You have to pay back the loan, plus interest, over a set period of time (usually thirty years).

  So how do I qualify for a mortgage?

  The bank needs to trust you to repay your loan. So you’ll need to have enough money for the bank to pick you, choose you, love you. Here are some of the steps to take in the years leading up to home ownership.

  Give credit where credit’s due

  As in, improve your credit score. Credit is one of the most important things a bank looks at. Generally, if your credit score is under 600, you won’t get a loan. And lenders (banks) typically reserve the lowest interest rate payments for people with a credit score of 760 or above. Get your credit score up by doing things like making credit card and bill payments on time. See: the credit section you just read.

  Feng shui your finances

  Save, save, save now so you can afford a home later. If you can’t pay at least 10 percent of the home’s worth (ideally 20 percent), you probably aren’t ready to buy that house. Other costs you’ll need to save for: monthly payments, property taxes, homeowners insurance, costs of repairs, and maintenance of the home, particularly if you’re buying an old house. Because haunted houses can also be haunted by higher bills.

  Seek (pre)approval

  You’ll want to get preapproved by the bank before you start shopping for houses. This is like a parental permission slip to attend a field trip (the field trip is your house). It’ll show real estate agents and sellers that you’re serious and in good financial health, and give you an edge in the buying process. Here’s some of what you’ll need: tax forms, bank statements, Social Security number, and maybe more depending on the lender. All of this is to prove you’re a living, breathing, money-making human who can be trusted to pay back a mortgage once you close on the house.

  Let’s talk about that whole “paying back” process…

  You have to pay back the principal (amount of the loan) plus interest (a certain percentage every year). If your loan’s due back over 30 years, it might seem to make the most sense to divide your loan amount by 30 and pay that dollar amount every year. But the way it normally works is that you pay more as you start to make more. So you’ll pay a little bit more every year, with the assumption that you’ll make more money as you move up in your career.

  For when you like consistency…

  Get your fix. As in, look into a fixed-rate loan. This is the most common type of home loan. You’ll pay the same rate of interest every year.

  For when you like to follow trends…

  Stay adjusted. As in, look into an adjustable rate mortgage (ARM). These loans have a lower initial interest rate that adjusts or resets every year depending on the markets. So you may start by paying 5 percent interest the first year but pay higher the next year due to the Fed raising interest rates.

  For when you want to sell the house before your mortgage is paid off…

  The mortgage doesn’t go away. You still have to pay it back. Most people use some of the money they make from selling the house to pay off the rest of their mortgage.

  For if you think you’re going to sell the house kinda soon…

  Get yourself a mortgage that pops. As in, look into a balloon mortgage. This works like a fixed-rate mortgage but then has a lump-sum payment due at the end to make up for all those years you won’t be repaying on a schedule. This is considered risky, since you’re effed if you can’t pay that lump sum when you sell.

  I just want to know how to save money.

  Got it. All of this depends on your financial situation, but in general…if you can pay off your mortgage early, you’ll save money. Because you won’t have to pay that interest every year.

  OK, ready to park myself at this house for a while. Let’s talk cars.

  Car ownership isn’t for everyone. You might be uber enthusiastic about ride-sharing or live in a city where public transportation’s the best option. While car ownership on the whole hasn’t been declining, it’s been going down amongst millennials. If you still think you want a car, consider how much flexibility you need. Do you need to take a car to work every day? Do you travel locally on the weekends? If you answered yes to both of those questions (and you have good credit and a healthy savings account) you might want to consider revving up to buy a car.

  Can I take out a loan?

  Yup. Many of the lenders for mortgage loans also deal in auto loans. But know that a car is a depreciating asset, à la milk, whereas a house is hopefully an appreciating asset, à la red wine. Meaning the value of your car will consistently go down as new models are released, while the value of your house will hopefully go up with the real estate market and improvements you make to it. Taking out an auto loan means you’re paying yearly interest on something whose resale value keeps going down. The cure? Either pay in cash…or, if you don’t have a casual 30K lying around, negotiate for good terms on your auto loan. That might mean getting the lender to pay for some added fees or doing comparison shopping and finding better rates from other lenders. Good credit gives you leverage here.

  You also might want to consider leasing a car instead of buying one. A lot of the time, it means lower monthly payments compared to the loan terms for a car you purchased. That’s because a lease takes the depreciation of a car into account.

  How much should I expect to pay for a car?

  Depends on your wheels. A typical midsize car will set you back about $25,000, while a midsize SUV will be about $31,000. And a midsize luxury car will go for about $55,000.

  How do I make sure I don’t get ripped off?

  First, check the mileage. Any new car you’re buying should have less than 10 miles on it. If you’re buying a used car, know that 13,000 miles a year is considered average. So the average 10-year-old car should have around 130,000 miles on the odometer. Anything more than that and you may want to take a turn toward negotiating a lower price (or getting off the exit ramp and just not buying the car).

  theSkimm: Ownership is a sign of growing up. Don’t panic; plan for it.

  In “Skimm the World,” we’ll get into historic global issues, movements, and relationships between countries. Then, we’ll move to D.C. to see how the government of the most powerful country in the world functions, how elections really work, and how you can enact real change at the polls.

  The news cycle moves quickly. Behind every headline’s five minutes of fame, there’s a lot of historical context. Most of it traces back to who gets along, who doesn’t, and who owes who money. Tale as old as time.

  Things That Make the World Go Round

  theSkimm on Geopolitics

  It’s not a small world after all.

  Captain Planet is home to 7.5 billion people, an estimated 6,000 languages, and 4,200 religions…standing on top of 4.5 billion years of history.

  First up…we’ll set the stage with historical context, the movements, and international relationships that have shaped the world today.

  Types of Governments

  The “isms,” the “chys,” the “cy.” Gang’s all here. Here’s a refresher on some types of government, political parties, and movements you hear about a lot.

  Democracy

  The “We, the people” type. It’s a government run by the people, meaning majority rules. Today, more than half of the countries in the world are democracies. A lot of them—including the US—are representative democracies: You elect people, or representatives, to vote on issues for you. While democracy is considered the most free and, yes, democratic form of gov, the US has been criticized for forcefully trying to spread democracy worldwide.

  Monarchy

  The “Uneasy lies the head that wears a crown” type. In a monarchy, a single ruler has all th
e authority, and it’s usually hereditary. Most monarchies that exist today are constitutional monarchies where the monarch can be considered a figurehead (like the UK). Then there are absolute monarchies, where the royals are also the heads of gov (like Saudi Arabia and Brunei).

  Communism

  The “Sharing is caring” type. All property and means of production are owned collectively. The aim? To create a classless society where everyone is truly equal. The result? Often mass poverty, in part because there are fewer incentives to succeed. It’s the opposite of capitalism. China, North Korea, Vietnam, Laos, and Cuba are the last communist countries standing.