Why Saving Money is Important

You’ve probably heard that you should be saving money each month. It’s one of those things that’s just supposed to be good for you, like eating broccoli or flossing before you go to bed.

But why is it important to save money?

And, if you’re already stretched covering your current expenses, and possibly also paying back debt (such as student loans), you may wonder, why even bother to try saving?

The answer is that everyone has to start somewhere, and even just putting aside a little bit every month is well worthwhile.

That’s because having savings can decrease worry (since you have back-up should a sudden expense come up), help you reach your goals (such as making a large purchase or downpayment on home), and also help you earn money without doing anything at all (yes, money can do that).

Understanding why saving is important—and learning how to make it happen—might be the fuel you need to get started.

Reasons Why Saving Money is Important

It can be hard to get motivated to save money just because it’s the “responsible” thing to do. But you may see the appeal once you understand the huge advantages that saving offers. Here are a few.

Peace of Mind

If money is tight, you may find yourself worrying how you will pay the rent or other critical bills if an extra unexpected expense were to suddenly come up, as they often do.

Financial experts generally recommend building up an emergency fund of at least three months worth of living expenses to prepare for any financial surprises.

Having this contingency fund in your back pocket can provide the sense of security that comes with knowing you can get through a rough spot without hardship.

Avoiding Debt

Saving is beneficial for non-emergencies too. Say you are hoping to be able to afford a major expense in the future, such as a wedding, vacation, home renovation, or sending a kid to college.

You could finance these big-ticket items with debt, whether through high-interest credit cards, loans, or a home equity line of credit.

However, borrowing generally means that you’ll be paying more than you borrowed thanks to interest that accrues.

If you save up for your dream in advance, you can side-step debt, which can help save a significant amount of cash in the long run.

Expanding Your Options

Generally, the more money you have saved, the more control you can have over your life.

If you’re unhappy with where you live, for instance, having some savings can open up the possibility of moving to a more desirable location, or putting a downpayment on a new home.

If you dislike your job, having a cushion of savings might afford you the option of leaving that job even before you have another one lined up.

Money certainly does not solve all problems, but having savings can give you a little bit of breathing room and allow you to take positive steps in your life.

Getting Your Money to Work For You

Another big incentive to save is the power of compound interest.

Compound interest means you earn a return not just on the amount you originally put away, but also on the interest that accumulates.

Over time, that means you can end up with much more than you started with. And the earlier you start saving, the more your money grows, since compound interest is able to work its magic over a longer time horizon.

For example, a person who starts putting $100 per month towards retirement at age 25 will wind up putting $12,000 more of their money into their retirement fund by age 65 than the person who started saving $100 per month at age 35.

But because of compound interest (and assuming a 7% annual rate of return), the person who started at 25 will wind up with over $120,000 more at age 65 (way more than the extra $12,000 they invested). Please note that this is a hypothetical scenario and does not represent an actual investment. All investing involves risk.

How to Get Started with Saving

If you’re convinced that saving is the right move, how do you actually do it? The key is to make a budget and make sticking to it easy.

This doesn’t have to be intimidating. The key is to get familiar with what you spend, what you earn, and what your goals are.

Here are some steps you could take to help get started.

Figuring Out What You’re Saving For

Is it a long-term goal, like retirement or your kids’ college tuition? A short-term goal, like an emergency fund? Or a medium-term goal, like a wedding or home renovation? It can help to get a sense of how much you need to stash away and by when.

The point of this is twofold: First, you can divide the amount you need by the months left until your deadline to get a clear picture of how much you’ll need to save each month.

Second, you will know where to put your money. If your goal is less than a couple of years away, you may want to keep your savings in a high-yield savings account, cash management account, online savings account, or money market account.

These options can help you earn more interest than a standard savings account but still allow you to access your money when you need it.

If your goal is in the distant future, you might want to invest the money in a retirement account, 529 college savings plan, or brokerage account so that it has the chance to grow over time.

Sticking to a Budget

You don’t really know where your money is going unless you track it. That’s why for a month or two, you may want to take note of all your daily and monthly expenses.

Next, you’ll want to tally up your net monthly income, meaning what goes into your account after taxes and deductions.

The difference between your monthly income and your expenses is what you have left over to save. If there’s not enough left over, you can work on finding ways to cut spending or increase your income.

Putting Savings on Autopilot

If you’re manually putting cash away every month, it can be easy to fall behind.

For one thing, you may forget to move money into savings regularly amid your busy schedule. And, unless you protect the money in advance by transferring it to a different account, you may accidentally spend it.

One way to avoid this is to set up automated savings through your bank account or retirement plan.

If you’re putting away the amount you identified you need for your goal, you may get there without even thinking about it.

The Takeaway

Saving money is highly important–it can provide peace of mind, open up options that improve your quality of life, increase your wealth due to compound interest, and may even allow you to retire early.

Many people earn wealth through a combination of working and savvy saving.

Looking to save for a future goal (like buying a car or making downpayment on a home?) Consider signing up for a SoFi Money® cash management account.

With SoFi Money Vaults, you can separate your spending from your savings while still earning competitive interest on all your money.

Vaults also allow you to track your savings progress and set up recurring monthly deposits (which could help you reach your savings goal faster). Plus, there are no account or minimum balance fees.

Check out everything a SoFi Money cash management account has to offer today!



Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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How Long Does a Direct Deposit Take?

Even with all of the financial tech available at your fingertips, like online banking and mobile apps, it can still be a drag to deposit a check.

Whether it’s trying to take a clear photo of the front and back to submit to the bank, which will deposit it pending review, or physically bringing it into a branch, these hassles are easily avoided by signing up for direct deposit.

With direct deposit, no paper checks are ever issued. The money is transferred electronically, and you can typically access that money on that same day, and sometimes even before your scheduled payday.

Because the transfer is done digitally, direct deposit tends to be more convenient, less time-consuming, and more secure than using paper checks.

Most employers now offer direct deposit as an option, and, in some states, even require it.

What is a direct deposit?

Direct deposit allows someone to electronically send money from their bank or financial institution directly into someone else’s.

The money is sent via the Automated Clearing House (ACH) network, which transfers money between banks and financial institutions.

ACH transfers eliminate the need to send physical checks or cash. These transfers can also happen almost instantaneously because they’re digital and you don’t need to worry about things like proving that a check is legitimate.

Employers also find direct deposit convenient because they can process payroll much faster without having to deal with issuing, signing, and mailing checks.

Direct deposit is a popular way to get your paycheck, but that isn’t the only use.

You can also use it to get a tax refund, Social Security benefits, unemployment benefits, investment-related dividends, as well as other payments.

How do You Set Up Direct Deposit?

Setting up direct deposit is simple. All you have to do is fill out a direct deposit authorization form.

This usually happens on your first day of work, but you can often choose direct deposit or change your information later on.

Some companies handle this process entirely online and some use a third party to sign you up.

When setting up a direct deposit, especially at a new job, you’ll want to remember to have the following information available to make it as simple as possible:

•  Your bank account number(s) and type of account
•  Bank routing number
•  Bank name and address
•  Whether your putting money in a checking or savings account
•  How much of your paycheck you want to deposit in the account
•  A blank, void personal check

Much of this information can all be found on a personal check, or by contacting your bank or financial institution directly.

Splitting Your Direct Deposit

If you want to split your paycheck between multiple accounts, you can typically add each account to the direct deposit form and specify how much of your pay should go into each.

Most forms ask what percentage of your pay goes into each, instead of just a dollar value. You may need to fill out a new form for each account.

For example, you might designate a set amount of money to move into your savings account automatically, while leaving what you know you’ll need in checking for bills and smaller payments.

How Long Does It Take to Get Direct Deposit

Signing up for direct deposit can be done in minutes. However, it may not take effect for a few weeks or even more because the payor has to confirm your bank account information.

With your employer, direct deposit may take one or two pay cycles to become active. During that time, you may receive a paper check as payment instead.

In some cases, an employer may hire an employee at the start of the pay cycle so that the direct deposit authorization process is done just in time for the new employee to receive his or her first payment via direct deposit.

Is Direct Deposit Instantaneous?

Exactly when you will have access to your direct deposit income will depend on the entity issuing the funds.

For example, if your employer uses payroll software to process your paycheck and send the transfer, they’ll set a pay date, which might be a day or two before your regular payday.

That’s the date the funds will be transferred into your bank account, and you can typically access the funds by the end of that day.

To learn the exact time a direct deposit will post to your account, you can contact your bank directly, or watch to see what time of day the first few direct deposits come into your account.

Set up your direct deposit with
SoFi Money today.


Advantages of Direct Deposit

Receiving your paycheck or other income via direct deposit can simplify your life.

You won’t have to worry about waiting for a check or making time to take the check to the bank for deposit. And, you have access to your money sooner, since you don’t have to wait for a check to clear.

Direct deposit also makes it easier to stay on top of your personal finances because you know exactly when money is coming into your account.

This accuracy can help you manage your money and work towards short-term financial goals, such as paying all your bills on time or saving for an upcoming expense.

If you know when you have access to your paycheck, for example, it’s possible to schedule your other bills or an automatic transfer to savings account soon after the direct deposit is scheduled.

Other advantages of direct deposit include:

•  Your bank might waive your account maintenance fee if you receive regular direct deposits.
•  It reduces the risk of check fraud or identity theft from a lost or stolen check.
•  You can’t lose or misplace the funds.
•  Electronic records don’t clutter draws or fill file cabinets.
•  You can easily track your paychecks, and make sure none have been missed, since there is an electronic record of each payment in one place.

The Takeaway

Direct deposits occur when an employer, government agency, or other third party instructs its financial institution to digitally deposit funds into your spending or savings account on a specific date.

Direct deposit eliminates the hassle of depositing paper checks and, once the funds are transferred into your bank account, they are available to you.

Direct deposit can make it easier to keep track of your finances, pay bills on time, and avoid negative balances and overdraft fees.

Looking for more ways to simplify your financial life? Consider signing up for a SoFi Money® cash management account.

With SoFi Money, you can earn a competitive interest rate, spend and save–all in one account. And, you can easily add your SoFi Money account as an option for your direct deposit.

Sign up for SoFi Money, then set up direct deposit into your new cash management account.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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How to Avoid Overdraft Fees

You can’t spend money you don’t have, right?

Well, that’s not necessarily true, and if you overdraw your bank account, you may be subject to costly overdraft fees.

Fortunately, there are some simple things you can to help avoid overdraft fees.

It’s also sometimes possible to negotiate your way out of overdraft fees even after they have been charged.

Here’s what you need to know about overdraft fees.

What Is an Overdraft Fee?

You may generally keep track of your money and have a good sense of how much is in your account most of the time, but mistakes can happen.

Every once in a while you might make a payment that is higher than your balance. Or, you might have a bill set up on autopay, and it gets paid out before you have enough deposited into the account to cover the bill.

Bank accounts often come with “overdraft coverage,” which means the bank will cover the charge and it will still get paid—and the recipient of the funds will be none the wiser.

Your account will then dip before zero and you’ll have a negative balance that reflects the amount you owe the bank for covering the expense, plus an overdraft fee, which is payment to the bank for the service (essentially a small “loan”) that it provided you.

What Is the Average Cost of an Overdraft Fee?

Overdraft fees aren’t cheap. The cost can vary somewhat depending on the bank or financial institution, but they generally run around $33.

It’s important to note that the overdraft fee is generally per overdraft. So if you overdraft your account, and don’t realize you overdrafted, you might make multiple purchases, and incur a fee on each one.

And these fees can add up quickly. At $33 a pop, just three small purchases could set you back over $100.

Some banks charge extended overdraft fees (sometimes called “continuous” or “sustained” fees), anywhere from $6 to $38.50, possibly on a daily basis, if your account doesn’t go back into positive territory within a few days.

It’s no wonder that Americans pay billions of dollars in overdraft fees each year.

Ways to Avoid Overdraft Fees

These strategies can keep overdraft fees from accumulating—or ever being charged in the first place.

Keeping an Eye on Your Balances

It’s a good idea to make a habit of checking your accounts weekly or even more frequently to make sure your balances aren’t too low.

This can be done quickly online, via mobile app, when you take money out of the ATM, and/or by calling the bank and getting an automated update on your account.

Maintaining a Cushion

One simple way to avoid overdraft fees is to keep a little more in your account than you typically spend each month in order to cover unexpected or forgotten charges.

Setting up Automatic Alerts

An easy way to help avoid unexpected overdrafts–and high overdraft fees–is to set up some automatic alerts.

One that is particularly helpful is a low balance alert, which means you will be notified (by text, email or cell phone notification) whenever your balance falls below a certain amount.

You could then immediately transfer money from savings, or hold off on making any purchases until another paycheck comes in.

Another useful alert you may be able to set up is the “overdraft” alert. This means you would be notified whenever you overdraft your account.

This alert won’t help you avoid the initial overdraft fee, but it could stop you from continuing to make payments and incurring more overdraft fees.

Opting Out of Overdraft Coverage

It is possible to prevent your bank from using the automatic overdraft. You just need to opt out of overdraft coverage.

Customers typically have to “opt in” to a bank’s overdraft protection program, which many do without thinking much about it when they open their accounts.

This gives the institution permission to clear a transaction even if there is not enough money to cover it in the account.

If you’re unsure about whether you’re enrolled in an overdraft program when you opened your account, you can contact your bank to find out whether you have this coverage or not.

If you have overdraft coverage, you may want to consider opting out. Without overdraft coverage for debit card purchases and ATM withdrawals, you will not be able overdraft.

Instead, if you try to withdraw more than you have in the account, your charge will simply be declined—no money will be withdrawn from your account, and no fees will be triggered.

Keep in mind, though, that opting out of overdraft coverage programs typically does not protect you from fees charged for bounced checks.

Linking to Another Account

Your bank or financial institution might offer an overdraft protection service that is different from overdraft coverage.

This service, which typically involves signing a contract to set up, will link your checking account to another account at the same institution.

Then, in the event that there’s not enough cash in your spending account to cover a transaction, the needed money would then be transferred from the linked account to cover it.

It’s important to remember, however, that most savings accounts have a limit of six withdrawals per month.

While there may be a fee involved for the funds transfer, these fees are typically lower than overdraft fees.

Another perk of overdraft protection is that it can help you avoid the awkwardness of having your transaction denied.

Being Careful About Where You Use Your Debit Card

You might want to avoid using your debit card to check into a hotel or rent a car. These companies may put a hold on your card equal to, or sometimes greater than, the full amount of your bill.

In this case, money wouldn’t actually be withdrawn from your account, but it also wouldn’t be available for you to use.

If you use your debit card to make another purchase and don’t realize that the hold is tying up your money, you may put yourself at risk for overdrafting.

If you’re planning to use your debit card to book a hotel or rent a car, you might want to check company policies in advance.

You may also want to avoid using your debit card to make lots of small purchases. These might be harder to keep track of and could add up quickly, making it more difficult for you to know how much money is flowing out of your account.

If you lose track of your spending, this too could put you more at risk for overdrafting.

What to Do If You Do Overdraft

If you overdraw your account, the best first step is generally to transfer money into the account right away. You might still be able to prevent an overdraft fee.

You may then want to see if your provider has a daily cutoff time, or deadline, for adding money to an account to correct a negative balance that same day to avoid fees.

Even if you miss the cutoff, transferring money into the account soon can prevent other fees. That’s because leaving a balance negative for several days can sometimes result in an extended overdraft fee.

If you are charged an overdraft fee, however, that doesn’t automatically mean you are stuck paying it. It doesn’t hurt to negotiate to try to have the fee reimbursed.

You can try to get overdraft fees waived by calling the bank and politely asking if they will remove the charge—if it’s your first offense, you might prevail.

You may also want to ask your bank if it has a formal forgiveness program. Some institutions have policies to waive the first fee charged each year or if a customer is experiencing economic hardship.

The Takeaway

Overdrafting is when you try to spend more money from your checking account than you actually have in that account.

Banks will often let your charge go through instead of declining it, but then will charge you an overdraft fee northwards of $30.

These fees can add up quickly, especially if you don’t realize you overdrafted your account and continue to make purchases.

But there are a few simple ways to avoid hefty overdraft fees, such as opting out of overdraft coverage, setting up an automatic “low balance” alert, linking your accounts, and keeping a little cushion in your account.

If you do get slammed with an overdraft fee, it never hurts to ask the bank to waive it, especially if it’s your first offense.

If you’re looking for a simple way to keep track of your money (and you’re not a fan of fees), you may want to consider opening up a SoFi Money® cash management account.

With SoFi Money, you can easily track your spending in your dashboard within the app.

Plus, SoFi Money doesn’t have any account fees or many other common fees–and withdrawing cash is fee-free at 55,000+ ATMs worldwide.

Check out all the advantages a SoFi Money cash management account has to offer today!



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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5 Tips to Hedge Against Inflation

To achieve financial freedom and grow wealth over long periods of time, it’s vital to understand the concept of inflation.

Inflation refers to the ever-increasing price of goods and services as measured against a particular currency. The purchasing power of a currency depreciates as a result of rising prices. Put differently, a rising rate of inflation equates to a decreasing value of a currency.

Inflation is most commonly measured by the Consumer Price Index (CPI) , which averages the national cost of many consumer items such as food, housing, healthcare, and more.

The opposite of inflation is deflation, which happens when prices fall. During deflation, cash becomes the most valuable asset because it can buy more. During inflation, other assets become more valuable than cash because it takes more currency to purchase them.

The key question to examine is: What assets perform the best during inflationary times?

This is a much-debated topic among investment analysts and economists, with many differing opinions. And while there may be no single answer to that question, there are still some generally agreed upon concepts that can help to inform investors on the subject.

Is Inflation Good or Bad?

Depending on an individual’s perspective, inflation might be seen as either good or bad.

For the average person who tries to save money without investing much, inflation could generally be seen as negative. A decline in the purchasing power of the saver’s currency leads to them being less able to afford things, ultimately resulting in a lower standard of living.

For wealthier investors who hold a lot of financial assets, however, inflation might be perceived in a more positive light. As the prices of goods and services rise, so do financial assets. This leads to increasing wealth for some investors. And because currencies always depreciate over the long-term, those who hold a diversified basket of financial assets for long periods of time tend to realize significant returns.

It’s generally thought that there is a certain level of inflation that contributes to a healthier economy by encouraging spending without damaging the purchasing power of the consumer. The idea is that when there is just enough inflation, people will be more likely to spend some of their money sooner, before it depreciates, leading to an increase in economic growth.

When there is too much inflation, however, people can wind up spending most of their income on necessities like food and rent, and there won’t be much discretionary income to spend on other things, which could restrict economic growth.

Central banks like the Federal Reserve try to control inflation through monetary policy. Sometimes their policies can create inflation in financial assets, like quantitative easing has been said to do.

5 Tips for Hedging Against Inflation

The concept of inflation seems simple enough. But what might be some of the best ways investors can protect themselves?

There are a number of different strategies investors use to hedge against inflation. The common denominators tend to be hard assets with a limited supply and financial assets that tend to see large capital inflows during times of currency devaluation and rising prices.

Here are five tips that may help investors hedge against inflation.

1. Real Estate Investment Trusts (REITs)

A Real Estate Investment Trust (REIT) is a company that deals in real estate, either through owning, financing, or operating a group of properties. Through buying shares of a REIT, investors can gain exposure to the assets that the company owns or manages.

REITs are income-producing assets, like dividend-yielding stocks. They pay a dividend to investors who hold shares. In fact, REITs are required by law to distribute 90% of their income to investors.

Holding REITs in a portfolio might make sense for some investors as a potential inflation hedge because they are tied to a hard asset—real estate. During times of high inflation, hard assets tend to rise in value against their local currencies because their supply is limited. There will be an ever-increasing number of dollars (or euros, or yen, etc.) chasing a fixed number of hard assets, so the price of those things will tend to go up.

Owning physical real estate—like a home, commercial complex, or rental property—also works as an inflation hedge. But most investors can’t afford to purchase or don’t care to manage such properties. Holding shares of a REIT provides a much easier way to get exposure to real estate.

2. Bonds and Equities

The recurring theme regarding inflation hedges is that the price of everything goes up. What investors are generally concerned with is choosing the assets that go up in price the fastest, with the greatest possible return.

In some cases, it might be that stocks and bonds very quickly rise very high in price. But in an economy that sees hyperinflation, those holding cash won’t see their investment, i.e., cash, have the purchasing power it may have once had.

In such a scenario, the specific securities aren’t as important as making sure that capital gets allocated to stocks or bonds in some amount, instead of holding all capital in cash.

3. Exchange-Traded Funds

An exchange-traded fund (ETF) that tracks a particular stock index or group of investment types is another way to get exposure to assets that are likely to increase in value during times of inflation and can also be a strategy to maximize diversification in an investor’s portfolio. ETFs are generally passive investments, which may make them a good fit for those who are new to investing or want to take a more hands-off approach to investing. Since they are considered a diversified investment, they may be a good hedge against inflation.

4. Gold and Gold Mining Stocks

For thousands of years, humans have used gold as a store of value. Although the price of gold can be somewhat volatile in the short term, few assets have maintained their purchasing power as well as gold in the long term. Like real estate, gold is a hard asset with limited supply.

Still, the question of “is gold a hedge against inflation?” has different answers depending on whom you ask. Some critics claim that because there are other variables involved and the price of gold doesn’t always track inflation exactly, that it is not a good inflation hedge. And there might be some circumstances under which this holds true.

During short periods of rapid inflation, however, there’s no question that the price of gold rises sharply. Consider the following:

•  During the time between 1970 and 1974, for example, the price of gold against the US dollar surged from $240 to more than $900 for a gain of 73%.
•  During and after the recession of 2007 to 2009, the price of gold doubled from less than $1,000 in November 2008, to $2,000 in August 2011.
•  In 2019 and 2020, gold has hit all-time record highs against many different fiat currencies.

Investors seeking to add gold to their portfolio have a variety of options. Physical gold coins and bars might be the most obvious example, although these are difficult to obtain and store safely.

5. Better Understanding Inflation in the Market

Ultimately, no assets are 100% protected from inflation, but some investments might be better than others for some investors. Understanding how inflation affects investments is the beginning of growing wealth over time and achieving financial goals. Still have questions about hedging investments against inflation? SoFi credentialed financial planners are available to answer questions about investments at no additional cost to members.

Downloading and using the stock trading app can be a helpful tool for investors who want to stay up to date with how their investments are doing or keeping an eye on the market in general.

Learn more about how the SoFi app can be a useful tool to reach your investment goals.



External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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Common Credit Report Errors and How to Dispute Them

Your credit report contains a detailed record of your past use of credit, and can have a big influence on your life.

Whenever you apply for a loan, lenders will typically look at your credit report (either a hard or soft credit inquiry) to decide whether or not to lend to you, as well as how much interest to charge.

Potential employers may also check your credit. And, your credit report may be pulled when you are trying to rent a home, connect utilities, or get a cell phone.

Since credit reports are so important to so many aspects of your life, it’s essential they’re accurate.

Unfortunately, they have more errors than many people may realize. According to the Consumer Financial Protection Bureau (CFPB), one in five people have an error on at least one of their credit reports.

While a misspelled name or incorrect bank balance might not seem like much, it could be impacting your credit score, and hurting your ability to get new lines of credit, or making the terms of the credit more expensive. Ultimately, these errors could be costing you money.

That’s why it’s important to periodically check and monitor your credit reports.

This can help you ensure that the information being used to calculate your credit scores is accurate and up to date. It can also alert you to fraud or identity theft.

In addition, when you’re working on building credit, it can be helpful to see what potential creditors see when they check your credit.

Getting a hold of, and checking, your credit reports from the three major bureaus–Equifax , TransUnion and Experian –is relatively easy, and also free.

Here’s how to do it, and key things to look for when reading your reports.

Getting a Credit Report

Like going in for a check-up once a year can benefit your physical health, regular credit report check-ups can benefit your financial health.

Everyone is entitled to see their credit reports for free once a year at the government-mandated AnnualCreditReport.com site.

It’s a good idea to take full advantage of this service, and to look over your reports from the three major bureaus annually.

Checking your credit report regularly can also make it easier to notice when the numbers look off or if something’s amiss.

Scanning a Credit Report

The best way to find an error in a credit report is to read through it thoroughly.

The CFPB recommends making sure that the following information is accurate:

•  Name
•  Social Security Number
•  Current Address
•  Current Phone Number
•  Previous Addresses
•  Status
•  Employment History (names, dates, locations)
•  Current Bank Accounts Open
•  Bank Account Balances
•  Joint Accounts
•  Accounts Closed

If any of the above is incorrect, the report has an error that you may want to dispute.

Common Credit Report Errors

While there are any number of errors that could crop up on a credit report, some are more likely than others. According to the CFPB, these are among the most common:

•  Typos or wrong information. In the personal information section, names could be misspelled, or addresses could just be plain wrong.
•  A similar name is assigned to your report. Instead of a typo, the credit report might be pulling in accounts and information of a person with a similar name to yours.
•  Wrong accounts. If an account is in your name but unfamiliar to you, this could be proof of identity theft.
•  Closed accounts are still open. You may have closed a savings account or credit card recently, but the report shows it as still open.
•  Being labeled “owner” instead of a user on a joint account. If you’re simply an authorized user on a joint account or credit card, your credit report should reflect that.
•  False late payment. A credit report might show a late or delinquent payment when the account was paid on time.
•  Duplicate debts or accounts. Listing an account twice could make it look like more debt is owed, resulting in an incorrect credit report.
•  Incorrect balances. Account balances might show incorrect amounts.
•  Wrong credit limits. Misreported limits on credit card accounts can impact a credit score, even if they’re only off by a few hundred dollars.

How to Report an Error

Errors on credit reports don’t typically fix themselves. Account owners often have to be the ones to bring the error to the credit bureau’s attention.

Here are steps to take if you find an error in one of your reports.

1. Confirming the error is present on other credit reports.
Credit scores may vary across credit reporting bureaus, but all the core information should be the same. That means if there’s an error on one, it’s best to check that it’s on the other two. You can order free reports from all three bureaus–Experian, Equifax, and TransUnion–from the free Annual Report Site , and check each report against the others.
2. Gathering evidence.
To prove an element of the credit report is wrong, there needs to be evidence to the contrary. That means you’ll want to collect supporting documentation that shows the report has an error, whether that’s a recent bank statement, ID, or a loan document. Having this documentation on hand can make the process move faster.

3. Reporting the error to the credit reporting company.
To resolve the error, you’ll want to file a formal dispute with the credit reporting company. That means sending a dispute via snail mail (using this template from the CFPB ) or filling out a form online at the company’s site (listed below).

It’s important to make sure to include all documentation of the error, in addition to proper identification.

Here’s how to contact each credit reporting company:

Equifax

Online Dispute Form
Mail dispute form to:

Equifax Information Services LLC
P.O. Box 740256
Atlanta, GA 30348

Experian

Online Dispute Form
Mail dispute form to:

Experian
P.O. Box 4500
Allen, TX 75013

Transunion

Online Dispute Form
Mail dispute form to:

TransUnion LLC
Consumer Dispute Center
PO Box 2000
Chester, PA 19016

4. Contacting the furnisher (if applicable).
A furnisher is the company that gave the credit reporting bureau information for the report. If the report’s mistake is an error from a bank or credit card company, you can also reach out to the furnisher to amend its mistake. You can contact the company through mail (the address can be found on the credit report), or reach out to customer service by phone or online.

If the furnisher corrects the mistake, it could, in turn, update the credit report. But, to play it safe, reach out to both parties.

5. Reaching out to the FTC to report identity theft (if applicable).
If you notice an error that suggests identity theft (such as unknown accounts or unfamiliar debt), it’s a good idea to sign up with the Federal Trade Commission’s (FTC’s) IdentityTheft.gov site in addition to alerting the credit bureaus. The FTC’s tool can help users create a recovery plan and figure out the next steps.

6. Sitting tight and waiting for a response.
Once someone sends a credit dispute to a bureau or furnisher, they can expect to hear back within 30 days, typically by mail.

When a credit bureau receives a dispute, they have one of two choices: agree or disagree. If the bureau agrees, they will correct the error and send a new credit report.

If the bureau disagrees and doesn’t believe there’s an error, they won’t remove it from the report. In some cases, they may not agree there’s an error because there’s a delay in information getting to them.For example, a recently canceled credit card might not show up as canceled in their records yet. Changes like that might take some time.

However, if you’re confident of the error and a credit bureau doesn’t agree, that’s not your last stop.

You can also reach out to the CFPB to file an official complaint . The complaint should include all documentation of the dispute. Once the CFPB receives the complaint, you can keep track of its progress on the organization’s website.

The Takeaway

Checking your credit reports can help you ensure that the information being used to calculate your credit scores is accurate and up to date. It can also tip you off to fraud or identity theft

It’s easy and free to gain access to your credit reports from the three major bureaus once a year. Taking advantage of this service (and reporting any errors you may come across) can be key to maintaining good credit, and good overall financial health.

Another way to maintain good financial health is to pay your bills on time (which can boost your credit score), and to keep track of your spending.

Signing up for SoFi Money® Cash Management Account can help with both.

SoFi Money is a mobile-first account that allows you to track your weekly spending right in the dashboard of the SoFi Money app.

You can also set up all of your bill payments directly from the SoFi app or on your computer to help ensure that payments are never missed or late.

Make it easier to manage your finances with a SoFi Money cash management account.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
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