How to Build Up Your Credit

A strong credit score makes it easier to qualify for a mortgage, yields lower interest rates on personal loans, and may even impact your auto insurance premiums. Whether you’re just getting started on building a positive score or rebuilding your credit, understanding how the bureaus calculate scores is essential for achieving your goals. Here is an overview of building and maintaining a good credit rating.

1. Pay Bills on Time

A history of on-time payments is the single most important factor in establishing a positive credit reputation. This shows future mortgage lenders and other creditors that you’re committed to paying your debts and know how to use credit responsibly.

Missing a due date by a few days once or twice won’t necessarily impact your credit, but payments that are more than 30 days late may be reported to the credit bureaus. If you have trouble keeping up with due dates, consider setting up automated payments.

2. Use Credit

Staying out of debt entirely may seem like a sign of financial health, but it makes creditworthiness difficult to calculate. Lenders may be warier about issuing loans to borrowers with no credit information at all than someone who has made mistakes in the past.

Using credit cards and taking out loans shows lenders that you know how to manage debt responsibly. You can still stay out of debt by paying off the entire balance at the end of the month, which also boosts your credit score.

3. Keep Balances Low

Mortgage and auto lenders prefer borrowers who aren’t using all of their available credit. If you’re using store charge accounts or credit cards, try to keep the balance at less than 30% of the limit. For instance, if your credit card account limit is $3,000, try to avoid carrying a balance of more than $1,000 at any given time.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.

3 Financing Options for Your Child’s Education

College tuition costs keep going up, putting higher education out of reach for many families. Fortunately, there are financing options for parents who haven’t been able to save enough for their child’s education. If the financial aid package offered by your child’s school isn’t sufficient, grants, scholarships, and loans can help make up the difference.

1. Apply for Grants & Scholarships

The tuition reduction and financial aid package offered by your child’s school of choice likely won’t include scholarships and grants from student organizations or other groups. The school may have an honor society that offers scholarships to qualifying students, or your child may be eligible for a grant from the department they’re applying to.

Many private organizations in your area might also offer financial assistance. Even if these awards are only $500, they still chip away at out-of-pocket expenses.

2. Consider Private Student Loans

Student loans from a private lender can bridge the gap between your child’s tuition and federal student aid. Depending on your credit, these options can be quite affordable, but they may also have interest rates higher than some credit cards. Like federal student loans, the funds you borrow are sent directly to your child’s school, while you get anything left over.

3. Take Out a Personal Loan

Personal loans may have slightly higher interest than student financing packages, but they do offer more flexibility. Because you receive this money directly, you can also use the funds to buy your child a car or anything else they might need while in college.

These are practical options if you’re having trouble qualifying for a student loan or your child is planning on going to grad school. Many international students and those pursuing a master’s degree find taking out a personal loan is the best way to finance their education.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.

How Taking Out an Auto Loan Affects Your Credit

If you’re in the market for a new car, you might be wondering how taking out a loan will affect your credit. While your rating might drop at first, a secured loan can boost your rating in the long term. Here are a few ways financing a vehicle might affect your credit rating.

Before Accepting the Loan

When you apply for a loan, most lenders will do a hard inquiry of your credit report. An inquiry will cause your score to drop by a few points, but don’t worry if you’re shopping around for a loan. The credit reporting bureaus will combine all inquiries of the same type that occur within 14 days.

After Taking the Loan

Your available credit and debt-to-income ratios are some of the most important factors affecting your credit score. Taking on a new secured loan reduces your available credit and increases your monthly payments, so your rating might go down a few more points.

However, a history of on-time payments demonstrates to creditors that you can manage your finances responsibly. Making regular payments on your car loan can boost your credit score over time, making auto loans smart options for those without significant credit histories.

Paying Off the Loan

As the balance on the auto loan goes down, your percentage of available credit will go up. As long as you make your payments on time, your credit score will likely rise. Paying off the loan shows reliability, so future lenders will be more likely to issue loans with lower interest rates and fewer fees.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.

What Financial Institutions Consider Before Giving You an Auto Loan

An auto loan allows you to drive away in a new or used car, even if you can’t afford the full price right away. Before approaching your credit union for a loan, you might wonder what kind of rate they’ll offer. Here are some factors that can affect the results.

1. Credit Score

Your credit score helps a lender figure out your reliability as a borrower. It’s based on a variety of financial criteria, like your debt payment history, evictions, ratio of debt to available credit, and missed payments. Although a credit score is a determining factor for most loans, a credit union will likely be more concerned about your income.

2. Income

To show your lender that you can pay back the debt over its term, you’ll likely need a steady, full-time job. While it’s possible for freelancers and self-employed individuals to get auto loans, they may have more difficulty, and the lender will weigh other parts of their application more heavily.

3. Length of Term

If you’re looking for a low interest rate, choose a shorter term length. When you’re willing to pay the lender back sooner, they’ll offer you a better deal. Calculate your monthly payment carefully to ensure you’ll be able to afford it for the whole term. It’s better to have a higher interest rate and more manageable payments than to fall behind.

4. Down Payment

If you’re having trouble qualifying for the interest rate you want, it can help to offer a substantial down payment. Putting more money in shows you’re committed to the process and that you have the money to pay off the loan during the term.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.

Tax Credits Are Often More Valuable Than Deductions

If you are confused about the difference between a tax deduction and a tax credit, you are not alone. A deduction is subtracted from your income, lowering your taxable income and your income tax. But a tax credit kicks in after you have computed your income tax, reducing that income tax dollar-for-dollar.

You must choose between taking a standard deduction or itemizing your deductions. Since the standard deduction is now $12,400 per taxpayer, even more for seniors over 65, it won’t benefit most people to itemize unless they have a hefty home mortgage or huge medical expenses.

But even if you take the standard deduction, there still are a few deductions you can claim and many credits for which you might qualify. Here are some of the more popular ones.

Student loan interest deduction. You can deduct up to $2,500 of student loan interest if your income is less than $85,000 on a single return (double that if filing jointly.)

Educator expenses deduction. School teachers can deduct up to $250 they spend on classroom supplies.

HSA contributions deduction. For 2020, if you have high-deductible health coverage, you can contribute up to $3,550 to a Health Savings Account to pay for medical expenses ($7,100 for family coverage).

Retirement plan contributions. You may have a traditional 401(k) or other retirement account available to you at work, and all your contributions to the plan are tax-deductible up to $19,500 ($26,000 if you are 50 or older). Contributions to traditional IRAs or other individual retirement accounts are also deductible. You may also qualify for a Saver’s Credit of up to 50% of your first $2,000 in retirement plan contributions if your income is under $32,000.

Education tax credits. If you are paying for college for yourself or your kids, the American Opportunity Tax Credit (AOTC) and the Lifetime Learning Credit LLC) may help. The AOTC credit is 100% of the first $2,000 you spend on education and 25% of the next $2,000. The LLC lets you claim 20% of the first $10,000 you paid toward tuition and fees. The AOTC cuts off at $90,000 of income at the LLC at $69,000.

Child credits. You’ll get a Child Tax Credit of $2,000 per child ($500 for non-child dependents) if your income is under $200,000 ($400,000 on a joint return.) For child and dependent care costs, you’ll get a credit of 20% to 35% of the first $3,000 of care costs, or double that if there are two or more dependents. If you adopt a child, you can claim credit for up to $14,300 of adoption costs per child if your income is under $254,520. And if your income is under $57,000, you may also qualify for an Earned Income Tax Credit of up to $6,660 depending on your marital status and how many kids you have.

Residential energy credit. If you installed solar equipment this year, you may qualify for a tax credit of 26% of the cost. In 2021, the final year, the credit is reduced to 22%.

When it’s time to file your taxes, TurboTax® is here to help!

From simple to complex taxes, TurboTax has you covered. And when you need help, real experts are standing by — and can even do your taxes for you, start to finish with TurboTax Live®. Getting your biggest possible tax refund has never been easier. And as a credit union member you can save up to $15 on TurboTaxClick here to get started today!

The information in this article for general educational purposes only and not intended to provide specific advice or recommendations.Please discuss your particular circumstances with an appropriate professional before taking action.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.

I Was Temporarily Furloughed and Then Came Back to Work, What Does That Mean for My Taxes?

Whether you are furloughed, laid off or fired, it hurts. It’s a blow to your ego, and losing a regular paycheck is a blow to your finances. Fortunately, for many it was temporary, and after the initial weeks and months of the pandemic they were able to go back to work.

If you were furloughed and your paycheck continued during your furlough (lucky you!) then your finances and taxes didn’t change much. But if you had a gap in pay, with a corresponding gap in taxes withheld, what does that mean for your overall tax picture for 2020? 

If you received unemployment benefits during the period you weren’t working, those benefits are taxable, but income taxes weren’t withheld unless you made a special request. As a result, the taxes on those benefits are due when you file your tax return in the spring or will reduce the amount of your tax refund.

Speaking of refunds, the amount of your refund depends on how much was taken out of your paycheck for income taxes compared to the actual taxes on your tax return. If you had more taken out than the actual taxes, you are due a refund of the difference. But during the weeks or months you weren’t receiving a paycheck, nothing was taken out. That will result in a lower refund at 2020 year end.

There is one ray of sunshine in all of this. Our system of income taxes is graduated, with higher rates applying to higher income. If your income dropped for 2020, your tax bracket may have dropped as well, and that could increase your refund a bit. And now that your income is lower, that could make you eligible for tax credits that didn’t apply to you before, such as the Earned Income Tax Credit.  When it’s time to file your taxes TurboTax is here to help! 


From simple to complex taxes, TurboTax® has you covered. And when you need help, real experts are standing by — and can even do your taxes for you, start to finish with TurboTax Live®. Getting your biggest possible tax refund has never been easier. And as a credit union member you can save up to $15 on TurboTaxClick here to get started today!

The information in this article for general educational purposes only and not intended to provide specific advice or recommendations.Please discuss your particular circumstances with an appropriate professional before taking action.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.

How to Address Post-Holiday Debt

The holidays are a time to celebrate your loved ones, but if you went overboard on the presents, you may be wondering how to get your finances in order. Whether you turned a blind eye to your online banking account while shopping or racked up a little too much on your credit cards, take these steps in the new year to get your spending back on track.

1. Know Where You Stand

The first way to address your post-holiday debt is by utilizing your online banking system to evaluate your spending over the last few months. If you had to move some funds from your savings into your checking to cover gifts, determine how much money you’ll need to build this account back up again. Once you have a set number, divide it into three or four payments over the next few months to restore your savings.

2. Create a Budget

If you relied on credit cards to fund your holiday spending, you may be looking for the fastest way to pay these accounts off. Setting a budget allows you to take a comprehensive look at where you’re currently spending money and how you can better allot these purchases.

You can create a weekly or monthly budget using some simple steps. First, gather all financial information, including pay stubs, retirement benefits, and monthly bills. Break down your yearly income by month, paying attention to the number you bring home after taxes. Estimate your weekly spending on groceries, activities, and necessities, like utility bills and gas.

Then tally in any additional debts. After you pay off the maximum amount of these monthly payments, take at least 75% of what is left and apply it to your savings or additional credit payments. 

3. Opt for Cash

Research shows using credit cards makes you more likely to overspend when making purchases because of the ease of using plastic, the expedited exchange, and that you don’t see the money leave your hand. Combat this effect by withdrawing cash from your online banking account to cover the weekly budget you created, and limit yourself to this amount to prevent overdrafts.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial Federal Credit Union is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services online, follow us on FacebookTwitter, and Instagram for news and updates, or call (808) 832-8700 on Oahu or toll-free at (800) 272-5255 with any questions.

What is the Social Security Withholding Tax Deferral and What Does It Mean to Me?

Most employers are required to withhold 6.2% in Social Security tax from their employees’ pay and submit it plus a matching amount to the government. But in August President Trump signed an executive order allowing employers to temporarily suspend withholding the Social Security for September through December 2020. The suspension only applies to employees whose bi-weekly pay is under $4,000.

The suspension wasn’t a payroll tax reduction, it was a deferral. Any employer who opted to implement the suspension had to collect the suspended tax from their employees in January through April of 2021 and remit the deferred taxes to the government by April 30, 2021.

Many employers decided not to implement the tax suspension amid concerns over collecting deferred taxes from employees who might no longer be on the payroll in 2021 and other logistical issues. But if your employer did opt to suspend collecting Social Security withholding taxes, here are some things you should know.

  • The suspended tax will be withheld from your paycheck evenly from the beginning of the year through the end of April. That withholding is in addition to the normal Social Security tax withholding from your paycheck. So not only will the 6.2% withholding begin again on your current wages, a similar amount will be withheld for the suspended taxes. That could mean a cut in your net pay of 12.4% or so. Ouch!
  • Consider setting funds away in savings now that you can use into after the first of the year to make up for that dip in your net paycheck. 
  • If you leave your job before next April, be prepared to see all the deferred payroll taxes deducted from your final paycheck.
  • If you get a bonus that increases your bi-weekly gross pay to over $4,000, that paycheck will not be eligible for the payroll tax deferral and your employer will take Social Security taxes out of the wages and bonus in that particular paycheck.

When it’s time to file your taxes TurboTax is here to help! 
From simple to complex taxes, TurboTax® has you covered. And when you need help, real experts are standing by — and can even do your taxes for you, start to finish with TurboTax Live®. Getting your biggest possible tax refund has never been easier. And as a credit union member you can save up to $15 on TurboTaxClick here to get started today!

The information in this article for general educational purposes only and not intended to provide specific advice or recommendations.Please discuss your particular circumstances with an appropriate professional before taking action.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.

COVID-Related Distributions from 401(k) Plans – How will it impact my taxes?

The coronavirus certainly threw a monkey wrench in our finances this year, didn’t it? But there is some relief, if you or a household member lost their job, were furloughed, or had their work hours cut. A special provision of the Coronavirus Aid, Relief and Economic Security (CARES) Act lets you take up to $100,000 from your 401(k) or other retirement account before the end of 2020 without penalty. Here is the fine print for who qualifies, and from which accounts you can draw the money:

  • You, your spouse, or your dependent is tested and diagnosed with COVID-19.
  • You, your spouse, or a household member suffers financial hardship as a result of being quarantined, losing your job, having your hours or pay reduced, or having a job offer rescinded or delayed. And being unable to work because of lack of childcare counts as well.
  • You, your spouse, or household member closes their business or reduces business hours due to COVID-19.
  • Almost all retirement plans qualify for this temporary relief from penalties on early withdrawals, including all IRAs (traditional, Roth, SEP, SIMPLE, and SARSEP IRAs), 401(k) and 403(b) plans, pension and profit-sharing plans, governmental 457(b) plans, federal Thrift Savings Plans and 403(a) plans.

If you had a retirement stash you could draw from, this provision may have been a lifesaver for you. But now that tax time is around the corner, it’s time to start thinking about the tax consequences of those withdrawals.

Wait, I thought the withdrawals were tax-free!  Not quite. You don’t owe the 10% penalty for early withdrawal, but that doesn’t mean the distribution came to you scot-free. If your contributions to the retirement account were tax-deductible (what’s known as “before tax dollars”), then withdrawing the funds may have triggered tax.

But here’s the good news: it’s up to you as to how much is taxable and when that tax is due. Under the CARES Act the income from withdrawals is spread over a three-year period. So, if you received a $9,000 distribution, you would report $3,000 in income on your federal income tax return for each of 2020, 2021, and 2022. But if your income is super-low this year, you can elect to have it all taxed in 2020 at this year’s lower tax rates. Want to escape current taxation altogether? Repay the distribution within three years and you won’t owe income tax on the portion repaid.

When it’s time to file your taxes, TurboTax® is here to help! 

From simple to complex taxes, TurboTax has you covered. And when you need help, real experts are standing by — and can even do your taxes for you, start to finish with TurboTax Live®. Getting your biggest possible tax refund has never been easier. And as a credit union member you can save up to $15 on TurboTaxClick here to get started today!

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial FCU is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services, follow us on Facebook, Twitter, and Instagram for news and updates, or call (808) 832-3700 on Oahu or toll-free at (800) 272-5255 with any questions.

A Beginner’s Guide to Emergency Funds

Whether you’ve just landed your first full-time job or you’re starting to pay off debts, starting an emergency fund is an important step to take as you gain financial independence. It can help you navigate life’s uncertainties with greater confidence. Here is a guide to help build up your savings and create your emergency plan.

Why Should You Have One?

If you become unemployed, this financial security net can prevent you from going into debt while you look for a new job. It can help you by paying for the basics, including food and utilities.

There are also other circumstances to consider for an emergency plan. For example, you might incur medical bills that aren’t covered by insurance or have to put out money for car repairs or a new vehicle if yours stops working. Vet bills and major home issues, such as problems with plumbing or appliances, are also reasons to dip into the emergency fund.

How Can You Build Up Your Fund?

To start an emergency fund, set aside a portion of each paycheck. You can have some of your check directly deposited or transferred to a designated emergency account. This amount should be separate from your other savings for retirement, a home, or other future purchases. See if there are account options available so you can’t access it with your debit card and, therefore, won’t be tempted to spend it.

Establishing a budget will also help you stay on track. After you’ve accounted for your monthly expenses and money toward your emergency fund, give yourself a small sum that you can spend as you please. Try to dedicate 50% of your pay to expenses like rent and utilities, 20% toward savings, and 30% for discretionary spending.

While each person’s emergency plan will differ, in general, aim to have three months’ worth of income saved. This amount may vary based on whether you have financial dependents, such as children or a spouse, and whether you’re part of a two-income household.

With hundreds of millions of dollars in assets and over 60,000 members across Hawaii, Hawaiian Financial Federal Credit Union is one of the leading financial institutions in the state, with a reputation for combining personalized service with technologically advanced personal banking solutions. Learn more about our broad array of services online, follow us on FacebookTwitter, and Instagram for news and updates, or call (808) 832-8700 on Oahu or toll-free at (800) 272-5255 with any questions.