The 9 Top Reasons Mortgage Loans Are Denied in the U.S.

Although interest rates have inched up recently, they remain at historic lows, spurring demand in both home purchases and mortgage refinancing. However, many lenders have tightened up their borrowing standards due to the economic uncertainty of the pandemic, and hopeful loan applicants may find it hard to get approved. According to loan-level mortgage data from the Home Mortgage Disclosure Act, the denial rate for conventional, single-family loans was 18.8% (excluding withdrawn and incomplete applications) in 2019.

Mortgage application denial rates vary by purpose of the loan. When considering total loan applications for conventional, single-family loans, 2,055,774 applications were denied. At 43%, denial rates were highest for home improvement loans. Loans for home purchases had the lowest denial rate, at just 10%. Refinancing applications, both with and without a cash-out component, had denial rates in between, at 16% for non-cash-out and 18% for cash-out refinance loans.

Mortgage application denial rates vary not only by purpose of the loan but also by the race and ethnicity of the applicant. Non-Hispanic White applicants and co-applicants of different races (“Joint”) had the lowest denial rates at 17%. Black, American Indian or Alaskan Native, and applicants of two or more minority races all had a denial rate that was more than twice as high as that for White applicants. Hispanic or Latino borrowers also had high denial rates, at nearly 30%. The difference in denial rates reflects differences in credit profiles and application types across different demographic groups, but it also may reflect racial and ethnic discrimination in lending behavior.

Loan approvals and denials also vary widely by location. Denial rates skew higher in the South, Southeast, and parts of the Northeast, while denial rates are much lower in the Midwest. This could be due to varying demographic makeups and local job market conditions. At the state level, Mississippi and Florida have the highest mortgage denial rates in the U.S. at 27.3% and 25%, respectively. At the opposite end of the spectrum, North Dakota has the lowest mortgage denial rate in the country, at just 10.2%.

To find the top reasons mortgage loans are denied, researchers at Construction Coverage analyzed the latest data from the Home Mortgage Disclosure Act. The researchers ranked reasons mortgage loans are denied based on the percentage of all denials mentioning each reason. For each reason that mortgage loans are denied, researchers also calculated the total annual denials and the percentage of denials that were due to that reason for several loan types: home purchase, refinancing, cash-out refinancing, and home improvement.

The Top Reasons Mortgage Loans Are Denied

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1. Debt-to-income ratio

  • Percentage of all denials: 37.2%
  • Total annual denials: 765,772
  • Percentage of home purchase denials: 36.2%
  • Percentage of refinancing denials: 38.0%
  • Percentage of cash-out refinancing denials: 35.4%
  • Percentage of home improvement denials: 37.2%

The debt-to-income ratio (DTI) ratio is the share of gross monthly income (pre-tax) that goes towards debt payments (rent or mortgage, car payment, credit cards, student loans, etc.). A lower DTI can help applicants get approved for a mortgage.

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2. Credit history

  • Percentage of all denials: 34.8%
  • Total annual denials: 715,393
  • Percentage of home purchase denials: 34.2%
  • Percentage of refinancing denials: 24.8%
  • Percentage of cash-out refinancing denials: 25.8%
  • Percentage of home improvement denials: 44.8%

A mortgage applicant’s credit history gives lenders an idea of how risky it is to loan an applicant money. Credit history is a record of how an individual repays debts, such as credit cards, mortgages, car loans, and other bills.

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3. Collateral

  • Percentage of all denials: 19.7%
  • Total annual denials: 404,084
  • Percentage of home purchase denials: 13.9%
  • Percentage of refinancing denials: 18.5%
  • Percentage of cash-out refinancing denials: 19.6%
  • Percentage of home improvement denials: 23.4%

Insufficient collateral means that the home an applicant is trying to purchase, refinance, or borrow against is not worth enough compared to the proposed loan amount.

Mortgage loan

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4. Other

  • Percentage of all denials: 12.9%
  • Total annual denials: 265,772
  • Percentage of home purchase denials: 13.2%
  • Percentage of refinancing denials: 12.9%
  • Percentage of cash-out refinancing denials: 15.0%
  • Percentage of home improvement denials: 12.0%

The “Other” category covers all other reasons that an applicant could be denied a home loan besides the eight covered by the Home Mortgage Disclosure Act and listed here.

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5. Credit application incomplete

  • Percentage of all denials: 8.9%
  • Total annual denials: 183,024
  • Percentage of home purchase denials: 8.5%
  • Percentage of refinancing denials: 14.4%
  • Percentage of cash-out refinancing denials: 14.6%
  • Percentage of home improvement denials: 4.1%

Incomplete credit applications lack the necessary information for the lender to make a credit decision, resulting in a loan denial.

Tax forms

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6. Unverifiable information

  • Percentage of all denials: 6.7%
  • Total annual denials: 137,968
  • Percentage of home purchase denials: 8.9%
  • Percentage of refinancing denials: 5.8%
  • Percentage of cash-out refinancing denials: 4.5%
  • Percentage of home improvement denials: 6.4%

Mortgage denials due to unverifiable information often arise from inaccuracies in an applicant’s employment history or tax records or discrepancies between the application and credit report.

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7. Insufficient cash (down payment, closing costs)

  • Percentage of all denials: 4.0%
  • Total annual denials: 82,354
  • Percentage of home purchase denials: 8.6%
  • Percentage of refinancing denials: 4.0%
  • Percentage of cash-out refinancing denials: 4.4%
  • Percentage of home improvement denials: 1.4%

Mortgage applicants must have sufficient funds to cover down payments and closing costs and fees, or lenders may deny their application.

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8. Employment history

  • Percentage of all denials: 1.8%
  • Total annual denials: 37,567
  • Percentage of home purchase denials: 3.9%
  • Percentage of refinancing denials: 1.4%
  • Percentage of cash-out refinancing denials: 1.6%
  • Percentage of home improvement denials: 1.0%

Mortgage lenders prefer that applicants have worked in the same field for at least two years. However, a new job is not necessarily a hurdle to securing a loan as long as it pays a steady salary.

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9. Mortgage insurance denied

  • Percentage of all denials: 0.1%
  • Total annual denials: 1,665
  • Percentage of home purchase denials: 0.2%
  • Percentage of refinancing denials: 0.1%
  • Percentage of cash-out refinancing denials: 0.0%
  • Percentage of home improvement denials: 0.0%

Mortgage insurance protects the lender and allows borrowers making a down payment of less than 20% to still qualify for a home loan. Applicants who are denied mortgage insurance that need it are also likely to be declined for their loan.

Detailed Findings & Methodology

A low debt-to-income ratio (DTI) is the number one reason that mortgage applications are denied. Over 37% of denied applications had a low DTI as a reason for denial. This rate is constant across home purchase loans, refinancing loans, and home improvement loans. The second most common reason for mortgage application denials is credit history, accounting for almost 35% of denials. Indeed, credit history was a reason that almost 45% of home improvement loans were denied. The third most common reason for mortgage application denials is collateral, which was cited in about one out of five mortgage denials. Together, these top three reasons account for the vast majority of mortgage denials.

Less common reasons for mortgage denials are an incomplete credit application, unverifiable information, insufficient cash, employment history, and mortgage insurance denied. While most applications list one denial reason, some applications list two or more.

To find the top reasons mortgage loans are denied, researchers at Construction Coverage analyzed the latest data from the Federal Financial Institutions Examination Council’s Home Mortgage Disclosure Act. The researchers ranked reasons mortgage loans are denied according to the percentage of all denials mentioning each reason. For each reason that mortgage loans are denied, researchers also calculated the total annual denials and the percentage of denials that were due to that reason for several loan types: home purchase, refinancing, cash-out refinancing, and home improvement.

Only conventional, single-family mortgage applications were considered in the analysis. In the calculation of denial rates, withdrawn and incomplete applications were excluded.


The Average Homeowner Could Reap $4,000 a Year by Refinancing

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Medicare Will Not Cover These 6 Medical Costs

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Turning 65 brings access to senior discounts galore, but there is no benefit of senior citizenship quite like Medicare.

The federal program extends subsidized health insurance primarily to folks age 65 and older. But, while Medicare coverage comes with numerous freebies, it is hardly free.

Medicare beneficiaries pay into the system via taxes withheld from their pay during their working years. Additionally, Medicare coverage is not all-inclusive: Beneficiaries must cover all or part of certain medical expenses.

If you are already on Medicare, you already know that — perhaps painfully well. But the costs associated with coverage can come as a surprise to folks who have yet to sign up for Medicare.

So, here’s a look at some of the most expensive, most common and most surprising health care costs that Medicare does not cover.

First, though, note that your out-of-pocket costs under Medicare will vary depending on your coverage type. When enrolling in Medicare, you’ll choose between two main types of Medicare:

  • Original Medicare (aka traditional Medicare), which is offered directly by the federal government’s Medicare program
  • Medicare Advantage plans (aka Medicare Part C plans), which are offered by private insurers that are approved by the Medicare program

Medicare Advantage plans must cover all the same services that Original Medicare covers. Some Medicare Advantage plans cover other expenses, too. So, as you read on, remember that some of the following costs may not apply with certain Medicare Advantage plans.

1. Care you receive outside the U.S.

Tourists on a street in Europe.
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For many, retirement is a perfect time to see the world. Just be sure you first understand what your insurance will and won’t cover when you travel.

With a few limited exceptions, Original Medicare does not pay for health care that you receive while traveling outside of the United States or its territories. Medicare prescription drug plans — which are supplemental plans that people with Original Medicare can opt to buy — don’t cover prescriptions you buy outside of the U.S., either.

How to lower your costs: If you have Original Medicare, you have the option to buy a supplemental Medicare health insurance plan, also known as a Medigap plan, from a private insurer. Depending on the specific plan, it might cover any care you receive while traveling.

Another option is to buy travel insurance that includes coverage for health care.

2. Premiums

A senior lifts his eyeglasses in surprise at a bill while working at his kitchen table with a laptop computer
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You might be surprised to learn that even federally subsidized health insurance can have premiums, but that is the case with Medicare.

For 2021, the monthly premium for Part B — the component of Medicare plans that primarily covers services you receive outside of a hospital — is $148.50 or more, depending on your income. Usually, this premium is deducted from your Social Security benefits check.

Seniors with Medicare Advantage usually pay a premium for their plan in addition to the Part B premium.

One bit of good news: A vast majority of seniors do not pay a premium for Medicare Part A, which covers inpatient hospital services.

How to lower your costs: The Part B premiums are fixed. There’s nothing you can do about them.

Again, if you have Original Medicare, you could buy a supplemental Medigap policy, which would pay for some expenses that Original Medicare does not cover.

The Part B premium generally isn’t among the costs that Medigap plans cover, though. So, if you bought a Medigap plan, you will still have to pay the Part B premium — plus the Medigap plan premium.

Still, a Medigap plan is worth the extra cost in some cases — especially if you were to face big medical bills. To learn more, see “How to Pick the Best Medicare Supplement Plan in 4 Steps.”

3. Long-term care

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Long-term care refers to medical and nonmedical services for people who are unable to perform basic daily tasks like dressing or bathing on their own. You may receive long-term care in your home, in the community or at an assisted living facility or nursing home.

Like most health insurance plans, Medicare generally does not cover long-term care costs, which are notoriously high.

The national median cost of long-term care ranges from $1,603 per month for adult day health care to $8,821 per month for a private room at a nursing home, as we report in “11 Huge Retirement Costs That Are Often Overlooked.”

How to lower your costs: Start by considering long-term care insurance. For help determining whether it would be a smart buy for you, check out Money Talks News founder Stacy Johnson’s advice in “Should I Buy Long-Term Care Insurance?”

4. Dental care

Dental patient
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Some Medicare Advantage plans may cover some dental services. It depends on the specifics of the plan.

Original Medicare does not cover most dental care, procedures or supplies — including:

  • Cleanings
  • Fillings
  • Tooth extractions
  • Dentures
  • Dental plates
  • Other dental devices

There are some exceptions. For example, Original Medicare covers certain dental services that you get while in a hospital. But aside from exceptions, seniors on Original Medicare plans are stuck paying for 100% of their dental expenses.

How to lower your costs: Check out “5 Ways to Slash Dental Care Costs.”

5. Hearing aids

Otolaryngologist putting hearing aid in woman's ear
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Some Medicare Advantage plans may pay for hearing aids, but Original Medicare doesn’t cover them. So, if you have Original Medicare, you are responsible for 100% of the cost of hearing aids themselves and exams to fit hearing aids.

Original Medicare generally does cover 80% of the Medicare-approved cost of diagnostic hearing exams — meaning those that a health care provider orders to determine whether you need medical treatment. The patient or the patient’s Medigap plan pays the other 20%, though a deductible applies.

How to lower your costs: Check out “How to Save Hundreds of Dollars on Hearing Aids.”

6. Routine vision care

Older woman in eyeglasses
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Some Medicare Advantage plans cover some vision-related expenses, but Original Medicare typically does not cover eyeglasses or contact lenses or exams for eyeglasses or contacts. So, 100% of those costs is on you.

Original Medicare does cover eye exams for patients with diabetes. It also covers tests for glaucoma and macular degeneration. It even covers artificial eyes that your doctor orders. So, a senior on Original Medicare is responsible for only 20% of such expenses, after a deductible.

How to lower your costs: Check out “Lookin’ Good! How to Get a Killer Deal on Eyeglasses.”

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.


Never Buy These 10 Things on Amazon

Shopper upset about an online purchase
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It’s hard to beat having things delivered straight to your door — even when you’re not stuck at home due to a pandemic.

Amazon has made it easy for anyone to order just about anything and have it delivered to their doorstep. But just because you can purchase something on Amazon, it doesn’t mean you should.

Following are some purchases that we don’t think you should ever make on Amazon — and our reasons why.

1. Kirkland-branded items

Costco's Kirkland Signature brand of organic creamy almond butter
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When you buy Kirkland-branded products on Amazon, you are buying from a third-party reseller, as Costco doesn’t sell its private-label products on Amazon. Costco says on its website that “ will not be liable for merchandise once it has been signed for and approved by the third party facility.”

Additionally, because Kirkland products on Amazon have gone through a third-party reseller, it’s possible that some of those products could be counterfeit or expired. A 2019 Quartz analysis also found that Kirkland products tend to be more expensive on Amazon.

If you have a Costco close to you, consider shopping there. Many items are also available to order on and can be shipped to your home.

Even if you don’t have a membership, you still can shop at warehouses if you pay with a Costco gift card and shop online if you pay a surcharge, as we detail in “7 Ways to Shop at Costco Without a Membership.”

2. Add-on items you don’t need

Amazon boxes seen piled up on a doorstep
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Amazon offers what it calls “add-on items” — items that are low-priced but only available for purchase if your order totals $25.

While many of the add-on items are great deals, you will end up spending money to save money — which is never a good idea — if you buy an add-on item you don’t need.

Stick to buying add-on items that are already on your shopping list and avoid buying ones that simply looked good at the time.

3. Trader Joe’s products

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Trader Joe’s items sold on Amazon can come with a high markup compared with buying in a store. They are sold by third-party sellers who may list damaged, expired or even counterfeit products.

A Trader Joe’s representative told Refinery 29 in 2019, “We do not authorize the reselling of our products and cannot stand behind the quality, safety or value of any Trader Joe’s product sold outside of our store.”

For more TJ’s shopping guidance, check out “15 Things I Always Buy at Trader Joe’s.”

4. Paper towels

Couple using paper towels
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It’s easy to assume that household items such as paper towels are cheaper on Amazon. However, Money Talks News managing editor Karla Bowsher has a different take:

“Every single time I’ve compared per-square-foot prices, Costco’s Kirkland paper towels have been cheaper than even Amazon’s own brands of paper towels (Presto and Solimo). That was even the case on Prime Day.”

You might also find cheaper paper towels at stores like Walmart. So, compare prices before pulling out your credit card.

5. Ikea products

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Since Ikea locations can be out of the way, it’s tempting to order their products online via Amazon. But Ikea no longer sells products online via Amazon, so everything you see on Amazon comes from third-party sellers.

Ikea offers many of its items online. You’ll pay at least $5 for shipping, but you’ll know that what you are getting is a new and genuine Ikea item.

6. Off-brand accessories for Apple devices

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Acessories for Apple devices are not cheap, so it’s tempting to hop on Amazon and search for off-brand versions. But knock-off chargers, for example, can damage your iPhone’s motherboard — which isn’t easily or cheaply repaired.

Vice explains:

“The Geniuses at the Apple won’t be able to help, either — they can’t make repairs to the motherboard. So if you don’t want to be stuck buying a new phone, you’ll have to go to an independent repair shop that offers microsoldering services. They’re the only ones who will be able to revive a mangled motherboard. Of course, it’s much easier to just avoid knock-off chargers in the first place.”

7. Almost anything else that is cheaper elsewhere

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Don’t assume that Amazon has the best price on everything. At least comparison-shop at other online retailers before clicking the “buy” button.

Amazon’s prices also fluctuate, so something may be cheaper one day and more expensive the next. But free tools like CamelCamelCamel can tell you how the price for a certain item has fluctuated over time, which gives you a sense of whether Amazon’s current price is good.

To learn about other tools like CamelCamelCamel, check out “7 Free Tools for Saving More Money on Amazon.”

8. Fresh produce

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If you order your food through Amazon Fresh — Amazon’s grocery delivery and pickup service — the quality of fresh produce can vary. You are relying on a shopper to select produce for you, so you may not get what you want.

When you go to a local store, on the other hand, you can pick out your own produce, ensuring you get the best size and quality for the price.

9. Anything with reviews you didn’t vet

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You find what seems like a great product at an even better price and all the reviews are glowing. That’s an automatic buy, right? Not necessarily. Amazon has had issues with fake reviews in the past — as CNET reported in 2019, for example — so you might not want to take Amazon reviews at face value.

Fortunately, free tools like Fakespot and ReviewMeta can help by giving you an idea of how authentic reviews of a particular item are.

10. Designer items sold by third parties

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While some designers sell their products through Amazon, many of the listings you will find are from third parties. So, it’s important to scrutinize each listing to ensure that the item you’re buying is sold by the company or an authorized reseller.

When buying through a third-party seller that is not an authorized reseller, there is no way to verify that what you’re getting is authentic.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.


7 Ways to Get Your FICO Credit Score for Free

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A good credit score is the key that unlocks the door to better loan terms, an improved chance of getting a rental apartment and even the odds of landing a job.

So, this three-digit number packs a punch. Knowing the score reveals whether you need to work to improve your credit score.

In the past, you’d have to pay to see your credit score. But that has changed. Today, you can get a free score from any of the following sources.

1. Discover

Anyone can access their credit score for free through the Discover Free Credit Scorecard program.

You don’t have to be a Discover customer to sign up for the service. It not only provides your credit score, but also will notify you of new accounts on your Experian credit report and send an alert if your Social Security number is found on the dark web.

2. Credit cards

Through the FICO Score Open Access program, FICO works with more than 200 financial institutions to provide their partners’ customers with free access to credit scores. The following credit card issuers are among those participating in the program:

  • Citi
  • Barclaycard
  • HSBC

3. Lenders

If you have student loans, an auto loan or a mortgage, you may also be able to get a free FICO score through your lender. Here are a few of the loan companies that have partnered with the FICO Score Open Access program:

  • Sallie Mae
  • Payoff
  • Vanderbilt Mortgage and Finance

4. Banks and credit unions

Dozens of banks and credit unions across the country also offer access to free FICO scores through FICO Open Access. These include both large and small institutions. Here are a few examples:

  • SunTrust
  • Bank of America
  • Affinity Federal Credit Union

Depending on the institution, free scores may only be available to customers enrolled in certain products, and the program may change.

5. Credit counselors

If you’re using the services of a credit-counseling program to improve your finances, you may be eligible for a free FICO score through that organization via the FICO Score Open Access program.

Partner organizations (see them listed below participating banks and credit cards) include companies with national or regional clients.

These are a few of the credit counseling organizations offering free FICO scores:

  • Operation Hope
  • Consumer Credit Counseling Service of Savannah

6. Experian

The credit reporting company Experian offers free access to FICO credit scores through its website

You won’t have to enter any credit card information to create a free account and see your FICO score. The company says it does not sell your information to third parties. It updates scores every 30 days.

7. Credit applications

A sometimes overlooked option for getting a free credit score is simply to ask to see it when applying for a loan.

If your credit is being pulled by a dealership, mortgage lender or bank, see if they will be willing to share your score with you. While this won’t work for an automated credit application, such as for a credit card, it is an option anytime you have contact with a company representative.

Keep in mind, though, that a major reason for checking your score is to provide you time to repair or boost your credit score before applying for a loan. If possible, try one of the options above first.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.


10 Things That Lower Your Social Security Check

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You’ve worked hard for Social Security retirement benefits, and you probably want every dollar you’re entitled to receive.

Unfortunately, the sad reality is that there are reasons why your Social Security payments could decrease. Many are in your control, but some are not.

Keep reading to find out how your monthly check could get dinged for everything from poor timing on your part to poor planning on the government’s end.

1. Failing to catch incorrect wage information

A young black man gets angry at his laptop computer while working at his office desk
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Social Security benefits are based on your lifetime earnings record. If the government doesn’t have the correct wage information for you, the result could be a smaller Social Security check.

To make sure the government has the right info on your wages, sign up for your own account at the Social Security Administration (SSA) website. Among other things, you can use the account to review your earnings history.

For more on Social Security accounts and earnings histories, check out “9 Social Security Terms Everyone Should Know.”

2. Receiving some types of pensions

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Some workers may not be eligible for Social Security as a result of the nature of their employment. As we report in “6 Types of People Who Can’t Count on Social Security“:

“Not every worker pays into the Social Security system. In certain states, public employees are not covered by Social Security due to receiving a pension. They can include employees of state and local government agencies, including school systems, colleges and universities. In some states, they may also include police officers and firefighters.”

3. Missing the Medicare application window

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While the full retirement age for Social Security has been slowly changing, the age for Medicare eligibility has remained the same. That means that even if you aren’t applying for Social Security until age 66 or later, you need to apply for Medicare at age 65.

Failure to do so could result in late enrollment penalties. For instance, Medicare Part B premiums are 10% higher for every 12-month period a person fails to sign up for Medicare coverage when they are eligible. Because Medicare payments generally are taken from your Social Security benefit, this could lower your Social Security benefit each month.

4. Rising Medicare premiums

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Even if you apply for Medicare on time, you could find that your Social Security payments take a hit from rising Medicare premiums. That’s because Medicare premiums generally are deducted from Social Security payments.

In 2012, people paid $99.90 per month for Medicare Part B, which covers outpatient services. For 2020, that premium is $144.60 for most people, with high earners paying more — between $202.40 and $491.60, depending on their income.

5. Claiming retirement benefits early

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Claiming your Social Security benefits earlier than your full retirement age (an age set by the SSA) will result in a smaller check going forward. While the government is happy to start sending you monthly checks at age 62, it is going to reduce your monthly payment — possibly by up to one-third or more.

The reduction is permanent, so don’t expect to see a big bump in benefits once you reach your full retirement age.

6. Getting your full retirement age wrong

senior man
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You may think you’re doing everything right by filing for Social Security benefits at age 65, but filing at that age will reduce your payments as well. Although 65 was long considered the full retirement age, the government has been slowly moving the goalposts.

If you were born between 1943 and 1954, your full retirement age is 66. The number increases by two months each year (for example, 66 and 6 months for those born in 1957) until reaching a full retirement age of 67 for those born in or after 1960.

7. Earning too much income as an early retiree

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If you decide to go the early retirement route, you should think twice about continuing to work while receiving Social Security benefits. In 2021, if you are younger than your full retirement age but old enough to have started taking Social Security, you can only earn up to $18,960 before a portion of your benefits is withheld. In that situation, the government reduces monthly benefits by $1 for every $2 earned above that amount.

If you’ll hit your full retirement age this year, you can earn up to $50,520 in the months leading up to your birthday. Exceeding that amount means the Social Security Administration will take $1 for every $3 you earn over the limit.

Fortunately, these aren’t permanent reductions in your benefits. And, starting with the month you reach full retirement age, there is no limit on how much you can earn. In addition, any benefits withheld because of your earnings will be added back to your benefits each month starting at your full retirement age.

8. Owing taxes or child support

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The government can also take money from Social Security to pay for back taxes or child support.

Garnishment for taxes is limited to 15% of your monthly benefits. However, if you owe child support, get ready for the government to take as much as 65% of your benefits to pay for that obligation.

9. Defaulting on federal student loans

Student loans

Thanks to a U.S. Treasury rule, debt collectors for credit cards and other consumer accounts can’t garnish your Social Security benefits. However, that protection doesn’t extend to debts owed to the federal government. If you have defaulted on federal student loans for yourself or loans you took out for a child, some of your Social Security benefits can be withheld to pay off the debt.

10. Outliving the Social Security trust fund

A senior man opens an empty wallet
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Your Social Security benefits might take a hit if you outlive the program’s trust fund. According to the 2020 Trustees Report, the Old-Age and Survivors Insurance Trust Fund — which pays out Social Security retirement benefits — will run out of cash in 2034.

The retirement of the largest generation in U.S. history, the baby boom generation, is challenging the system as the cost of those workers’ benefits grows faster than the working-age population paying into the system.

After 2034, the program will only have enough income from employed workers to pay 76% of Social Security benefits, the report notes.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.


5 Things You Think Could Hurt Your Credit Score — but Don’t

Surprised senior woman holding credit card
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There are plenty of things that people don’t realize can damage their credit score, from reserving a rental car to canceling a credit card.

At the same time, there are some things that people commonly believe can hurt their credit score — but that actually have no impact on scores.

Following are a few examples of the more persistent myths about what can affect your credit score.

1. Checking your credit report

As we noted in “7 Credit Score Myths: Fact vs. Fiction,” checking your own credit report doesn’t hurt your credit score. It’s actually a good idea to look at your report regularly, to monitor for errors and signs of identity theft.

Under federal law, you are entitled to one free report from each of the three major nationwide credit reporting companies — Equifax, Experian and TransUnion — every 12 months.

Order them through the official website Or, for detailed directions, see “How to Get Your Free Credit Report in 6 Easy Steps.”

2. Unpaid library fines

In the past, it might have been possible for unpaid library fines to hurt your credit score. But credit reporting companies no longer collect information reported through municipalities or municipal court records, according to Consumer Reports.

This is true even if the library sends your unpaid fine to a collection agency. Rod Griffin, director of public education at Experian, explains to Consumer Reports:

“A library may work with a collection agency, but municipalities have relationships with collection agencies that prohibit them by contract from reporting. To my knowledge there are no exceptions. We’ve removed all of that information.”

3. Unpaid parking tickets

Like unpaid library fines, unpaid parking tickets are part of municipal records — and, again, credit-reporting companies no longer collect this information.

4. Civil judgments

A civil judgment is effectively a court-ordered debt resulting from a civil lawsuit.

In the past, civil judgments could have appeared in credit reports and thus negatively affected credit scores. But in July 2017, the three major credit-reporting companies changed their standards for the collection of certain court-related records in such a way that civil judgments are generally excluded from credit reports.

5. Recent medical debts

Back in 2016, the three major credit-reporting companies announced that medical debts would not appear on credit reports until after a 180-day “waiting period” had passed.

So, if your insurance company hasn’t dealt with all the claims related to last month’s surgery, don’t worry: Those unpaid bills won’t show up just yet.

Obviously, it’s important to take care of medical debts as promptly as possible. If you’re having trouble paying, see “Successfully Negotiate Your Medical Bills in 7 Simple Steps.”

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.


17 Ways to Dig Yourself Out of a Financial Hole

 At age 47 I was jobless, emotionally broken after an abusive marriage, and running through savings to keep a divorce attorney in my corner. Grieving my mother’s death and terrified that my disabled adult daughter and I would end up homeless, I couldn’t see any kind of future for myself.

Within five years I had earned a university degree on scholarship, found a new career as a personal finance writer, paid off divorce-related debt, and started rebuilding my cash reserves. In the next four years, I would open a Roth IRA and a SEP-IRA. I never was homeless, and I’ve never carried any debt since then.

Dig out of a financial hole

It’s possible to dig yourself out of a financial hole if you’re willing to do the work. But you can’t stop there. It’s absolutely crucial to establish smart money habits in order to build your financial future — and to keep from winding up back in the hole.

Maybe you’ve stalled financially because you never learned how to manage money. Or maybe you’re mired in debt due to circumstances beyond your control, such as job loss or serious illness.

It doesn’t matter how you got there. What matters is that you get yourself out. Use these basic tactics to get a handle on your finances.

The best time to have started getting your finances together was 20 years ago. The second-best time is right now.

If you’re in debt, quit adding to it. Easier said than done, I know: My divorce attorney charged by the minute, for heaven’s sake, yet I couldn’t do without representation.

What could I do without? Almost everything else. I’d always been fairly thrifty, so it wasn’t as hard for me as it might be for others. However, I hadn’t done such a deep dive into frugality since my single-mom days, when I did all the laundry (including diapers) on a scrub-board in the sink. Not everyone can (or wants to) go to the lengths I did, such as living mostly on dry beans and homemade soups, using coupon/rebate deals to stretch my budget, buying almost no new clothing for years, recycling cans picked up on walks around the neighborhood, looking for any possible side gig (babysitting, participating in medical studies, shoveling snow) to add a few dollars to debt payoff.

If you find it tough sledding at first, welcome to the club of being human. Then think about your spending in this way: Adding more debt doesn’t just mean paying extra interest, but also something called “opportunity cost.” Every dollar you spend is a dollar that can’t work for you any other way.

While you’re still in the hole, this means dollars that can’t help you dig your way back out. And once you’re debt-free? It means dollars that can’t help you meet new financial goals: retirement savings, paying off your mortgage, a trip to your family reunion, or whatever will make your life better.

To be clear: Your tolerance for frugal hacks is as unique as you are. I can’t force you to wash out Ziploc bags or to shovel snow for that matter. What I can do is urge you to adopt the main attitude that helped get me through those five years — something I call the Frugal Filter:

  • Do I really need this whatever-it-is?
  • Is there something I already have that might work?
  • If I absolutely must get this item, is there a way to do so for free (borrowing it from a friend, using Freecycle)? And if not, how can I make it as affordable as possible? (Some examples: thrift store, yard sale, cashing in rewards points for gift cards to pay for it.)

Start by adding up all your income sources. Next, list all your obligations, including but not limited to mortgage, minimum credit card payments, utilities, insurance car note, and legally mandated payments (e.g. alimony or child support).

Subtract the second number from the first. If your monthly expenses are lower than your current income, that’s a good sign. But keep in mind that these are your anticipated expenses. You’ll also need money for irregular expenses such as home repair or a replacement vehicle, as well as for vacations, gift-giving, and other things that make our lives richer.

Tracking spending means you’ll know where you stand. The next thing to do is look for the best ways to use your money.

A lot of people swear by the 50/30/20 plan: Spend no more than half your after-tax income on needs, 30% on things you want, and 20% on savings and debt repayment.

Arrange your current spending into those categories. If you’re spending more than you should in any given department, find ways to bring costs down. For example, you might be able to refinance the mortgage and cut grocery costs (more on that in a minute) to get your “needs” spending under 50% of your take-home pay.

The categories can be flexible, though. For example, if debt repayment is more important to you right now than going out to eat, you could use some of your “wants” dollars toward paying down your credit cards.

Speaking of which, you also need to…

Earlier you added up your basic monthly expenses. But what’s the total amount owed? A lot of people honestly don’t know, because they never added it up. Full disclosure: I still don’t know how much my divorce cost, because I don’t want to know. (Hint: It was a lot.)

Don’t be like me. Add up your credit card balances while seated, because the total might make you feel a little faint (especially when you consider how much interest you’re paying). Let that Big Number inspire you to get real about paying it off.

First: If you’re making extra payments on your current mortgage, stop for now and put that money against your credit card balance. Talk with a mortgage specialist about the possibility of refinancing; your loan would be longer, but the money you’d save each month can be used against higher-interest debt.

Next, call your credit card issuers and ask for lower interest rates. There’s no guarantee you’ll get them, but it can’t hurt to ask.

Some people swear by the “debt snowball.” You pay minimum payments on all your credit cards except for the one with the lowest balance (but not necessarily the lowest interest rate); for that one, make the biggest payment you can. Once it’s paid off, you attack the card with the next-lowest balance, and so on.

The theory is that paying one card off quickly encourages you to keep going. Then again, you’re paying more interest on the other cards. That’s why some suggest it’s better to pay off the cards with the highest interest rates first.

Do what works best for you. If you need that encouragement, go with the debt snowball.

Another option is a 0% balance transfer credit card: moving all your debt onto a new card that offers 0% interest for 12 to 18 months. You’ll pay a balance transfer fee, typically about 3% of the total debt. However, if you pay the card in full during the introductory period, you won’t owe any interest.

This could save you a ton of money. (Wish I’d known about it back when I was paying off my divorce debt.) However, you shouldn’t get a 0% balance transfer card unless you have an ironclad plan to pay it off. Otherwise, you’ll wind up paying a ton of interest anyway, in addition to the transfer fee.

Another credit card debt tactic is a personal loan, that is if you can get a decent rate. You’d need an ironclad payoff plan for this option, too. And no matter how you pay off your debt, you absolutely need a plan to keep you from running up the credit cards all over again.

Our consumerist culture tells us that if we want something, then we should have it. This is why some people shop for fun, I guess, even if they don’t technically need anything.

“Need” is the operative word. Food, shelter, basic clothing, and utilities are needs. Everything else is a parade of wants.

There’s nothing wrong with wanting things. But there’s a whole lot that’s wrong with buying things we can’t actually afford. So if you shop for fun, stop doing that. Stop it right now. Un-bookmark your favorite shopping sites. Avoid brick-and-mortar stores.

Delete your stored credit cards, and remember that “one-click” shopping is of the devil.

Sound harsh? Reframe that thought right now: This is prudence, not punishment. It’s part of your plan to meet financial goals, including getting out of debt.

Since we get a nice dopamine rush whenever we find that Really Good Deal, our brain will try to trick you into “just looking.” Look for other ways to feel good, whether that’s The New York Times crossword puzzle or bingeing your favorite shows on an affordable streaming service.

Find a friend who’s also trying to get out of the financial hole, and the two of you can support each other. (“I just saw the most amazing price on cheese straighteners and I really want to get one! Talk me out of it!”)

Here’s what worked for me: Thinking about what I did have, rather than obsessing about what I didn’t. Sounds corny, but hear me out. While living on about $1,000 a month (and still helping my daughter), I made an actual list of my advantages: decent health, a university scholarship, a library card, a part-time job, a 99-cent radio from the St. Vincent de Paul thrift shop, and the absolute conviction that I would one day be back in the black.

The only person who can help me is me,” I said out loud, more than once, developing a stoic pride in — once more! — making do on nothing. I was dirt-poor but I was not dirt. I had a plan. (I also still had the scrub-board, and even used it sometimes.)

Sure, sometimes I still wanted stuff I couldn’t afford. Most of the time, my attitude of gratitude helped me power through. After all, I had things that were important to me and I knew if I just kept working at it, my debt would be gone. It wasn’t easy. But as my dad used to say, “That’s why they call it ‘work.’ If it were fun, they’d call it ‘fun.’”

Be an adult. Own your mistakes or your misfortunes. And do the work.

Part of the reason I went broke was the financial support I gave to my daughter, whose disability benefit was minuscule. Ultimately she got married, found a job she could do from home, became self-sufficient, and moved to a different city. I kept giving, though: treating them to multiple meals out when I visited, sending numerous “just because” gift cards throughout the year, forgiving them a decent-sized loan (as a wedding gift).

Maybe you do this sort of thing, too. Keeping your grown kids on the family phone plan. Paying for their health insurance. Covering some (or all) of their rent. A financial planner told me some clients routinely buy extra stuff at Costco to bribe their children to drop by.

Perhaps your own kids don’t have to drop by because they’re already there: boomerang offspring who came back due to job issues, or who live with you so they can save up for their own homes. Or maybe your kids never launched in the first place — and why should they? Mom and Dad have a comfy home, a well-stocked fridge, and all the streaming platforms.

It’s natural to want to give our children the best. But here’s the thing: You cannot finance retirement. Your kids have many decades to build their financial lives. You, on the other hand, have a finite number of years to make the right money choices.

If you are in debt and/or have an underfunded retirement, do not set yourself on fire to keep someone else warm. Doing so could leave you out in the cold, financially speaking.

To be clear: I would have helped my daughter forever if necessary, but I’m very glad it wasn’t. Those dollars wound up going to retirement savings, my emergency fund (more on that below), and some cash reserves. I refuse to put my daughter in the position of having to support me if I run out of money in retirement. Don’t put that burden on your kids, either.

This may sound counterintuitive. Why save for retirement while I still have balances on 18% credit cards?

Because you can’t finance retirement, remember?

Retirement isn’t a question of simple-interest savings. It’s about growth, and growth takes time. The years you spend not contributing will be felt keenly when you retire — especially if you, like me, got something of a late start.

As noted, the 20% part of the 50/30/20 budget includes saving for the future. Ideally, you’ve already got some retirement savings from your current (or recent) job, and it will continue to grow as you figure things out. Resist the temptation to raid it early; the longer it stays there, the better your chances for its lasting throughout your retirement.

For some people, a 10% (or higher) contribution to their house of worship is absolute. If that’s you, know that it still may be possible to keep tithing at that level — but the money has to come from somewhere else in your budget. As noted above, you can find other ways to cut in order to keep the tithes coming.

If need be, talk to your religious leader about temporarily cutting back or even pausing your contribution. You could always promise to restart and to make up for the lost time.

Even when things were pretty dire for me I gave $20 a month to my church. Sure, that money could have gone toward my credit card debt. But giving to others got me out of my own head. That $240 a year reminded me that not only were my basics covered, I could even afford a little help for others who needed it. Never underestimate the satisfaction and peace this knowledge can bring.

I kept a certain amount of liquid cash while paying off the divorce-related debt. It was tempting to throw every dime I had toward the balance. But I also wanted cash on hand so I could pay for utilities, car insurance, and food in case my job went away.

Some money experts suggest having a year’s worth of expenses banked. Others say that amount discourages people from even trying to save. Instead, they suggest one to three months’ worth as an initial goal, with additional contributions when possible.

I’m in the latter camp. Rather than pressuring yourself to come up with tens of thousands of dollars, aim for a single month’s worth. Go back to that household budget and look for places to cut. Canceling a subscription box you’ve stopped being thrilled by, skipping that automobile detailing you normally get every couple of months, dropping the gym membership that you haven’t been using anyway — these and other budget trims can help plump up the EF faster than you would have thought possible.

Food is the budget category with the most flexibility. You probably can’t negotiate your car payment or your son’s college tuition, but you can cut down on meals outside the home and be choosier about shopping.

Accustomed to stores like Whole Foods and Sprouts? You might be surprised by the organic options available at regular grocers and even discount markets. Take an hour a week to browse different stores, and plan future shopping accordingly.

If you eat most of your meals away from home, gradually change your ways. Buy good-quality coffee and breakfast ingredients so you aren’t tempted to grab takeout every morning. Batch-cook and freeze breakfast sandwiches on weekends, or buy premade ones from a warehouse club (still more affordable than breakfast out).

Carrying your lunch just one day a week could likely save you $10 to $20, or $520 to $1,040 a year. Over time, work your way up to brown-bagging it at least three times a week, and put the thousands of dollars you save toward some other financial goal. In the four years it took to get my degree, I never once bought a single meal at school. An occasional snack or drink, maybe, but I carried all my meals. Again, I’m hardcore and looked at lunch as the fuel I needed to get through the day. Your mileage may vary. Just make sure it’s something you actually like to eat — and again, start slowly so that you don’t set yourself up to fail.

Dinners can be tough since most people arrive home as tired as they are hungry. A little weekend planning or some monthly batch cooking — especially with an Instant Pot — can change the way you eat, and will certainly change how much you spend.

Don’t know how to cook much, or at all? Do an online search for “easy affordable recipes with [your favorite ingredients].” Remember, you didn’t know how to use a smartphone until you made it your business to learn. The same is true of cooking.

It is worth it to shop around for something like car insurance.

Ask me how I know. When I arrived in Seattle, fresh out of my horrible marriage, I used the insurance agent a relative recommended. And wound up paying about $700 more a year than I needed to, for five years. Still shake my head sometimes about that $3,500 worth of opportunity cost, but I didn’t know what I didn’t know.

Look for better deals on Internet, phone, and cable service, too. This can save you some serious bucks, especially if you bundle services.

Note: Many people have ditched cable entirely in favor of streaming services. If you haven’t investigated these lately, you’ll be surprised by the options — and the potential savings.

All of it. You won’t get out of the financial hole overnight, so it’s essential to note individual steps along the way. For some, a spreadsheet makes things easier.

Or use my daughter’s method, which is to list debts on a whiteboard. Each time you make a payment, you get to amend the total to reflect the change — and oh, my, how satisfying it is to literally wipe the debt off the board.

Once you’re back in the black, keep those savvy money moves in place. Spend less than you earn. Contribute to retirement regularly. Build an emergency fund to guard against the unexpected.


Study: Credit Cards Hijack Your Brain, Leading to More Spending

Excited woman with credit card
Photo by Roman Samborskyi /

Credit cards get you to spend by creating a “purchase craving” in your brain, according to a new study out of the MIT Sloan School of Management.

Researchers say the study is the first to show evidence that a consumer’s choice of payment method can trigger different types of brain activation.

In the words of two of the study authors — Drazen Prelec of MIT and Sachin Banker of the University of Utah — when you use a credit card instead of cash, it serves to “step on the gas,” driving more spending “by putting costs out-of-mind regardless of the price of the product.”

In a press announcement from the MIT Sloan School of Management, Prelec says:

“Prior studies have shown that credit cards have a different effect on consumers than cash and are often blamed for overspending and household debt. But it is unclear from standard research tools whether credit cards ‘release the brakes’ by removing the pain of payment or ‘step on the gas’ by creating a craving to spend.”

The study found that paying with a credit card sensitizes reward networks in the brain. The process involves the striatum, a dopaminergic reward center that drugs like cocaine and amphetamines exploit.

Once these reward networks are sensitized, credit card use drives an increase in purchases.

As Prelec says:

“The reward networks in the brain that are activated by all kinds of rewards are activated by a credit card purchase. The act of putting that plastic credit card in your hand is associated with enjoyable purchases.”

The study also found that different types of cards — and the way they are used — elicit different types of spending. So, a card used at a restaurant or during a vacation spurs a different appetite for spending than a card used to fill up your gas tank, for example.

Looking for a new credit card — hopefully one that will not make you spend more? Stop by Money Talks News’ Solutions Center and search for the perfect credit card for you.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.