The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Ask your property manager to report utilities or utilize a third-party reporting service to have your utility bill payments, such as electricity and water, reflected on your credit report.
Most landlords and utility companies don’t report your utility payments to the credit bureaus, so they don’t typically impact your credit. However, if your payments are in default or delinquent, the debt will likely be reported to one or all of the three major credit bureaus and negatively affect your credit.
While credit accounts, like credit cards, automatically appear on your credit report, utilities such as water and gas are becoming more easy to report.
You can now add the following utility bills to your credit report:
Rent
Electricity
Water
Gas
Phone and internet
Including your utilities and rent in your credit report can be an effective strategy for building credit if you consistently make on-time payments. In this guide, you’ll learn how to add utilities to your credit report and alternative ways to build your credit.
Table of contents:
Ask your property manager to report payments
Ask your leasing company or property manager about their ability to report utilities to credit bureaus. Some property managers utilize rent reporting services that report on rent payments, utility payments or both.
Some property managers will automatically enroll their renters in a reporting service when they sign their leases. Alternatively, it might be optional, and the renter may request to be enrolled in the service. Depending on the type of service and whether payments require verification, they may be free of charge or require an enrollment fee for renters.
Utilize a third-party reporting service
Alternatively, you can independently use a rent-reporting service. If your property manager doesn’t utilize such a service, there are tenant-only rent-reporting services you can enroll in.
To report your payments, you’ll likely need verification from your property manager. There may be additional fees associated with using a third-party service. You’ll need to pay an additional fee to utilize the service. Options for alternative credit reporting services include Experian Boost® and ExtraCredit from Credit.com®. These services allow users to provide credit bureaus with additional financial information by linking their bank accounts to their credit profile.
When adding your utilities to your credit report, consider your payment habits. If you can’t consistently pay your utility bills on time, using a reporting service may not be the best option for building your credit.
How can utility bills hurt your credit score?
If you use a reporting service and then fail to pay your utility payments on time, your payment history, which affects 35 percent of your FICO® score, will be negatively affected.
Additionally, if you miss enough payments on any utility account, the company can consider it delinquent and send it to collections.
The collection account will then become part of your credit file and will likely negatively impact your credit health. Collections and missed payments are considered derogatory marks and can stay on your credit report for up to seven years.
While paying the collection debt won’t remove the derogatory mark from your credit file early, we recommend settling the debt as soon as possible to avoid accumulating additional fees.
Alternative ways to build your credit
There are alternative routes to consider aside from including your utility bills in your report to build credit. Below are a few recommendations we suggest for building credit.
Credit builder loans
Credit builder loans allow borrowers to build a credit history or improve their credit score. With a credit builder loan, your payments go toward a savings account until the loan term ends. These payments are typically reported to the credit bureaus, demonstrating that you’re a reliable borrower and improving your credit and history.
When selecting a credit builder loan, it’s crucial to choose a realistic loan amount that you know you’ll be able to afford. You must complete the loan payments on time to see a positive impact on your credit history and to avoid penalties.
Credit cards
Credit cards are another convenient method to begin building credit, as payments are automatically reported to the credit bureaus. If you have bad or little credit history, consider applying for a secured credit card.
Unlike traditional credit cards, a secured credit card is backed by a cash deposit, which acts as collateral in case of a missed payment. You can improve your credit by using the card responsibly, maintaining low credit utilization and making timely payments.
Add a cosigner
If you’re having difficulty getting approved for a credit card due to a lack of credit history, consider adding a cosigner to your credit card application. A cosigner is considered equally responsible for any card utilization and accrued debt.
Having a cosigner signals lower risk to the lender, increasing the chance of approval. However, any missed payments will negatively impact both your credit and your cosigner’s.
FAQ
Below are commonly asked questions about how utility bills affect credit scores and are reported to credit bureaus.
Can I add utilities to Equifax or Experian?
Typically, utility bills aren’t automatically reported to Equifax® or Experian® by your utility provider or property manager. However, you may utilize a reporting service through your property manager or independently to add them to your credit history. Doing so can demonstrate positive financial behavior and potentially improve your credit.
How do I add rent and bills to my credit report?
You can include your rent and bills in your credit report through a reporting service. These services are either tenant-only or managed by property managers. Check to see if your property manager utilizes a reporting service. If they do, ask to be added to the service to report your rent and utility payments to the credit bureaus.
If they do not use one, consider using a tenant-only reporting service. Keep in mind that there is likely a fee associated with using the service. Lexington Law Firm offers assistance in repairing your credit, providing services ranging from obtaining a free credit assessment to addressing errors on your credit reports. Take the first step toward improving your credit by signing up today.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
The Bank of England has kept interest rates at a 16-year high for at least another month, as governor Andrew Bailey said Threadneedle Street would not bow to political pressure to cut rates.
The BoE’s Monetary Policy Committee (MPC), announced its latest decision at midday on Thursday, opting to keep the current rate of 5.25 per cent – set last August – in a blow to those hoping for the first reduction since 2020.
High interest rates have saddled homeowners with soaring mortgage repayment costs, and are used as a tool to help bring down inflation.
While the rate of Consumer Prices Index (CPI) inflation fell to 3.2 per cent in March, experts had suggested that two key economic indicators – pay growth and services sector inflation – have remained more stubborn.
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In positive news, the Bank improved its forecasts on Thursday to predict that CPI inflation would fall to 2.25 per cent next year and to 1.5 per cent in 2026, and said it expected the UK economy to grow by 0.5 per cent this year and 1 per cent in 2025 – slightly higher than previous predictions.
Key Points
Breaking: Bank of England holds interest rates at 5.25%
Governor Andrew Bailey says Bank will not bow to political pressure
Inflation will fall to 1.5 per cent within two years, Bank forecasts
Pay growth and services sector inflation remain stubborn
Voices: Improving the economy may limit a Tory wipeout, but it won’t save Rishi Sunak
16:02 , Andy Gregory
We’re pausing updates on the liveblog for this evening, thanks for following here.
You can read our latest reporting on the Bank of England’s announcement by clicking here, or else keep scrolling to catch up on the day’s events as we reported them.
Chancellor Jeremy Hunt said the Bank of England’s decision on rates was “finely balanced”.
Asked if he had been hoping rates would be cut ahead of the general election, Mr Hunt said: “I welcome the fact the Bank of England’s obviously thought about this very hard, they take this decision independently.
“And I would much rather that they waited until they’re absolutely sure inflation is on a downward trajectory than rush into a decision that they had to reverse at a later stage.
“What we want is sustainably low interest rates, and I think what’s encouraging is that the Bank of England governor, for the first time, has expressed real optimism that we’re on that path.”
Bank of England will not wait for US Federal Reserve to cut rates, says Bailey
14:59 , Andy Gregory
The Bank of England will not wait for the US Federal Reserve to move on interest rates before it decides to cut rates in the UK.
Andrew Bailey, governor of the Bank of England, said: “There is no law that the Fed has to go first. Moreover, we have a remit and a target that is related to domestic inflation in the UK.”
He added that the Bank will always “take the rest of the world into consideration”, but only in regard to how it affects domestic inflation.
“But there’s no law which says we can only move after the Fed moves. That is not something that ever gets discussed in the MPC.”
Bank of England ‘getting very close’ to first rate cut since 2020, says economist
14:41 , Andy Gregory
James Smith, ING developed markets economist, said: “The Bank of England is getting very close to its first rate cut. That much is clear from the latest policy statement which, while keeping rates on hold at 5.25%, has a distinctly more optimistic flair.
“It echoes recent comments from governor Andrew Bailey, who has been hammering home the message that the UK’s inflation outlook is quite different to the US.
“We’re still leaning slightly more towards an August start date for rate cuts, though it’s a close call. What isn’t in doubt is that the Bank is comfortable with moving ahead of the US Federal Reserve.”
Bank of England will not bow to political pressure to cut rates, says Bailey
14:22 , Andy Gregory
The Bank of England will not bow to increased pressure from politicians to cut interest rates, its governor has said.
Andrew Bailey said: “We are an independent central bank. We have a very clear remit. It’s our duty to exercise our duty at all times. When we are sitting in a room as the Monetary Policy Committee, we never discuss politics … It isn’t a consideration in that respect.”
It comes amid a period of heightened pressure from some MPs on the Bank to move faster on rate cuts in the run-up to a general election later this year.
When pressed on whether an upcoming election could influence how the Bank makes its decisions on rates, Mr Bailey added: “We will take the decisions at each meeting which are consistent with our remit. That’s our job and we will do our job.”
Inflation to fall before rising slightly before end of year, says Bank
14:04 , Andy Gregory
The Bank of England has predicted that lower oil and gas prices mean that inflation is likely to drop to around 2 per cent in the coming months before rising slightly before the end of the year.
Inflation could fall noticeably below target without rate cuts, says Bailey
13:52 , Andy Gregory
Here are more comments from Bank of England governor Andrew Bailey.
He told reporter: “It’s likely that we will need to cut bank rates over the coming quarters and make monetary policy somewhat less restrictive over the forecast period, possibly more so than currently priced into market rates.
“This will be consistent with ensuring that inflation does not fall noticeably below target at the end point of the forecast.”
Pound falls against the dollar
13:35 , Andy Gregory
The pound fell against the US dollar and euro after the Bank of England signalled growing support for an interest rate cut among policymakers.
Sterling fell 0.3 per cent to $1.246 and was 0.2 per cent lower at €1.161.
Financial markets more pessimistic than Bank of England, Bailey indicates
13:17 , Andy Gregory
Andrew Bailey has indicated that the financial markets are more pessimistic about the path for lowering interest rates than the Bank of England.
“With the progress we’ve made, to make sure inflation stays around the target, it is likely that we’ll need to cut bank rates in the coming quarters, possibly more so than is currently priced into markets,” he said.
The Bank governor said the committee has “no preconceptions” about how far and how fast it can lower interest rates, and it make a judgment based on the economic data it sees before each meeting.
Visualised: How have interest rates changed over time?
12:58 , Andy Gregory
The below graph shows how interest rates have changed over the past decade:
Bank has not ruled out cutting rates next month, says governor
12:49 , Andy Gregory
The Bank of England has not ruled out cutting rates at its next Monetary Policy Committee decision.
Andrew Bailey, governor of the Bank, said that upcoming economic data would be key to helping the MPC decide whether to cut rates on 20 June.
He said: “Before our next meeting in June, we will have two full sets of data – for inflation, activity and the labour market – that will help us in making that judgement afresh.
“But, let me be clear, a change in bank rate in June is neither ruled out nor a fait accompli.”
Full report: Bank of England holds base rate for ninth consecutive month
12:20 , Andy Gregory
The Bank of England has kept interest rates on hold at 5.25 per cent for the ninth month in a row.
My colleague Jane Dalton has more in this report:
Bank of England holds interest rates at 5.25% despite hopes of cut
Inflation will fall to 1.5 per cent within two years, Bank of England forecasts
12:14 , Andy Gregory
The Bank of England has projected that inflation will fall more than previously thought over the coming years – dropping below its 2 per cent target to 1.5 per cent in 2026.
Headline CPI inflation is expected to fall below the Bank’s 2 per cent target between April and June, but rise again to 2.6 per cent in the second half of this year as the impact of recent drops in energy prices fades.
In the longer term, the Bank dropped its projections for CPI inflation to 2.25 per cent for 2025 and 1.5 per cent in 2026, down 0.25 and 0.5 percentage points respectively on the Bank’s February estimates.
The projection came in the Bank’s May Monetary Policy Committee (MPC) report, which signalled optimism from recent falls in retail inflation. The report said persistently high interest rates had helped push headline inflation down.
Bailey signals optimism that Bank could soon cut rates
12:10 , Andy Gregory
Governor Andrew Bailey has signalled optimism that the Bank of England could soon cut rates.
The Bank’s Monetary Policy Committee voted by a majority of seven to two to keep rates unchanged – with members Dave Ramsden and Swati Dhingra voting to cut rates by 0.25 percentage points.
Mr Bailey said: “We’ve had encouraging news on inflation and we think it will fall close to our 2 per cent target in the next couple of months.
“We need to see more evidence that inflation will stay low before we can cut interest rates. I’m optimistic that things are moving in the right direction.”
The MPC indicated it is still looking for more progress on factors including services inflation and wage growth, which have remained persistently high at about 6 per cent, before cutting rates.
Bank of England expects economy to grow by 0.5% this year
12:08 , Andy Gregory
The Bank of England said it expects the UK economy to grow by 0.5 per cent this year and 1 per cent in 2025 – slightly higher than previous predictions.
Breaking: Bank of England holds rates at 5.25 per cent
12:01 , Andy Gregory
The Bank of England has opted to keep interest rates at a 16-year high of 5.25 per cent – confounding hopes of the first base rate cut since 2020.
We’ll bring you more updates here as we get them.
BoE chief unlikely to give clear signal on when interest rate cut could come, economist predicts
11:08 , Andy Gregory
Bank of England chief Andrew Bailey is unlikely to give a clear signal on exactly when the bank’s first interest rate cut since 2020 might come – but focus will be on what guidance he does give and if more than one member of the Bank’s Monetary Policy Committee votes for a cut this time around, according to Pimco economist Peder Beck-Friis.
“We know from history that policy meetings may create some volatility,” Mr Beck-Friis said.
“What is also interesting is that we have come from a few years where monetary policy has been very correlated globally … but as the pandemic shocks fade I think it is natural that we see some divergence,” he added – pointing to how Sweden and Switzerland had already cut rates while the US may need to wait longer.
Pound falls against US dollar
09:23 , Andy Gregory
The pound edged lower against the US dollar this morning ahead of the Bank of England’s policy meeting, with the central bank expected to hold rates steady but flag when it intends to lower the cost of borrowing.
According to LSEG data, money markets are pricing in an almost 95 per cent chance that the Bank will hold its benchmark interest rate at 5.25 per cent – the highest since 2008. But investors will be watching for signs of when the first interest rate cut in four years will come as inflation falls.
Markets now see a 56 per cent chance of such move in June – when the European Central Bank has already signalled it will reduce borrowing costs, and a greater chance of 72 per cent of a BoE rate cut in August.
London stocks waver ahead of Bank of England announcement
08:40 , Andy Gregory
London stocks wavered this morning as investors turned cautious ahead of the Bank of England’s interest rate decision – while energy shares gave a boost to the benchmark index.
As of 7:17am, the blue-chip FTSE 100 edged up 0.1 per cent at 8,357.85, hovering below its record high of 8,365.28 points. The mid-cap FTSE 250 edged lower by 0.1 per cent.
The pound slipped against the US dollar and the UK’s benchmark 10-year gilt yield was at 4.155 per cent ahead of the decision.
Investors avoided big bets ahead of Threadneedle Street’s interest rate decision due at 11am, where the central bank is widely expected to keep borrowing costs steady.
Bank of England to shed more light on its predictions for the economy today
06:00 , Maryam Zakir-Hussain
The Bank of England will shed more light on its predictions for the economy and the path of interest rates when it publishes the latest Monetary Policy Report alongside the rates decision today.
Meanwhile, the central bank in the US, the Federal Reserve, said on Wednesday it was keeping its key interest rate at the same level and noted a “lack of further progress” towards lowering inflation.
It means rates could stay higher for longer until there is firmer evidence of price rises easing, its chairman Jerome Powell suggested.
04:00 , Maryam Zakir-Hussain
Andrew Goodwin, chief UK economist for Oxford Economics, said: “The data published in mid-April for services inflation and private sector regular pay growth has likely extinguished any remaining hopes of a move in May.
“Though both measures have continued to fall, progress has been slightly slower than the MPC anticipated, and they are currently running marginally higher than the forecasts published in February’s Monetary Policy Report.”
He said it is likely to be a “close call” on whether the MPC decides to cut rates in June or August.
02:00 , Maryam Zakir-Hussain
Higher interest rates are used as a tool to control inflation, which has fallen sharply in recent months.
The latest official figures showed that Consumer Prices Index (CPI) inflation slowed to 3.2% in March, as it edges closer to the Bank’s 2% target.
But economists think the Bank’s policymakers will want to hold out until they are more convinced that inflationary pressures have eased.
Mapped: Which areas worst hit by mortgage rate hikes as homeowners ‘forced to move’
Thursday 9 May 2024 00:00 , Maryam Zakir-Hussain
Homeowners coming off fixed rate mortgages faced huge rises in their monthly payments, latest figures have revealed, with the costs severely biting into household disposable income.
With the Bank of England base rate rising to 5.25 per cent in the summer of last year, families faced soaring mortagage rates with the average two-year fixed rate reaching 6.9 per cent.
The new rates meant many homeowners, especially those with large mortgages still to pay, faced challenging increases in monthly payments.
Mapped: Areas worst hit by mortgage rate hikes as homeowners ‘forced to move’
Bank of England not yet ready to cut UK interest rates, experts say
Wednesday 8 May 2024 21:57 , Maryam Zakir-Hussain
UK borrowers eager for costs to come down may have to wait a little longer before interest rates take a dip.
The Bank of England’s Monetary Policy Committee (MPC), which sets the level of UK interest rates, will announce its latest decision on Thursday.
However, economists are widely expecting the committee to keep rates at the current level of 5.25 per cent, which it has been held at since August last year.
Bank of England not yet ready to cut UK interest rates, experts say
Wednesday 8 May 2024 19:18 , Maryam Zakir-Hussain
Philip Shaw, chief economist at Investec, said: “This broad direction illustrates that collectively the committee is moving gradually towards a rate cut.
“It seems unlikely though to be ready to bite the bullet just yet and the Bank rate looks set to remain on hold at 5.25% for the sixth consecutive meeting.”
He added that it is possible that a second member of the MPC will switch to the “easing camp” and vote for a cut on Thursday.
‘Too early’ for economists to cut rates, economists predict
Wednesday 8 May 2024 17:30 , Maryam Zakir-Hussain
Economists think the Bank of England’s policymakers will want to hold out until they are more convinced that inflationary pressures have eased.
Laith Khalaf, head of investment analysis at AJ Bell, said: “It is almost certainly too early for the Bank of England to pull the trigger on a rate cut right now, especially against the backdrop of a more hawkish US central bank.”
The US Federal Reserve said last week it was keeping its key interest rate at the same level and noted a “lack of further progress” towards lowering inflation.
It means rates could stay higher for longer until there is firmer evidence of price rises easing, the Fed’s chairman Jerome Powell suggested.
Mr Khalaf said the Bank is also likely to be influenced by the European Central Bank, which is widely expected to cut rates in early June.
“The other important factor is more inflation readings for April and May, where CPI could get very close to, or possibly even hit, the Bank’s 2% target,” he added.
“The closer the inflation dial gets to 2%, the greater the pressure on the Bank of England to take its foot off the brake and cut rates.
“Markets currently think it’s a coin toss whether we get a UK rate cut in June, but this rises to a three in four chance priced in by August.”
The housing market has turned – so what does that mean for buyers and sellers waiting to make a move?
Wednesday 8 May 2024 16:29 , Maryam Zakir-Hussain
House prices are down and mortgage costs are up, writes James Moore. So how long will buyers and sellers need to wait before the market shows signs of life?
Britain’s housing market has turned hostile again, at least for sellers. The latest Nationwide index showed a surprise 0.4 per cent fall in April, the second month-on-month decline in a row.
A rival index produced by Halifax recorded a 1 per cent month-on-month fall in March, with the next update due next week. These indices can be volatile, but another fall would now be the betting favourite.
Read more here:
House prices are falling – but what does it mean for the future market?
Improving the economy may limit a Tory wipeout, but it won’t save Rishi Sunak
Wednesday 8 May 2024 15:47 , Maryam Zakir-Hussain
Thanks to the Liz Truss mini-Budget disaster, the Conservatives can no longer claim to be the party of economic competence, writes Andrew Grice. But an election campaign based on the economy is still their best hope of avoiding annihilation:
Improving the economy will not save Rishi Sunak
Pay growth and services sector inflation remain stubborn
Wednesday 8 May 2024 15:45 , Maryam Zakir-Hussain
Interest rates are used as a tool to help bring down UK inflation, which has fallen sharply from the highs hit in 2022 when energy costs spiked and the cost-of-living crisis was at its peak.
The rate of Consumer Prices Index (CPI) inflation fell to 3.2 per cent in March, according to the latest official figures.
But experts suggested that two key economic indicators for the Bank of England – pay growth and services sector inflation – have remained more stubborn.
Average wages continued to increase faster than the rate of inflation last month.
Bank of England not yet ready to cut UK interest rates, experts say
Wednesday 8 May 2024 15:43 , Maryam Zakir-Hussain
UK borrowers eager for costs to come down may have to wait a little longer before interest rates take a dip.
The Bank of England’s Monetary Policy Committee (MPC), which sets the level of UK interest rates, will announce its latest decision on Thursday.
However, economists are widely expecting the committee to keep rates at the current level of 5.25 per cent, which it has been held at since August last year.
This means that there could still be some time before the pressure of the cost of living begins to ease.
Bank of England not yet ready to cut UK interest rates, experts say
Welcome to the charming city of Asheville, nestled in the heart of the Blue Ridge Mountains. Known for its vibrant arts scene, thriving craft breweries, and stunning natural beauty, Asheville offers a unique blend of urban amenities and outdoor adventures. Residents here enjoy a laid-back lifestyle, with plenty of opportunities for hiking, mountain biking, and exploring the scenic landscapes. Whether you’re drawn to the historic architecture of downtown Asheville or the serene beauty of the surrounding mountains, this city has something for everyone.
In this Apartment Guide article, we’ll cut to the chase, breaking down the pros and cons of moving to Asheville. So whether you’re searching for the perfect apartment in the heart of downtown Asheville or a cozy home in the surrounding mountain communities, you’ve come to the right place. Let’s get started and see what awaits in this vibrant mountain city.
Pros of living in Asheville
1. Natural beauty
Asheville is nestled in the heart of the Blue Ridge Mountains, offering residents breathtaking natural beauty at every turn. From the stunning views along the Blue Ridge Parkway to the hiking trails in the surrounding area, outdoor enthusiasts will find no shortage of opportunities to connect with nature. The city’s proximity to the Pisgah, Cherokee, and Nantahala National Forests provides endless opportunities for hiking or exploring.
2. Thriving arts scene
Asheville’s arts scene is renowned, with numerous galleries, studios, and art festivals showcasing the work of local and international artists. The River Arts District is a hub for creativity, featuring a wide range of mediums from pottery and painting to sculpture and glassblowing. The city has traditionally been especially popular with writers and musicians but now attracts a wide variety of artists in all mediums. Residents can also enjoy live music performances at venues like The Orange Peel and the Asheville Music Hall, adding to the city’s cultural richness.
3. Craft beer capital
Asheville has earned a reputation as a craft beer mecca, with a high concentration of breweries and taprooms offering a diverse selection of locally brewed beers. Residents can explore the South Slope Brewery District or take part in brewery tours to sample a wide range of craft brews. The city’s beer culture also includes beer festivals and events. Asheville Beer Week is a popular event in May and features brewers from Asheville and the surrounding towns in Western North Carolina. In the summer, residents enjoy tubing down the French Broad River from brewery to brewery.
4. Foodie paradise
With a wide array of farm-to-table restaurants, food trucks, and international eateries, Asheville’s culinary scene is a melting pot of flavors. The city’s commitment to sustainable and locally sourced ingredients ensures that residents can enjoy fresh and innovative dining from Southern comfort food to global cuisine. 12 Bones Smokehouse is a popular spot, even Barak Obama has made the pilgrimage to try their ribs. Rhubarb is a popular spot for high-end Southern food or try an Indian take on sloppy joe’s from James Beard award-winning Chai Panai. Asheville is also home to a number of weekly farmer’s markets selling locally grown produce and flowers in the summer months.
5. Outdoor recreation opportunities
With its proximity to the mountains and rivers, Asheville provides ample opportunities for outdoor recreation. Residents can enjoy activities such as whitewater rafting, rock climbing, mountain biking, and fishing, making it an ideal location for those who love to stay active and explore the great outdoors. The towns and National forests that surround Asheville are a haven for outdoor enthusiasts from around the country. The French Broad and Nantahala rivers are popular locations for tubing, fishing and whitewater rafting. Hikers and visitors love nearby Grandfather Mountain for hiking.
6. Unique neighborhoods
Asheville is known for its eclectic and diverse neighborhoods, each with its own distinct character and charm. From the historic architecture of Montford to the bohemian vibe of West Asheville, residents can find a neighborhood that suits their lifestyle and preferences. The sense of community and local pride in each area adds to the city’s appeal. For renters who prefer small towns to neighborhoods, the area around Asheville is dotted with small Western North Carolina towns that serve as bedroom communities for those who work or play in Asheville. Popular nearby towns include Weaverville, Sylva, Hendersonville, and Black Mountain.
7. Rich cultural heritage
Asheville has a rich cultural heritage, with a strong emphasis on preserving its history and traditions. The city has been a popular refuge for artists throughout its history, with Zelda Fitzgerald, Carl Sandburg, Luke Combs, Jermaine Dupree, and Roberta Flack among prestigious creatives who have lived in the town. Residents can explore historic sites, museums, and heritage trails that offer insight into the city’s past. From the Moogseum to the Museum of the House Cat to the Museum of the Cherokee there is a museum or historic site for everyone. The Biltmore House is a particular highlight for both residents and tourists. The Victorian mansion and grounds were home to the Vanderbilt clan and are now open to the public for tours and events.
Cons of living in Asheville
1. Tourist congestion
Asheville’s popularity as a tourist destination can lead to congestion, especially in the downtown area and popular attractions. During peak seasons, residents may experience increased traffic and crowds in the popular areas of town.
2. Limited job opportunities
While Asheville offers a thriving arts and cultural scene, the job market can be limited in certain industries. Residents may find it challenging to secure employment in specialized fields, leading some to seek opportunities in neighboring cities.
3. Seasonal weather extremes
Asheville experiences seasonal weather extremes, with hot, humid summers and cold winters. The fluctuating temperatures and occasional snowfall can pose challenges for residents who are not accustomed to such climate variations.
4. Cost of living
Asheville’s cost of living is higher than the national average, particularly in terms of housing and utilities. The demand for housing in desirable neighborhoods can drive up prices, making it more challenging for some residents to afford comfortable living spaces.
5. Limited public transportation
Asheville’s public transportation system is limited, which can be a drawback for residents who rely on alternative modes of transportation. The lack of comprehensive public transit options may require individuals to rely on personal vehicles for daily commuting.
7. Healthcare access
While Asheville offers quality healthcare facilities, access to specialized medical services may be limited compared to larger metropolitan areas. Residents with specific medical needs may need to travel outside the city for certain treatments and healthcare resources.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.
Learning how to build credit as a student is important so you’re ready for life after graduation. Focus on building healthy credit habits—paying bills on time, keeping your credit utilization low and avoiding common credit mistakes.
While the government considers you an adult at 18, many people consider graduating college and starting their first job as the first real marker of adulthood. However, adulthood comes with responsibilities, many of which require a credit score—putting utilities in your name, renting your first apartment, putting car insurance in your name and even buying a car.
Read on to learn about some of the ways you can build credit as a student so you can graduate college with a degree and healthy credit.
Become an authorized user on a credit card
For many students, the first step to building credit is using a credit card to build credit. Unfortunately, it can be challenging to get a credit card if you don’t have any credit.
Often, a person’s first credit card isn’t actually theirs. Instead, they become an authorized user on someone else’s credit card. An authorized user is someone who is added to another person’s credit card account with full spending privileges. Responsibility for paying the credit card bill will still belong to the primary cardholder, who is usually a parent, close friend or relative.
The advantages to being an authorized user don’t end with being able to use the card like it’s your own. You also piggyback credit because the credit card’s account and payment histories are added to your credit report. This extends the length of your credit history, builds your payment history and increases the amount of credit available to you, which should all help improve your credit.
If you want to ask someone to make you an authorized user on their account, make sure they have a good credit history. You don’t want to be added as an authorized user to a primary cardholder who doesn’t pay their bills on time, since that would hurt your credit more than help it.
Open a student credit card
If you can’t become an authorized user on someone’s credit card, you can open a student credit card instead. A student credit card is a type of credit card specifically geared for students looking to build credit.
Often, the only difference between a traditional credit card and a student credit card is that they have a lower credit limit. Some also offer rewards for students, such as incentives for good grades and other cashback and rewards offers.
Open a secured credit card
Another type of credit card to consider as a student is a secured credit card. With this type of credit card, you make a deposit to cover your credit limit, which minimizes the risk to the issuer. As a result, credit card issuers are more likely to offer credit to someone with no or low credit.
As you use the credit card and pay your bill on time, you’ll build credit and eventually graduate to an unsecured credit card.
Develop healthy credit habits
College is full of great experiences, but the costs can add up quickly, and being financially responsible can be challenging. Throw in access to credit for the first time, and it’s easy to see why many students struggle with credit initially.
While students may want to take advantage of that new credit limit, it’s important to use your credit card wisely. Only use it for emergencies or small, regular expenses that you have the cash to pay for. These actions seem small, but they will establish the skills you need to keep your credit high throughout your life.
From the moment you have your new credit card, do the following:
Keep your balance low. This keeps your credit utilization rate low, which is one of the factors impacting your credit health. Experts recommend only using 30 percent or less of your credit limit. An easy way to stick to this is to use your credit card for small, regular purchases each month. For example, put all your subscription services on your credit card or only use it for gas. This habit will also prevent you from overspending or spending money you don’t have on nonnecessities.
Pay your balance each month. While you are only required to pay off the minimum balance each month, you’ll owe interest on the unpaid balance. The interest is applied to your balance, which can hurt your credit utilization rate, not to mention cost you more over time. Get in the habit now of paying off your entire balance every month.
Avoid opening too many accounts. Don’t open too many credit cards at once. New credit can damage your credit score, and having too many credit cards can make it harder to monitor your spending.
Take out a credit builder loan
Your credit mix, or the types of credit you have, play a role in your credit score. So, just having a credit card may not be enough to build credit quickly—you need other types of debt. Instead of taking out a loan for a car you don’t need, consider a credit builder loan.
The sole purpose of a credit builder loan is to build credit, so you won’t get money to put toward something else. Instead, the bank will put the money you’re borrowing into a savings account. You’ll make regular payments to repay the loan, and once you’ve satisfied the loan terms, the money in the savings account is yours.
Get a cosigner
When you’re starting to build credit, it may be difficult to get lenders to let you borrow money on your own. You can add a cosigner, someone with a better credit history than you who agrees to take responsibility for the loan if you miss payments. The cosigner minimizes the risk to the lender, making them more likely to lend to you.
As long as you make your monthly payments on time, you can build your credit history and payment history with a cosigner.
Get credit for rent and utility payments
Usually, only credit cards and installment loans such as a student loan or car loan affect your credit. Monthly bills like rent, utilities, and cell phones won’t appear on your credit report unless they’re delinquent.
A few programs and services enable you to add some of your monthly bills to your credit report to track on-time payments and build your credit. For example, ExtraCredit® is a program that reports utility and cell phone bills to credit bureaus, and rent reporting services will add your rent payment history to your credit report.
Only add these bills to your credit report if you pay them on time. Adding them to your credit report and then missing payments will hurt your credit more than help it. Be aware that some of these programs and services may charge a fee.
Think carefully about your student loans
Student loans seem to be a fact of modern life, with over 43.5 million Americans carrying $1.7 trillion in student loan debt. While the exact amount varies, the average student graduate has more than $37,000 in student loan debt.
Using your loan as income might be necessary, but if you can help it, only take out enough to cover your education expenses. Look into work-study or student aid options as alternatives to an oversized loan.
Monitor your accounts carefully
Keep an eye on your accounts to protect yourself from identity theft. By monitoring your account using the credit card app, you can shut down the card as soon as you see fraudulent activity, preventing the problem from escalating.
If you are the victim of identity fraud, you can remove fraud from your credit account.
Check your credit report annually
Experts recommend that you check your credit report and score annually or more often to ensure they’re accurate. AnnualCreditReport.com will give you one free credit report from each of the three credit bureaus at least once every 12 months (currently, you can see your credit reports once a week!).
You can sign up for credit monitoring services if you want to review your credit report more often than once a year. Keep in mind that building credit takes time, and even though you may be able to check your credit score every 14 days with some services, it will still take time to see results.
Avoid these common credit mistakes
Being a student means learning, and so does building credit. You’ll want to keep the five factors that impact your credit in mind when making decisions. Those five factors are:
Payment history: 35 percent
Amounts owed: 30 percent
Length of credit history: 15 percent
Credit mix: 10 percent
New credit: 10 percent
While mistakes are part of the learning process, you’ll want to avoid these common credit mistakes to avoid long-term consequences to your credit.
Mistake #1: Waiting too long to start building credit
Credit factor: Payment history
Most experts agree that the best time to start building credit is at age 18. The length of your credit history determines 15 percent of your FICO credit score. If you start building credit at 18, you’ll have around four years of credit history by the time you graduate and need to start putting bills and loans in your name.
Mistake #2: Using your credit card for nonessentials
Credit factor: Amounts owed
When you don’t see the physical money you’re spending, it can be easy to lose track of your spending and spend more money than you have. Avoid this by limiting credit card purchases to essential items only. Use it to pay for groceries and gas, not expensive vacations.
Mistake #3: Maxing out your credit cards
Credit factor: Amounts owed
Maxing out your credit cards hurts your credit utilization rate. The less money you carry from month to month, the better it is for your credit.
If you have a low credit limit, you can avoid maxing out your card by paying more often than the monthly payment due date. For example, if you buy gas and groceries over the weekend, check your balance on your credit card app a few days later and pay it off.
Mistake #4: Missing payments
Credit factor: Payment history
If you aren’t used to them, remembering to pay monthly payments at first might be rough. But you want to avoid late payments at all costs because they can hurt your credit for up to seven years.
Avoid missing payments by setting up automatic payments or calendar reminders on your phone. If you missed the payment because it didn’t line up with your paycheck and you didn’t have the money, you may be able to change your payment date with the credit card company.
Mistake #5: Closing accounts too soon
Credit factor: Length of credit history
If you open a student or secured credit card and graduate with a traditional credit card, it might be tempting to close those other accounts. But if you don’t have any additional credit beyond those initial credit cards, closing them can actually hurt your credit health by minimizing the length of your credit history.
Instead of closing them and opening new credit cards, see if your credit card issuer can convert the student or secured credit card account to a traditional one. That way, you can keep the account active and preserve the length of your credit history.
If you can’t convert the account, hold onto it and make a small purchase every month to keep it active. After you’ve had the new credit card for a while, you can cancel your initial credit cards.
Mistake #6: Taking out too much credit
Credit factor: Amounts owed
Just because someone offers you credit doesn’t mean you should take it. Sometimes lenders offer more money than you need because they make money off your interest payments. When considering credit offers, look carefully at monthly payments and consider your budget. Only take out credit for the amount you need and can reasonably afford to pay back each month.
For example, when you apply for an auto loan for your first car after college, the lender might preapprove you for $20,000. Run the numbers and ensure that’s a monthly payment you can afford. You’ll probably find that you can only comfortably afford to borrow a lower amount.
FAQ
Here are some answers to common questions about how you can build credit as a student.
How long does it take for a student to build credit?
Typically, it takes about six months to a year to build up some credit. Your exact timeline may vary based on your specific situation and how responsible you are with credit-building techniques like a student credit card.
How can a college student build credit with no income?
Usually, you’ll need income to qualify for credit, but there are a few ways around it. You can use a cosigner for a loan or ask someone to add you as an authorized user to their credit card. As an authorized user, you won’t have to make any payments with your credit card to get the card put on your credit report.
Trust Lexington Law Firm to fight for your credit
Building credit is tough—it’s hard to build from scratch but frustratingly easy to damage. Don’t let a lack of credit or a few credit mistakes destroy your confidence. The credit repair team at Lexington Law Firm could help you challenge inaccuracies affecting your credit. Learn more about our services to see how we can help.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.
The standard narrative of buying a house involves a real estate agent. The Realtor acts as your tour guide, guiding you not only through available homes, but also through the complicated process of becoming a homeowner.
However, some independent sellers prefer to sell their home without a real estate agent’s services. As a prospective buyer, you would interact with the homeowner instead of a Realtor.
This process, known as a sale by owner or FSBO sale, offers potential buyers the opportunity to bypass some traditional real estate transactions, which may save money on agent’s commission fees. FSBO sellers handle every aspect of the sale, including setting the listing price, marketing the house for sale, and negotiating the purchase price.
FSBO sales differ from a typical sale, as they require the home buyer to assume tasks that a real estate agent would usually handle. This includes finding FSBO listings, validating property details, and negotiating the sales price with the FSBO seller directly.
Key Takeaways
A For Sale By Owner (FSBO) transaction allows buyers to negotiate directly with sellers, potentially bypassing real estate agent commissions but requiring extra due diligence.
Buyers should secure mortgage preapproval, verify property details through CLUE reports and title checks, and consider hiring a real estate attorney or title company to manage legalities.
Closing a FSBO sale involves setting up an escrow account, preparing extensive paperwork, and understanding post-closing steps like utility setup and managing property taxes and insurance.
An Overview of the FSBO Process
A FSBO sale, where an owner sells their house without a real estate agent or a listing agent, differs from a typical sale. Understanding the intricacies of these real estate transactions can be vital to a smooth closing. FSBO sellers handle everything from setting the listing price, marketing, negotiating, and closing, offering more room for direct communication and price negotiation.
However, an FSBO transaction requires the buyer to take on tasks typically handled by a real estate agent. Unless you are working with a buyer’s agent, closing can be complex. You may be on your own for a home inspection. Getting an appraisal and negotiating a selling price will be up to you. Completing the title search and other tasks usually falls to the seller’s agent.
Prepare for the Purchase
Buying a home is exciting, but it’s also a venture that requires substantial financial planning and understanding. Preparing for the financial aspect of your purchase can increase your chances of a successful transaction and make the overall home buying experience less stressful.
Determining how much house you can afford is the first step. Getting pre-approved for a mortgage is essential. You’ll also need funds for a down payment and closing costs. Buying a FSBO home is similar to purchasing through a real estate agency.
Assess Your Credit Score
Your credit score is a key player in this process. It has a significant impact on your ability to secure a home loan, dictating your interest rates and loan terms. Before you start shopping for an FSBO house, check your credit score and, if necessary, take steps to improve it. This may involve paying down debts or correcting any errors on your credit report.
Secure Loan Preapproval
Once your credit is in check, securing preapproval for a home loan can give you a head start. This process involves a lender checking your financial history and assessing whether you’re a viable candidate for a loan.
Upon preapproval, you’ll know the maximum amount you can borrow, which helps you set a realistic budget for your house hunting. A mortgage broker, with their extensive knowledge and resources, can guide you through this process and help you choose the best loan for your needs.
Set Aside Savings
Additionally, it’s essential to have savings set aside for a down payment and closing costs. Down payments typically range from 3.5% to 20% of the home’s purchase price. Closing costs, on the other hand, usually amount to 2% to 5% of the loan amount. These costs can add up, so preparing for them can prevent financial surprises down the road.
Ensure a Mortgage Contingency
Lastly, when setting the terms of the purchase contract, ensure it includes a mortgage contingency. This clause protects you if your final home loan approval falls through, allowing you to back out of the deal without financial repercussions.
Research the Property
Buying an FSBO home requires thorough due diligence and understanding your local market’s dynamics.
Familiarize Yourself with the Market
Familiarize yourself with FSBO listings in your desired area. Assess the features of various properties, their listing prices, and how long they’ve been on the market. This exercise can help you gauge a fair price for the property you’re interested in.
Verify Property Details
In FSBO sales, buyers need to take extra care when verifying property details. These include, but are not limited to, ownership history, physical condition, and any past insurance claims related to the house for sale.
CLUE Report: A good starting point for property research is the Comprehensive Loss Underwriting Exchange, also known as CLUE. This database contains up to seven years of insurance claims history for properties. Requesting a CLUE report can provide insight into any past damages or issues that have led to insurance claims. This information helps when assessing the overall condition of the home and can play a role in price negotiations.
Check the Title: Another important element in property research is checking the home’s title. The title outlines the history of property ownership, and any issues, like liens or disputes, could complicate the transaction. You might want to consider hiring a title company or a real estate attorney to ensure a clear title, further securing your investment.
Conducting extensive research on the property not only aids in making an informed decision but can also arm you with valuable information during price negotiations.
Understand the Legalities
Buying a house is not just a financial commitment, it’s a legal one too. Understanding the legal aspects of real estate transactions can protect you from potential complications, particularly in a FSBO sale, where you might not have a real estate agent guiding you through the process.
Hire a Real Estate Attorney or a Title Company
In a traditional real estate transaction, a buyer’s agent handles the legal paperwork. However, in a FSBO sale, buyers often need to manage these tasks themselves. This is where a real estate attorney or a title company can help. These professionals can assist with the legal aspects of the transaction, including:
Ensuring the house is a separate legal entity operated correctly, free from liens, and without any outstanding claims.
Conducting title searches to confirm the legitimacy of the property’s ownership.
Assisting with the closing process, ensuring all necessary documents are correctly filled out and filed.
Review the Purchase Agreement
The purchase agreement is a binding legal contract between the buyer and the seller. It outlines the final purchase price, terms of the home sale, and any conditions that must be met before the sale can be finalized.
Given its importance, it’s recommended to have a lawyer review the purchase agreement before the buyer and seller sign it. This review can ensure that all the stipulations are in your best interest and that there are no potential loopholes that could cause problems later.
Pricing and Negotiations
FSBO sales often provide room for more negotiation when it comes to the home’s asking price. This flexibility can result in a lower purchase price, potentially saving you money.
Home Appraisal
A home appraisal can be an essential tool during these negotiations. An appraiser evaluates the property and provides an estimated market value. This estimate is based on various factors, including the home’s condition, location, and comparable homes in the area.
With an appraisal in hand, you have a foundation for negotiating the home’s price with the seller directly. It gives you a benchmark, helping to ensure you don’t pay more than the property is worth.
Handling a Low Appraisal
A FSBO transaction can become complicated if the appraisal is lower than the agreed-upon purchase price. In this scenario, you have a few options:
Request a price reduction: If the appraisal comes in lower than the agreed-upon price, you can ask the seller to reduce the price. They may be willing to do this to keep the sale on track.
Challenge the appraisal: If you believe the appraisal was inaccurate, you can challenge it. You’ll need to provide compelling evidence, such as recent sales of comparable homes that were not included in the original appraisal.
Handling these situations tactfully can keep your home purchase on track while ensuring you get a fair deal. Remember, every real estate transaction is unique, and dealing with these challenges may require professional guidance from a real estate attorney or a buyer’s agent.
Home Inspections
Investing in a home inspection is a prudent step in the homebuying process. A comprehensive inspection can reveal potential problems or necessary repairs that may not be immediately apparent. This is especially critical when buying a FSBO property, as there might not be a real estate agent involved to facilitate this step.
Choosing a Home Inspector
Finding a qualified and experienced home inspector is paramount. Look for inspectors who are certified by a national association and who have a good reputation in your local market. Your home inspector should evaluate the following:
Structural elements: walls, ceilings, floors, roof, and foundation.
Systems: plumbing, electrical, and HVAC.
Other components: insulation, ventilation, windows, and doors.
Outside: drainage, driveways, fences, sidewalks, and any potential safety hazards.
After the Home Inspection
Once the home inspection is complete, you will receive an inspection report outlining any identified issues. Depending on the findings, you may:
Request repairs: If the inspector identifies any issues, you can ask the seller to make necessary repairs before closing.
Renegotiate the asking price: If there are significant issues that the seller is not willing to fix, you might renegotiate the price to account for the repair costs.
Walk away: In the case of severe problems, such as foundational issues or extensive water damage, it might be in your best interest to walk away from the sale.
Securing Financing
Once you’ve agreed on a sales price and completed the home inspection, the next step is to finalize your home loan. This stage requires careful consideration as it can significantly impact your personal finance situation.
Compare Mortgage Options
Start by comparing different mortgage options. Each loan type has its advantages and drawbacks, and the best one for you depends on your individual circumstances. A mortgage broker can be a valuable resource during this process, helping you understand the nuances of each option and finding the best fit for your financial situation.
Review the Loan Estimate
Mortgage lenders are required to provide a loan estimate within three days of receiving your application. This document outlines the specifics of your loan, including:
Loan amount: The total amount that you’ll borrow.
Interest rate: The cost you’ll pay each year to borrow the money, expressed as a percentage.
Closing costs: The expenses you’ll need to pay to finalize your mortgage, which can include origination fees, appraisal fees, and title insurance.
It’s essential to review the loan estimate thoroughly and make sure you understand all the costs involved. If something seems off, don’t hesitate to ask your lender for clarification. After all, this is a significant financial commitment, and you want to be sure you’re making an informed decision.
Closing the Sale
Closing a FSBO sale involves several key steps that vary slightly from a typical sale involving real estate agents. However, the primary goal remains the same: to legally transfer ownership of the property from the seller to you, the buyer.
Setting Up an Escrow Account
In real estate transactions, an escrow account is used to safeguard the earnest money — the deposit you make to show the seller you’re serious about buying the house. This account is managed by a separate legal entity, such as a title company or escrow company, ensuring the funds are protected until the sale is finalized.
Preparing the Paperwork
The closing paperwork can be quite extensive and typically includes:
The deed: This transfers ownership from the seller to the buyer.
The bill of sale: This outlines the terms and conditions of the sale.
The affidavit of title (or seller’s affidavit): This document states the seller owns the property and there are no liens against it.
It’s best to have a real estate attorney or a title company prepare these documents to avoid any mistakes.
Title Insurance and Closing
Your lender may require you to purchase title insurance. This protects both you and the lender in case any undisclosed liens or ownership disputes arise after the sale.
On the closing day, you and the seller will sign all closing documents. The funds held in the escrow account, including your down payment and closing costs, will be appropriately distributed, and the property’s ownership is legally transferred to you.
Post-Closing Steps: What Comes Next?
After the exhilarating process of buying a house, there are a few additional steps to take post-closing.
Utility Setup and Address Change
Ensure utilities are set up in your name, including water, electricity, gas, and internet. You should also update your address for any subscriptions, credit cards, bank accounts, and identification documents.
Understand Property Taxes and Home Insurance
As a new homeowner, it’s important to understand your obligations regarding property taxes and home insurance. Familiarize yourself with due dates and payment procedures to avoid late fees or potential complications.
Dealing with Potential Problems
If any problems arise with the home past closing, consult your home inspection report before paying for repairs out of pocket. If you’ve received a home warranty as part of the sale (which is different from home insurance), it may cover some of these post-closing issues.
Remember, buying a FSBO home might be more complicated than a typical sale, but the potential benefits, such as saving on the agent’s commission, make it an attractive option for many home buyers. With careful planning, research, and professional guidance, you can manage the FSBO homebuying process with confidence.
Conclusion
Though a FSBO transaction can be intimidating, with research and preparation, potential buyers can make the process go smoothly. Buying a house for sale by owner can offer significant savings and more room for price negotiation, as you bypass the real estate agent’s commission.
However, you need to remain diligent and informed throughout the process. Understand the local market, conduct a thorough home inspection, and engage professionals like a real estate attorney or title companies for a smooth real estate transaction. The homebuying process may be a marathon rather than a sprint, but with patience and perseverance, you’ll cross the finish line to your new home.
Inside: Unlock the secrets of debt types and management. Explore everything from mortgages to student loans, and devise savvy debt strategies for financial health.
Understanding debt is essential as it is a common financial obligation that, must be managed wisely, if mismanaged, can lead to financial strain.
Most importantly, comprehending the fundamentals of debt is crucial for financial literacy. Debt spans various forms of credit, from mortgages to personal loans to credit cards.
Debt is a powerful force in the consumer’s financial life; it has the power to either create opportunities or trigger economic stress.
You must realize the multifaceted role that debt plays is a prerequisite for achieving and maintaining financial stability. As such, a comprehensive understanding of the various types of debts is not merely beneficial—it is indispensable.
Right now, consumer debt has reached $17.1 Trillion in 2023. 1
With this knowledge, you can navigate the financial tides with confidence, distinguish between advantageous and precarious borrowing, and ultimately wield debt as a tool for prosperity.
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The Mainstream Maze Examples of Debt Types
Understanding the various types of debt is crucial for anyone looking to maintain or improve their financial health.
Debt, often viewed in a negative light, can actually be leveraged as a powerful tool if managed correctly. Each category of debt — from secured to unsecured, installment to revolving — functions differently and influences your financial profile in its own unique way.
Recognizing these differences enables individuals to make informed borrowing decisions, repay their debts more effectively, and develop strategies tailored to their personal financial goals.
With this background in mind, let’s understand the different types of debt:
Navigating Through Secured and Unsecured Loans
Secured loans require collateral, reducing risk for the lender, like a mortgage or auto loan.
Unsecured loans rely on creditworthiness and come with tighter requirements.
Understanding Revolving vs. Installment Debt
Revolving debts, like credit cards, offer flexible borrowing limits.
Installment debts involve fixed payments over a period.
Fixed-Rate vs. Variable-Rate
Choosing between fixed-rate and variable-rate debt shapes your financial commitment and interest rate.
Fixed rates provide predictability in repayments.
Whereas variable rates fluctuate with market trends, potentially lowering costs or introducing variability.
Short-Term Debt vs. Long-Term Debt
Short-term debt, to be settled within a year, requires immediate attention.
Long-term debt, with extended maturities, often permits strategic repayment over time.
Defining Callable Debt vs. Noncallable Debt
Callable debt allows issuers an early exit option, granting them the ability to retire debt before maturity.
Noncallable debt, in contrast, guarantees the term’s completion, offering predictability for both investor and issuer.
Delving into Secured Debt Details
Secured debt plays a pivotal role as it hinges on collateral to assure lenders of repayment.
This type of debt brings with it the potential for lower interest rates and higher approval chances, but also the risk of losing valuable assets should a borrower default.
Collateral Commitment: Risks and Rewards
Rewards of Secured Debt
Risks of Secured Debt
Lower interest rates due to reduced lender risk.
Risk of losing the collateral property, such as a house or car, on failure to make payments.
Access to larger loan amounts because of collateral provision.
Limited use of borrowed funds typically for a specific purpose (e.g., a home or vehicle).
With continued payments, a credit score increase is likely.
Possibility of incurring additional fees or penalties if the loan goes into default and the property is seized.
Increased likelihood of loan approval because the loan is secured by an asset.
Potential negative impact on credit score and financial stability if unable to repay the loan.
Notable Nuances of Mortgages, Auto Loans, and More
Mortgage interest rates generally fluctuate between 3% and 5%, influenced by economic conditions, with the option of fixed rates or adjustable rates that can change annually within set limits. Typically, a fixed interest rate is the best option for homeowners. Most common mortgage lengths are 15 or 30 year terms.
In contrast, auto loan interest rates tend to be high with shorter terms of 5 or 7 years. Many times, these loans are often subsidized by automakers’ promotional offers to attract buyers with good credit, thereby varying considerably based on the loan’s duration and the borrower’s creditworthiness. Another option is to secure a car loan at a local credit union.
With mortgages tied to real estate and auto loans to vehicles, both present unique terms and implications for borrowers navigating the nuances of substantial purchases.
National Debt Relief
While this isn’t our first choice to pay off debt, for some of readers, it is the only option to get ahead on their debt.
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Unmasking Unsecured Debt
Unsecured debt is a form of financing that does not require borrowers to pledge assets as collateral.
This type of debt is granted based on an individual’s creditworthiness and typically carries a higher interest rate due to the increased risk to lenders. The typical interest rates start at about 15% and go upwards from there.
Credit Cards and Personal Loans: No Collateral Needed
Credit cards and personal loans exemplify unsecured debt, with no collateral needed to secure them. Their accessibility hinges on the borrower’s credit history, representing a choice for financing without asset risk.
Many college students start with their first credit card and have no idea how it works.
The Pros and Perils of Unsecured Borrowing
Unsecured borrowing can offer financial flexibility without collateral, a clear advantage.
However, the perils include higher interest rates and the potential for a strained credit history if repayments falter, necessitating cautious consideration. This is how many people quickly rack up large amounts of debt without realizing the consequences of their actions.
Thus, why young adults need basic financial literacy.
Rolling with Revolving Debt
Revolving debt is a type of credit that lets you borrow money up to a certain limit, repay it, and then borrow again as needed, often seen with credit cards or home equity lines of credit (HELOC).
Unlike fixed installment loans, this type of credit emphasizes the borrower’s ability to manage and repay borrowed funds over time, which can have a significant influence on their credit score.
Mastering the Mechanics of Credit Lines
Credit lines empower consumers with fluid financial options, replenishing funds as balances are paid. Understanding their mechanics is critical in leveraging such revolving credit without succumbing to debt traps through accumulated interest.
Evaluating the Ubiquity and Utility of Credit Cards
Credit cards are ubiquitous in modern-day finance, serving as a versatile tool for electronic payments. They offer convenience and the potential for rewards but can lead to costly interest charges for those who fail to manage them judiciously.
Personally, I received a $942 cash back from my credit card. But, I pay off my balance monthly.
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Installment Debt Explored
Installment debt is a financial mechanism that allows individuals to borrow a lump-sum amount of money and repay it over a fixed period through regular payments, known as installments.
These debts, which can be secured or unsecured, usually involve fixed interest rates and include common financial products like mortgages, auto loans, student loans, and personal loans.
How Student Loans and Mortgages Shape Long-term Debt
Student loans and mortgages are pivotal in shaping long-term debt landscapes. They represent significant financial commitments with enduring impacts, facilitating education and homeownership while posing substantial repayment responsibilities.
You need to be wise in how much you decide to take out for either student loans or a mortgage. It is always best to take out less than offered by your lender.
Paying Off Different Types of Debt
Around here at Money Bliss, I stress the importance of paying off debt fast!
To effectively pay off different types of debt, starting with high-interest rate debts, such as credit cards, is essential because it reduces the amount of money paid on interest over time, allowing for more significant savings. This is the core idea behind the “avalanche” approach.
Alternatively, paying off smaller balances first using the “snowball” method can provide psychological wins and motivate continued debt repayment efforts.
For structured debts like student loans and mortgages with lower interest rates, adhering to the standard repayment plan while focusing extra payments on higher-interest debt can be a balanced strategy.
Additionally, employing methods like debt consolidation or transfers to lower APR vehicles can further aid in reducing the cost of borrowing and accelerate debt payoff.
Learn more about debt snowball vs debt avalanche.
Striking a Balance: Managing Varied Debts Wisely
Crafting an effective debt management strategy is a fundamental step toward financial health.
Implementing tailored repayment plans, such as debt consolidation or debt management programs, can alleviate the stress of multiple liabilities.
You don’t want to be at a point where you must get out of debt ASAP. Employing debt payoff methods such as the Snowball and Avalanche techniques can accelerate the journey toward being debt-free.
Credit counseling is often necessary to dig into the root of spending problems because it provides professional guidance on budgeting and debt management. Thus, helping individuals restructure their financial practices and develop a targeted plan to overcome excessive spending habits.
Frequently Asked Questions (FAQs)
Debt represents money owed across various agreements, while a loan is a specific form of debt where money is borrowed under agreed repayment terms and interest rates.
The most common debts include mortgage debt, credit card debt, auto loans, and student loans, reflecting the widespread financial needs for housing, education, transportation, and consumer spending.
Opting to pay off higher-interest revolving debt first generally saves money and boosts credit scores more effectively than tackling installment loans, due to the compounding effect of revolving debt interest.
This is a personal decision and one you must decide on yourself.
Which Consumer Debts Make Sense to You?
In conclusion, the takeaways are not all debt is created equal, and each type can affect your financial future differently. By recognizing whether a debt is secured or unsecured, or if it revolves or is due in installments, you can better strategize how to handle your obligations.
This knowledge is not only beneficial for making decisions about new loans or credit lines but also for creating a robust plan to tackle existing debt.
Comprehending this area of financial literacy, you position yourself to make wiser decisions that align with your financial aspirations. Ultimately, striving for a future where debt works for you, not against you.
By gaining a deeper understanding of the characteristics and consequences of each debt type, you can not only avoid common pitfalls but also harness debt as an instrument to build wealth and secure a robust financial future.
Then, you can stick with these debt free living habits.
Source
Experian. “Experian Study: U.S. Consumer Debt Reaches $16.84 Trillion in Q2 2023.” https://www.experian.com/blogs/ask-experian/research/consumer-debt-study/. Accessed May 7, 2024.
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I started working with a client a couple years ago whose incoming portfolio was 20% Starbucks. That’s a lat(te) in one stock. I’ll see myself out.
For comparison, Starbucks comprises 0.20% of the S&P 500. The S&P 500 should only be a portion of an individual’s stock holdings, which are only a portion of an overall portfolio (with bonds, alternatives, real estate, whatever). 20% is way too much Starbucks.
When I started explaining this thought process, the client protested. “Jesse – there’s a Starbucks on every corner in America. Why would we sell it?”
This logic is very understandable. After all, there is a Starbucks on every corner in America. The premise is true. But this client’s conclusion—“Therefore, why sell Starbucks?!”—doesn’t follow his premise.
That’s the logical misstep we’ll dive into today. A “good company” doesn’t always make a “good investment.”
Lessons from History
My hometown pride, Kodak, was once one of the most visible companies in the world.
It would have been easy to sit there in 1985 and think,
“Kodak is everywhere. They own the global film market the same way GE owns consumer electronics and Sears owns department stores. Why would I ever diversify out of Kodak?”
A seemingly logical investor
Well…
That’s a share price going from ~$90 per share to zero in about 17 years. The stock market and economic history are littered with “good companies” going broke. It’s called “creative destruction” and is an essential part of a healthy economy.
But it’s terrible if you happen to own those specific stocks.
It’s Not About Popularity or Frequency
Investor Peter Lynch is known for many quips, perhaps none more famous than:
“Invest in what you know. Know what you own and know why you own it.”
Unfortunately, many investors interpret that quote as:
“Invest in what you’ve heard of, and own it because you’ve heard of it.”
…and what they’ve heard of, naturally, are popular consumer brands and companies with a “high frequency” in society e.g. those with many stores, many products, long histories, etc.
But what Lynch actually meant in his quote is: “The more familiar you are with a company, and the better you understand its business and competitive environment, the better your chances of finding a good ‘story’ that will actually come true.”
You can’t just “know” Starbucks because you enjoy its coffee or because you see it on every corner. You must “know” its business fundamentals, competitors, potential future paths, etc. The market does not care about popularity or frequency alone. It only cares about popularity and frequency insofar as those factors positively or negatively affect the objective fundamentals of the business.
Past vs. Future
Riffing off the previous stanza, concepts like “popularity” and “frequency” are both hallmarks of a company’s past. The stores you see, the brand’s standing in our culture, and the company’s heretofore investment returns are all a function of what the company has done in the past.
But the stock market is forward-looking. The thousands of investors who buy and sell stocks and determine their daily prices don’t care about the past. They are, quite literally, trying to predict a company’s future. They are pricing in that anticipated future into today’s fair value.
Quite understandably, most investors don’t do this. They either shape their opinions based on the past (popularity, frequency, past investment returns, etc.) or they react to current-day news. These are both mistakes.
The intelligent investor thinks about the future. But any statement akin to, “Company ABC will be great in the future,” is a challenging statement to make accurately.
Wonderful Company? Fair Price?
Nothing against Peter Lynch, but most of you know I’m a fan of Uncle Warren, who is famous for saying:
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Even if Starbucks is one of Buffett’s “wonderful companies,” is it trading at a “fair price”? Most people – including many investment professionals – are terrible at determining what a “fair price” truly is. Price is a defining feature of any investment!
I frequently use the “Honda Civic” example to explain this idea.
Is a Honda Civic a fair car? Sure. A good to great car? Quite possibly! Would you be happy owning a new Honda Civic? Many of you would say, “Sure, why not?”
But would you pay $100,000 for that new Honda Civic? No way.
It’s not enough to say, “Starbucks is a good company. Perhaps a great company.” That’s challenging enough on its own. But we must go further and ask ourselves if Starbucks is trading for a “fair price.” And quite simply, most of us are terrible at determining what “fair price” truly means – at least when it comes to stocks.
Needles
I’m biased, but I’m a big fan of this article I wrote in May 2023. I won’t rehash it too much here, but I encourage you to read it right now.
Most stocks perform worse than simple Treasury bonds
Only ~4% of stocks (or 1 in 25) account for all historical stock market outperformance over bonds
Anytime your odds are 1 in 25, you should think hard about your actions.
Sizing and Allocation
Play along with me. Let’s assume, for the sake of argument, the client was correct. Because Starbucks is everywhere, it must be a good stock to own, and it’s trading at a good price.
If that’s true, does it necessitate Starbucks should comprise 20% of our portfolio? Put another way: are there only ~5 good companies in America?
Any way you cut the biscotti, a 20% position is severely overweight. In financial planning, we want to reduce our range of potential outcomes. That’s why we diversify. Having 20% of your money tied to one single stock leads to a wide range of potential outcomes.
Closing the Cafe
For what it’s worth, the client did listen to our counsel and has been divesting out of Starbucks (as tax efficiently as possible). This past week’s ~17% drop in Starbucks’ stock price hurts, but not as much as it would have two years ago.
I’m sure there are more reasons not to own a few single stocks, not to own Starbucks specifically, and not to have too many eggs in any basket. What do you think? If I’ve missed some low-hanging fruit (salad) in terms of my reasoning, please leave me a Comment below!
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-Jesse
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Revolving credit, like credit cards, allows you to borrow up to your limit and then again once you pay down the outstanding balance. Home, auto and personal loans are installment loans, which means you receive a lump sum that you pay back over a set period.
If you’re one of the millions of Americans who has outstanding debt, it can be helpful to better understand the difference between installment loans vs. revolving credit. Although debt can harm your credit, responsibly managing a mix of installment and revolving debt can help build your credit. Read on to learn more about installment loans vs. revolving credit and how to use them to your benefit.
Installment debt
Revolving credit
Definition
A borrowed lump sum that is paid back over time on a set schedule
A line of credit that enables for spending up to a predetermined limit
Examples
Mortgage, student loan, auto loan or personal loan
Credit cards and personal lines of credit
Interest rates
Typically fixed when the loan is established
Usually variable, and often higher overall
Payments
Consistent monthly payments on a set schedule
Payments vary based on spending
Effect on credit score
May increase credit score due to improved mix of credit, payment history and length of credit
Tends to have a larger effect on credit score, and score increases are possible with responsible usage
What is revolving credit?
Revolving credit allows you to spend up to a certain limit. As you pay down your outstanding balance each month, you can re-borrow up to the credit limit. If you need to borrow more, you can request a credit limit increase. It not only gives you access to more funds, but when used responsibly, it can also help improve your credit by reducing your credit utilization ratio.
When you have a revolving credit account, you can pay the monthly minimum or choose to pay more. Many lenders charge interest, but some lines of credit come with introductory offers, like 0 percent interest for a certain amount of time.
One way revolving credit is different from installment credit is that your account stays open until you close it. As you continue to make your payments and don’t spend more than the limit, you can continue to use your revolving credit.
Pros and cons of revolving credit
The biggest benefit of revolving credit is its flexibility, which can also be a downside. You can borrow up to your credit limit, but the ability to increase it may tempt you to overspend and get into debt. Below, we break down some of the additional pros and cons, starting with the benefits:
Flexible borrowing
Bigger impact on your credit when paid on time
Ability to only borrow what you need
Some credit cards come with periods of 0 percent interest
Can easily access funds
Some of the downsides to revolving credit accounts include:
Higher interest rates
Set borrowing limits
Due to ease of access, it can be tempting to spend more
Inconsistent monthly payments due to variable interest
How revolving credit accounts affect your credit
Revolving credit accounts typically affect your credit score more. With the FICO® scoring model, your payment history accounts for 35 percent of your score, and your utilization accounts for 30 percent of your score.
Your credit utilization is the amount you owe vs. your max credit limit. To benefit from this, you should keep your utilization below 30 percent. This is based on the credit limit of all your revolving accounts minus the amount you owe.
For example, if you have two credit cards, one with a $5,000 limit and one with a $3,000 limit, your total limit is $8,000. To stay lower than 30 percent, you would never want to owe more than $2,400. If you opened up a new credit card with a limit of $10,000, you could then spend up to $5,400 (30 percent of $18,000).
What is installment credit?
An installment loan account allows you to borrow a lump sum of money and pay it back in installments. Unlike revolving credit accounts, you have a set amount of money to pay back with interest before the account closes.
There are various installment loans, and you may need additional funds. Rather than increasing the loan amount, you would need to apply for a new loan.
Pros and cons of installment credit
Although credit cards are the most common form of credit, it’s helpful to have at least one installment credit account. One aspect of your FICO® credit score is “credit mix,” which accounts for 10 percent of your overall credit score.
The following are some of the additional benefits:
Predictable payments
Lower interest rates
You can receive a lump sum
Flexible terms for repayment
Some of the downsides include:
May not help credit score as much
Need to apply for a new loan to borrow more
Stricter qualification requirements
Some require collateral
How installment credit accounts affect your credit
Those who only open revolving credit accounts are missing out on the benefit of credit mix and improving their credit. Having installment credit accounts like auto or student loans can help improve your credit mix. Installment loans can also help with your credit history if they’re open for a long time, like when you get a home loan.
Similar to revolving credit accounts, you want to make your payments on time each month to improve your payment history. This is a positive signal of creditworthiness to future lenders.
Examples of installment credit
Now that you understand what installment credit accounts are, it can be helpful to see some examples:
Personal loans are forms of installment credit as well, but you often won’t need to use the funds for a specific purpose. Many people use personal loans to pay for large purchases or expenses, consolidate their debt or pay for home repairs.
Examples of revolving credit
The most common forms of revolving credit accounts include:
Credit cards. These are the most common form of revolving credit. People typically use credit cards for everyday purchases, and they can also be helpful in an emergency when you don’t have access to cash.
Home equity lines of credit (HELOCs). If you’re a homeowner, you can use a HELOC to borrow against the value of your home. People often use a HELOC for home renovations and repairs.
Personal line of credit. A personal line of credit works like a credit card but without one. To borrow the money, you go to your bank or credit union to withdraw money up to your maximum limit.
Can you get approved for revolving and installment credit accounts?
Whether you’re hoping to open a revolving or installment credit account or both, the first step is to have good credit. Good credit not only improves your chances of getting approval but can also help you get lower interest rates, saving you thousands of dollars. To start working on your credit score, first find out what it is. Lexington Law Firm offers a free credit assessment, and if you have errors on your credit report, we provide additional services to challenge them on your behalf. To get started, sign up today.
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While Des Moines may not be the first city that pops into your mind when you think about Iowa, it probably should be. As the capital and most populous city in the state, there’s somewhere for everyone to feel right at home in Des Moines.
Des Moines is one of those rare cities that provides the convenience and opportunities of a larger city while maintaining the community feel of a smaller town. With that in mind, it’s no wonder why so many people are clamoring to find an apartment in Des Moines.
Let’s take some time to dive into ten of the top things Des Moines is known for and see why folks from all over are falling in love with this midwestern gem.
1. Drake University
Drake University is a small, private university in Des Moines. Known as a cornerstone of Des Moines, Drake is renowned for its law school and journalism program. Student life on the campus is strong, anchored by the famous Drake Relays which bring athletes and spectators from across the globe to Des Moines every spring.
2. Blue Ribbon Bacon Festival
The Blue Ribbon Bacon Festival humorously claims “bacon-oisseurs” from near and far. What started as a quirky idea has grown into one of the most beloved events in Des Moines. The festival celebrates all things bacon with tastings, contests, and live entertainment.
3. Low Cost of Living
One of the most appealing aspects of Des Moines is its low cost of living. Residents enjoy affordable housing, utilities, and transportation costs, all of which are well below the national average. This makes it an attractive place for young professionals, families, and retirees looking to stretch their savings further.
4. Smitty’s Tenderloin Shop
A local favorite, Smitty’s Tenderloin Shop is famous for its breaded pork tenderloins, a must-try Iowa specialty. This no-frills eatery has been serving up these oversized sandwiches for decades.
5. Over 800 Miles of Trails
On a sunny day, you can find outdoorsy types exploring Des Moines’ extensive network of trails, which spans over 800 miles. These well-maintained paths are perfect for biking, jogging, and walking. Whether it’s along the Des Moines River or through scenic parks, these trails are a refreshing escape into the great outdoors.
6. 80/35 Music Festival
The 80/35 Music Festival is a highlight of the summer in Des Moines. Showcasing a mix of well-known and emerging artists across multiple stages, it’s a real can’t-miss. This two-day event celebrates a range of musical genres and the communities that support them.
7. Des Moines Art Center
The Des Moines Art Center has an impressive collection of modern art, paintings, sculptures, and mixed media installations. With free admission, it invites art lovers to explore works by renowned and contemporary artists in an inspiring setting.
8. Des Moines Farmers’ Market
Held in the historic Court District, the Des Moines Farmers’ Market is an awesome event that draws thousands every Saturday from May to October. With over 300 vendors peddling fresh produce, artisan goods, and prepared foods, it’s a vital part of the weekend for many Des Moines locals.
9. Iowa State Capitol
The Iowa State Capitol, with its striking gold dome, is more than just the seat of Iowa’s government. It’s a point of pride for Des Moines. Tours of this grand building offer insights into Iowa’s history and legislative process and can be scheduled easily online.
10. Greater Des Moines Botanical Garden
The Greater Des Moines Botanical Garden is a beautifully designed and meticulously maintained indoor-outdoor garden. This sweet spot educates visitors about botany and gardening while also serving as a peaceful retreat for reflection.
Known for its iconic Gateway Arch and passionate professional sports fandom, St. Louis is like nowhere else in the U.S. From brewing icons to massive parks and niche museums, there’s something for everyone to feel right at home in St. Louis.
Whether you’re exploring the sites of the 1904 Summer Olympics or catching a game at Busch Stadium, there’s never a dull moment in the city.
Let’s take a few minutes to explore ten of the top attractions in the Gateway to the West and learn why so many people are looking to find a place in St. Louis.
1. Gateway Arch
The Gateway Arch is a true architectural feat. Beyond that, it’s a symbol of St. Louis’s role as the “Gateway to the West.” Standing at 630 feet, it is the tallest man-made monument in the United States. Visitors can ride to the top of this stainless steel marvel for a stunning view of the city and the Mississippi River. The Arch isn’t only a sight to behold from afar but also has an interactive museum that details the area’s fascinating history.
2. Anheuser-Busch
Anheuser-Busch has been a cornerstone of St. Louis since its establishment in 1852. This brewery is famous for producing America’s best-selling beer, Budweiser, and its role in the ongoing craft beer movement in the U.S. Tours of the brewery are popular, giving visitors a peek into the brewery’s massive operations and ending with samples of their iconic beverages.
3. Cardinals
Thanks to the St. Louis Cardinals, baseball is almost synonymous with St. Louis. As one of the most successful teams in Major League Baseball, the Cardinals have a fiercely loyal fan base. Watching a game at Busch Stadium is definitely a must-do in St. Louis.
4. National Blues Museum
The National Blues Museum celebrates St. Louis’s profound impact on blues music. This museum showcases the history of the blues and its influence on modern music. It’s a hotspot for music lovers and historians alike, providing deep insights into the sounds that shaped America.
5. Forest Park
Forest Park is one of the largest urban parks in the United States, larger than Central Park in New York City. Forest Park is home to many of St. Louis’s major attractions, including the Art Museum, the Science Center, and the Zoo. With its picturesque landscapes and manicured walking paths, Forest Park is where you’ll find a lot of locals on a sunny day in St. Louis.
6. Home of the 1904 Summer Olympics
St. Louis made history by hosting the 1904 Summer Olympics, the first ever held in the United States. This event was held at Washington University and significantly impacted the city’s development and global reputation.
7. Missouri Botanical Garden
The Missouri Botanical Garden is an oasis covering 79 acres. The garden is renowned for its pioneering research in plant science. It has a geodesic dome called the Climatron as well as Japanese and Chinese gardens. The garden is a tranquil escape and a center for botanical research and conservation.
8. St. Louis Science Center
The St. Louis Science Center is one of the few free nonprofit science museums in the country. It covers everything from technology and engineering to biology and astronomy. The Science Center bridges the gap between fun and learning, making science accessible to all ages.
9. Old Courthouse
The Old Courthouse in St. Louis is the site of the pivotal Dred Scott case in 1857. The beautifully restored building is now a museum that provides a rare look into this storied past and the events that shaped civil rights in America.
10. Soulard Market
Soulard Market is the oldest farmer’s market west of the Mississippi River and remains a focal point of life in St. Louis. With vendors selling everything from fresh produce to exotic spices, and local meats to artisanal cheeses, the market encapsulates the community spirit of St. Louis.