Two Simple Ways to Boost Your Credit Score Before Applying for a Mortgage

About a month ago, I cautioned readers to avoid swiping the credit card before applying for a mortgage.

In short, the more you charge, the higher your outstanding balances. And the higher your balances, the lower your available credit and credit score will be.

That’s pretty straightforward stuff, but it may not apply to everyone because some folks may want a higher credit score despite making very few credit purchases.

However, there’s yet another way to give your credit scores a boost without simply doing nothing.

Increase Your Credit Limits

I’m talking about increasing credit card limits, something that is very easy (and fast) to accomplish thanks to the many credit card management tools now at our fingertips.

If you visit just about any credit card issuer’s website, you should be able to find an area to increase your credit limit online.

Put simply, you enter the desired amount you’d like (e.g. $10,000 if your current limit is $5,000) or you simply ask for an increase and get what you get and don’t get upset.

When it comes to credit card issuer Discover, you simply enter your gross annual income, employer name, and monthly housing/rent payment. Then they present you with your new credit line. It can take as little as a few seconds to get your new line of credit.

With other issuers, such as American Express, you are asked to enter your desired credit limit and then hope they extend it to you. Apparently you can get 3x your starting limit with little trouble.

So if you started with $5,000, you could get it increased to $15,000 simply by visiting the American Express website and filling out an online form.

The underlying goal of such moves is to lower your credit utilization, which is the percentage of credit you’re actively using at any given time.

A lower utilization, similar to a lower debt-to-income ratio, is viewed favorably.

So imagine you have that American Express credit card with a $5,000 limit.

If you currently have a $2,500 balance, even if it’ll be paid off on time and not revolved, you’re essentially using 50% of your available credit. This isn’t a good thing when it comes to credit.

You may actually want to keep your utilization below 25%, in this case, no more than $1,250, again, even if you pay it off in full by the due date.

But what if you naturally charge a lot on your credit cards each month, despite paying all of them off every month? What can you do to keep utilization low?

Well, if your credit limit happened to be $10,000 instead of $5,000, that $2,500 balance would only represent 25% utilization.

In other words, all you have to do is ask for higher credit limits, instead of spending less. Of course, spending less will sweeten the deal and ideally push your credit score even higher.

Tip: It’s easier to get credit limit increases approved if your balances are low because you’re viewed as a lower risk customer.

Pay Off Your Existing Balances

In conjunction with this tip, you can pay down any balances you may have, assuming you don’t pay your credit cards in full each month.

If implemented together, you can get higher limits and reduce balances, which will be a one-two punch in the credit utilization department.

So using our same example, if the person with the $2,500 balance lets it float from month to month and only has a $5,000 credit limit, imagine if they got a higher limit and started paying it down.

They could push their utilization down from 50% to say 15% if they got the limit increased to $10,000 and paid $1,000 off the balance.

These actions should result in a higher credit score, which generally means a better mortgage rate if you apply for a home loan.

Additionally, smaller credit card balances mean you’ll have more of your income available to use toward a mortgage payment. So you may actually be able to qualify for a larger mortgage and/or buy more house.

The only caveat here is that a credit limit increase request could result in a hard inquiry on your credit report, which could ding your credit slightly. It’s temporary, but could offset some of the expected gains of a higher limit.

So either request the higher limits several months in advance of applying for a mortgage, or ask the credit card issuer if it will result in a hard or soft pull before making the request. If it’s the latter, it won’t harm your credit score.

In any case, you’ll want to approach mortgage lenders with the highest credit score possible to ensure you have the best chance of approval and obtain the lowest interest rate.

source: thetruthaboutmortgage.com

Do Credit Repair Services Actually Work?

If your credit score is suffering, you’ll do practically anything to repair it. However, there are all sorts of scams out there that claim to improve your score. How are you supposed to know the difference? When you come across credit repair services on the internet, it’s not easy to know whether you’re looking at something legitimate.

Of course, credit repair services cost money as well, so you have to question whether they’re even worth it. Is it such a big deal to have a poor credit score? Well, we’re going to break this down for you today, and provide you with the information you need to know about credit repair services.

What Are Credit Repair Services?

A credit repair service is there to try and right the wrongs on your credit report. They’ll analyze your credit score to find out why it’s so low, and then try and improve it. They are experts in their field, so they know all the tricks of the trade and they’ll do their best to turn the problem around. In some cases, it might just be as simple as rectifying wrongs like basic errors in your personal information. Not many of us truly understand how credit works and what goes on the report, so these companies are there to help us out.

Why Do I Need To Repair My Credit, Anyway?

Good question! If you aren’t sure why you need to repair your credit, it’s a sure sign that you shouldn’t be trying to handle this task by yourself. Your credit is one of the most important things you need to get right. In the future, when you’re planning to buy houses or take out big loans, you credit score will come into play. If it isn’t up to scratch, you’ll miss out on many opportunities. But don’t fear! A poor credit score comes about as a result of failing to make payments. If this rarely happens to you, your credit score will probably be quite good! However, if you struggle to pay on time, your credit rating will slowly begin to decline. Eventually, it’ll get out of hand, and it’s a good idea to use a credit repair service before you get to that point.


I’ve Heard About Scams…

It’s true that some companies trading as “credit repair services” are merely a scam to provide false hope. Spotting one of these companies is simple as long as you know what you’re doing. Do you research ahead of time and read reviews about the company you intend to contact. For example, a quick glance of Sky Blue Credit Repair reviews shows plenty of positive feedback. You should never be in a position to get scammed as long as you’re taking the right measures to prepare in advance.


How Can They Help Me?

The most obvious way that a credit repair company can help is to speed up the process of improving your credit score. As previously mentioned, they can spot certain mistakes or errors which they can then challenge with the credit bureaus. You can’t always guarantee a positive result, even when the professionals are involved. Some services offer money back guarantees in case they can’t make any real progress. In a nutshell, these companies are there to do everything they can to clean up your credit score by identifying areas of improvement. They are a quick way of solving the problem, and they’ll be able to give you tips to manage your credit more effectively in the future.


Where Can I Find Them?

You’ll find the majority of credit repair services online. A quick Google search will present a vast number of potential options for you to consider, but remember what we’ve already spoken about. Before you go contacting anyone for assistance, make sure you do your research. What you’ll find in the listings of a search engine is not always reputable. As long as you’ve checked reviews beforehand and ensured it’s the right solution for you, you’ll get value for money.

So, it’s clear that credit repair services do work. The key factor in all of this is making sure you do the right preparation beforehand. You take it seriously with the right amount of care, as a good credit score is such an important thing to have. Even if you don’t intend to use it much right now, it’ll affect your future for things like mortgages and loans. Do what it takes to repair your credit score now, and you won’t ever have to worry about it when the time comes.

source: 20smoney.com

Why do I have a bad credit score and how to improve it?

It isn’t nice being rejected by a lender. You may have set your heart on a holiday or new car, or simply want to roll all of your monthly payments into one, but your plans could be wrecked if you have a bad credit score. When you get that credit rejection, it’s highly likely that there’s something the bank or other lender is seeing on your credit record which is acting as a big red flag. This can seem like the end of the world: a big setback that has wrecked your plans and put you back at square one.

But it doesn’t have to be like that. Hundreds of thousands of people in the UK suffer from poor or bad credit records and many of them have been able to take concrete steps to fix them. And once you have put yourself back on a sound footing with your credit record, it’s just a matter of discipline to ensure that you continue to manage your finances wisely and ultimately get access to more mainstream credit again.

What is a bad credit score?

The three major UK-based credit reference agencies – Experian, Equifax and CallCredit – maintain data on every borrower in the country as well as records on utility and insurance accounts as well as mobile phone contracts. The information held on each person includes a list of existing and past addresses, the history of payments on each credit account going back six years and whether those payments have regularly been made on time. If a person has any defaults registered against them, county court judgements (CCJs) or bankruptcies, this information will also be recorded on his or her credit record.

Anybody has the right to see their credit record. An individual can can apply to one or all of the reference agencies for a copy of the record in return for a small fee. Alternatively, all three of the agencies offer online subscription services where you get access to your credit record as it is updated every month. Once you get hold of your report, you should be able to spot exactly where you’re having trouble and what constitutes a bad credit record.

While you will be able to see immediately where your payments have been late or you have defaulted, figuring out how the agencies and lenders use the data can be more difficult. These organisations use a credit score – usually a figure between 300 and 900 although this can vary – which represents the risk that a particular individual might pose to a lender. In short, the lower the score, the higher the risk, while those with the best credit scores will have higher figures registered against them. Furthermore, that degree of risk might be expressed by one or more of the agencies as ‘very poor’, ‘poor’, ‘fair’, ‘good’ or ‘excellent’. If you have a rating of somewhere between 300 and 400 then this might be classed as ‘very poor’ or ‘poor’ while those with scores of between 650 and 900 may be judged to be ‘good’ or ‘excellent’ risks.

If you are in the bottom categories, then you may well find it difficult getting accepted for most mainstream forms of credit. These include loans, bank account overdrafts, mobile phone contracts and credit cards. In some circumstances, utility companies may be reluctant to set up new contracts and offer you pre-paid accounts instead.

There are some lenders who will offer credit to people in these categories but these may come with higher interest charges, lower capital sums and, occasionally, conditions about security or guarantors.

If your score is somewhere north of 400 but below 600, you will probably be classed as a moderate risk by lenders. That means that you will have access to loans and credit cards but you will probably face higher interest rates and lower credit limits than people with good or excellent records.

Those with the best credit records will be accepted for most or all loans that they apply for and will benefit from the lowest interest charges.

How to Improve Things
It is eminently possible to repair a bad credit score given time and good financial management. While there is no magic bullet, the experience of thousands of other people proves that even those with the worst credit records can find themselves back in the ‘excellent’ category within one to two years if they stick to some fairly simple steps:

    1. Always repaying on time, every time

Financial mistakes don’t stay on your record forever. They only last for a maximum of six years and so long as you make your repayments on time from this point on, this will start to outweigh any of the negatives on your record which will gradually get pushed down the list over time.

   2. Close accounts that you don’t use

Paying off loans or credit cards when you can afford to is sound financial management. It’s no good saving money if you have got debts that you can afford to clear. Rather than spending money on something you don’t actually need, look at the cards that you may have reached your credit limit on. If you pay these off or substantially reduce them, this will reduce your debt to income ratio and this is one of the most effective ways of improving your credit score quickly.

   3.  Consider a guarantor loan

While it may not be obvious, a guarantor loan is a great way to rebuild a bad credit record. It works because a borrower uses the good record of somebody else to borrow the money they need – be that person a family member or friend. This guarantor is the security that the loan will be repaid and will be liable to make repayments if the applicant slips up. But the great thing about guarantor loans is that every time the borrower makes a repayment on time, this goes on his or her credit record and will gradually improve even the worst record.

   4. Choose the right credit card

There are plenty of credit cards out there designed specifically for people with poor or bad credit records. These may be advertised as ‘credit builder’ or ‘credit repair’ cards. They are generally offered with higher interest rates and lower credit limits than other, more mainstream cards, but they give people the opportunity to build up a record of financial discipline by making repayments on time.

Article provided by Mike James, an independent content writer working together with technology-led finance broker Solution Loans, who were consulted over the information in this post.

source: 20smoney.com

Will a Change in FICO Make it Easier to Get a Mortgage?

Somehow it doesn’t seem fair that so much can depend on a single number. Your credit score, whether from TransUnion, Experian or Fair Isaacson Corporation (FICO), can make the difference between owning your own home and renting. It can also cost (or save) you tens of thousands of dollars on interest, since lenders set your rate to reflect the quality of your credit score.

When it comes to mortgages, FICO is the score that matters most. Fannie Mae and Freddie Mac set standards like credit requirements, and since they prefer FICO, lenders comply. It also helps that these two government-chartered companies have programmed credit score requirements into the automated underwriting programs they provide to lenders.

What many borrowers don’t realize, though, is that the algorithms behind their credit scores are not static. They are updated from time to time, and those updates can impact your mortgage.

The Process of Modernizing Credit Reporting

In recent years, as credit reporting companies have improved and updated their models to reflect how consumers use their credit, Fannie and Freddie have been slow to comply, in part because of the difficulty and cost of changing their automated underwriting programs.

Fannie balked at using the newest model, FICO Score 9, which was introduced 2014 and provides fairer treatment for those consumers whose scores have been lowered by medical bill collection accounts in their credit files or who have files with scant information because they make little or no use of the traditional banking system. According to Fair Isaacson, which owns FICO, applicants whose only major negatives are medical collections stand to see their FICO scores improve by a median 25 points.

Pressure is mounting on the two companies to modernize their credit standards, both from Congress and a directive from the federal agency that oversees Fannie and Freddie. Look for these changes in the near future.

How Trended Credit Data Will Save the Day

By mid-year 2016, Fannie Mae will begin incorporating trended credit data into its automated underwriting platform. No longer will lenders be limited to making an approval decision on the basis of a single score.

Trended credit data will enhance the static snapshot of a consumer’s credit balances with 24 months of historical data, such as payment and balance. It will help lenders examine and consider how consumers are managing their credit accounts over time. Today, lenders can see consumers’ existing balances on accounts and whether they have paid their bills on time; however, they cannot tell if consumers are consistently carrying debt loads on revolving accounts such as credit cards, or whether they pay their balances in full every month.

For example, a consumer with a large credit card balance who pays it off in full every month could be a better credit risk than a consumer with a large credit card balance who makes only the minimum payment each month. And for consumers who don’t have a large amount of available credit, but pay their balances every month, trended credit data may help originators determine if they are a good credit risk and better their ability to obtain a mortgage loan.

“For some consumers who don’t have a large amount of available credit, but pay their balances every month, trended data may potentially improve their ability to obtain a mortgage by providing lenders with a more complete picture of their credit behavior over time,” Crabtree said.” said Craig Crabtree, General Manager of Equifax Mortgage Services, which will provide the trended data.[1]

Alternative Credit Scores May Be an Option

Legislation was introduced late last year by two powerful members of the House Banking Committee that would require federal regulators and the GSEs to adopt alternatives to FICO that are more inclusive and updated models that incorporate non-banking forms of credit, such as rent, utilities, and cellphone payments to supplement a standard credit file.

If passed, the legislation would allow lenders to use scores from FICO’s competitor, VantageScore, which claims it can provide scores on as many as 35 million consumers, many of whom didn’t have enough credit history to have a score. Many are young, just starting out in their careers. Disproportionately, they are minorities.

Even if the legislation doesn’t pass, it will put serious pressure on the GSEs to modernize their credit reporting policies in the near future.

source: totalmortgage.com

All You Need to Know About Rapid Rescore

Upon first hearing about Rapid Rescore, you might be quick to lump it with all those other credit fix companies vying for your attention. However, Rapid Rescore is not just another company–it is actually a service provided by mortgage lenders and brokers. It is designed to help you improve your credit score within a very short timeframe so that you can secure a home loan at more favorable rates.

What is Rapid Rescore and how does it work?

When you first apply for a home loan, the bank, financial institution or mortgage broker of your choosing will check your credit. If your credit is excellent, then you normally have nothing to worry about.

But if your credit does not meet a certain minimum requirement, which varies by lender, you may receive a home loan at a higher interest rate, or you may be denied one. Sometimes, even a difference of 20 points can mean the difference between securing a home loan and being denied.

There are many things you can do to improve your credit over time, but credit bureaus often don’t make the appropriate adjustments for several months. Positive changes to your credit score may not be immediately apparent to those checking your credit for the purpose of securing a loan. However, utilizing the Rapid Rescore service may help you get an improved credit score within just a few days time.

When you use Rapid Service, you will receive a list of possible actions you can take to improve your credit score quickly, such as disputing certain items that appear to be incorrect, like a balance that still shows even though it was paid. Paying off balances can also make a big improvement in your score.

Once you have completed some of the actions, the Rapid Rescore service will submit proof to the credit reporting agencies, enabling the score adjustment to be reflected quickly.

Are there fees involved?

Although Rapid Rescore is a service provided by your mortgage broker or lender, there may sometimes be a small fee involved in using the service. However, some lenders may not require you to pay the fee, and even if they do, the service can often save you much more money in the long run.

How is Rapid Rescore different from a credit repair service?

Credit repair services more often than not attempt simply to eliminate damaging criteria from your credit report, regardless of whether the information is accurate. This is often done without your involvement, and typically takes longer than just a few days. Rapid Rescore works with you in a more beneficial manner, helping you to raise your credit score by 20 to 150 points.

The Rapid Rescore service might even help with a bankruptcy note by acquiring favorable notes from creditors, which will help mortgage lenders better make their decision.

When seeking a home loan, remember that only legitimate mortgage lenders and brokers can provide you with the Rapid Rescore service. If you are successful in raising your credit score, you may even be able to afford a higher mortgage.

source: totalmortgage.com

Raise Your Credit Score with These Tips

When it comes to getting a good deal on a mortgage, your credit score may be even more important to you than you realize.

It’s one of the three most important metrics lenders use to decide whether or not to approve your mortgage application; the higher your score, the more confident they are that you will make your monthly payments on time. Most home buyers don’t know how much their credit scores impact the mortgage rates they will pay.

Let’s play with some numbers.* A $250,000, 30-year fixed mortgage will require monthly payment of principal and interest of $1,527, for a borrower with a 620 score. That’s a total of $299,821 of total interest paid over thirty years.

If you have a better credit score of 700, you are considered a less risky borrower. You can expect to pay $1,313 monthly for a total of $222,689. If you have an extremely favorable credit score of 780, you fall into the top-tier range of borrowers, and lenders will likely offer you a lower mortgage rate along with more loan choices. Your monthly payment will be $1,280 for a total of $210,681.

Here are some tips to help you get your credit under control and turn it into an asset if it is a liability today.

Start now. Credit scores don’t change overnight. If you plan to buy a home a year from now, you need to get to work immediately in order to get your credit in shape by the time you apply.

Do a reality check. Order your credit histories from the three primary credit bureaus: Experian, Equifax and Transunion. Review them for accuracy. You’ll see immediately how detrimental making a payment that is late by only a few days can be to your credit.

If you see errors that you can document, ask for them to he removed. Take note of any really serious marks against you like foreclosure, bankruptcy, tax liens and collections actions. If you have any of these, they will remain on your record for five to seven years and you will have to work extra hard to improve every other aspect of your credit to qualify. Sign up for a service that will notify you of changes in your credit.

Pay your bills on time. If you have missed payments, get current and stay current. Sign up for a “wallet” program through your bank or online service. Pay your bills through your bank so that there is no delay.

With today’s technology, there is no excuse for ever making a late payment to a regular monthly creditor. The longer you pay your bills on time after being late, the more your FICO Scores should increase. Older credit problems count for less, so poor credit performance won’t haunt you forever. The impact of past credit problems on your FICO Scores fades as time passes and as recent good payment patterns show up on your credit report

Reduce your use of credit. Most people use their credit too much. Create a budget and learn to live on a cash basis. Use your credit cards only for purchases you can pay off quickly or for emergencies. Keep balances low on credit cards and other “revolving credit”; high outstanding debt can affect a credit score.

Don’t close unused credit cards as a short-term strategy to raise your scores, but don’t open new credit cards just to increase your available credit. Reducing your balances is important, but taking the next step and closing cards won’t really improve your case; lenders like to see that you have credit available. A closed account remains on your credit report.

Especially, do not close your oldest credit card account. A long history of using and making monthly payments will improve your score. However, this is certainly not the time to open new credit cards. New accounts will lower your average account age, which will have a larger effect on your scores if you don’t have a lot of other credit information. Rapid account buildup can look risky if you are a new credit user.

Keep balances low on credit cards and other “revolving credit”. This is also not the time to make large purchases. Rather reduce your outstanding debt by increasing your monthly payments. If making minimum payments has been your practice, stop now and pay more.

Have credit cards – but manage them responsibly.
In general, having credit cards and installment loans (and paying timely payments) will rebuild your credit scores. Someone with no credit cards, for example, tends to be higher risk than someone who has managed credit cards responsibly.

Don’t relax until you have closed on your new home. Mortgage lenders often pull the credit history of a customer the day before they close. If there is a significant change in their FICO or a new purchase that raises their debt, they are within their rights to raise the interest rate or cancel the mortgage altogether. Don’t relax until they hand you the keys to your new house.



*These are for demonstration purposes only. Your numbers may differ.

source: totalmortgage.com

A Few Easy Ways for You to Improve Your Credit Score

Few people truly understand credit scores. This isn’t surprising, since the algorithm used for the calculation of a credit score are so complex that only a computer can perform them. Most people want to figure out how to improve their credit score, and this leads to a number of questions. Those questions (and their answers) are below, as well as five great ways to help you improve your score.

Questions (and Answers) People Have about Improving Their Credit Score

• Should I hire a credit repair company in order to improve my score? No, you can do it yourself and save money.
• Will my score improve if I get married? No, your score is personal.
• Will my score improve if I make regular payments on time? Yes, this is one of the most important ways to increase your score.
•  

Let’s take a look at some of the ways in which you can improve your score.

1. Get Rid of Any Issues

This is a slightly sneaky trick, but if it works, it’s worth it. Ask for a copy of your credit report and officially file a dispute against each of the negative marks on there. Chances are that the credit of at least one of them will not respond, which means the credit bureau will remove it. Of course, do also check whether there are any marks on there that actually need contesting.

2. Ask for an Increased Credit Line

If you have a higher credit line, then your credit utilization ratio will also improve. This is because you will use a smaller percentage of your actual limit. As a result, your credit score will improve. With credit cards, you can usually request an increase without them checking your credit score. It is always worth asking, therefore. However, if they want to do a credit check, cancel your application because that will give you a new negative mark.

3. Pay Your Debt

You have to make sure you have as little debt as possible on your file. The less debt you have, the better your credit utilization ratio. The best way, but not the quickest way, to achieve this is by paying your debt. Always pay the debt with the highest interest rates first, as that will improve your credit utilization ratio the quickest.

4. Use the Credit Card as Little as Possible

You may think that you are doing the right thing by always paying off your credit card, but your score is calculated on your balance once a month. If that happens to be the day before you pay your balance, it will actually look bad on you. Hence, use your credit card as little as possible so that your balance is good.

5. Keep Your Eye on New Tips

There are always new tips out there and you should check them out. Follow things like https://123moneyhelp.com/blog to be kept up to date with these new tips. All in all, this will help you improve your score.

source: marriedwithdebt.com

Preparing for a Mortgage 101

You’ve paid rent year after year and what do you have to show for it? Zilch. Zero. Nothing.

If you’re starting to dream about building equity, now is a great time to make the leap. Interest rates are still low, and real estate prices haven’t started to spike yet. Before you apply to a lender, though, there are a few things you should know.

Applying won’t damage your credit

“If you are shopping around for a mortgage and worried that the inquiries will ding your credit score, don’t worry,” said Roman Shteyn, co-founder of Credit-Land.com. “The credit bureaus know that people may go to different providers to check interest rates especially for a big purchase like a house. Loan inquiries within 30 to 45 days of each other for the same thing are lumped together and treated as a single request, and your credit score should not be impacted.”

Your past matters to lenders

They will look at previous mortgages on your credit report to determine your creditworthiness

“We all know a foreclosure has a negative impact on your credit score,” says Shteyn “but many people don’t realize a short sale can be damaging as well. It can knock your score down 85 to 160 points depending on your score at the time and how it was reported to the credit bureau.” Occasionally, a lender will agree to report a short sale as paid which will not negatively affect a credit score. But this is rare.

A short sale is not as bad as a foreclosure, which will make it more difficult to get a loan. It will remain on your credit score for seven years, and lenders will see this black mark whenever you apply for credit during this period.

Lenders handle couples with different credit scores in a special way

If you’re applying for a mortgage loan as a couple, the mortgage lender will check both of your credit reports and credit scores. The bank reviews your debt, the length of your credit history and current credit activity.

Paying bills late and too much debt can negatively impact a mortgage approval, plus influence the mortgage rate. However, some couples believe that they’ll receive a low interest rate as long as one person has excellent credit — but this isn’t always the case.

Typically mortgage lenders use the lowest credit score to determine the mortgage rate. Therefore, if you have a 790 credit score and your partner has a 670 credit score, you’re not likely to receive the most favorable rate due to your partner’s less-than-perfect credit history.

To ensure the best rate, both of you need to maintain good credit before applying for a loan. This includes paying bills on time, paying off debt and checking your credit reports for errors.

For a lender, there’s nothing like responsibility 

Make other loan and debt payments on time, especially over the months leading up to the filing of your mortgage application. Every 30-, 60- or 90-day delinquency on a loan or credit card is going to reduce the credit score the lender considers as part of the loan file. That score, in turn, will determine how good a loan you get — if you get one at all.

You need to be strategic about your personal finances

Consider paying off more debt and putting down a smaller amount at closing. This move leaves borrowers with larger mortgages, but it will allow them to replace non tax-deductible, high-interest rate debt (like credit card debt) with lower-rate mortgage debt that features deductible interest.

If you have a financial setback and need to miss a payment on your other debts, miss the credit card payment first, followed by the payment on any installment loan you might have and finally, the payment for an existing mortgage. That’s because credit scoring systems look at the performance of similar loans first when deciding what type of score to assign.

Before you apply, think about the future

If your next few years are full of big life changes and multiple new financial obligations, apply for a mortgage first. Numerous credit inquiries, such as new applications for credit cards, can hurt a borrower’s credit score, especially if they’re filed in the months prior to the home loan review process.

The value of your potential home can make or break the deal

Sometimes it’s not your fault that your mortgage application is denied. If your home isn’t worth enough, lenders might not approve your request for a mortgage. Say you agree to pay $200,000 for a home and are asking for a mortgage loan of $190,000. If an appraiser determines that the home is worth only $160,000, a mortgage lender might not grant you a loan, even if you are willing to pay the higher amount.

The 3 big don’ts

We can talk about the things you should do when applying for a mortgage all day long, but realistically, avoiding the big mistakes should be your first concern. Here are five things you should remember.

1. Don’t make any big purchases over the next couple of months. It makes less money available for the down payment and it might require you to get yet another loan.
2. Don’t upgrade too fast. Lenders consider what’s known in the industry as “payment shock” when approving loans. Somebody who goes from a relatively small monthly housing payment to a huge one either won’t qualify for a mortgage or will end up having to cover too much loan with too little money.
3. Don’t just get pre-qualified for a mortgage, get pre-approved. Home buyers must allow their lenders to pull credit reports, check debt-to-income ratios and perform other underwriting steps. But that puts a borrower much closer to obtaining a loan and locking in a rate and term.

source: totalmortgage.com

Eliminate Financial Stress With A Personal Line Of Credit

There are plenty of reasons you might find yourself in some financially dangerous waters. You might have had to run your child to emergency care and are left to deal with the subsequent bill; you could be in between work contracts and come up short for your next utility bill. Whatever the case may be, sometimes you aren’t prepared for what life throws at you – through no fault of your own. But that doesn’t make the reality of being strapped for cash any less harsh. When you find yourself momentarily short on money, do you know where you can turn?

Not everyone is blessed with family or friends who can help you balance the check book when you’re in need of some help. Even if it’s just $300 to smooth out the edges until your next contract starts up again, that can be out of your (and your social circle’s) abilities. Luckily, there’s an organization that you can turn to and no – it’s not the bank. In order to secure a loan with your local financial institution, you have to jump through hoops and hurdles just to speak with a bank representative, after which you’ll have to wait weeks while they review your application and credit score. When you’re bills are due in a few days, you can’t afford to wait and play by the bank’s schedule.

The alternative that you’re looking for is a personal line of credit with an accredited direct online lender. These lenders understand the importance of having cash for when you need it, so they’ve developed a process whereby your application won’t have to go through credit bureaus and other institutions before it’s approved. As opposed to the average traditional lender, they’re the lender that directly approves and facilitates your loan. By cutting down on the middle man, they can give you your loan that much faster.

A direct online lender like MoneyKey can approve your application quickly and deposit your approved limit in just 24 short hours. The limit of a personal line of credit from MoneyKey depends on your state of residence, as they pride themselves in following the rules and regulations provided by the state. That’s because they want to set you up with the appropriate tools for responsible lending habits. By following state sanction laws and providing you with information regarding online lines of credit, they want you to flourish. They don’t want you to take out a line of credit amount higher than you can reasonably pay back any more than you do.

Having a line of credit for whenever you find yourself short on cash (be it when your child is in the hospital or when you’re a couple of weeks away from the start of another contract), can take a stressful situation and make it more manageable. When you finance your credit with a responsible direct online lender, you can trust that you’re covered for when life puts a crick in your budget.

source: christianfinanceblog.com

Young professionals urged to start building credit history

MANILA, Philippines – Young professionals have been urged to start building their credit history as the country prepares to have a fully-operational integrated credit bureau soon.

Credit Information Corp. president Jaime Garchitorena said it is important for the youth to start being conscious of their credit usage to benefit them in the future.

“The earlier you start building your credit score or credit history, the better for you,” Garchitorena said as the CIC plans to launch a credit score database by 2017.

Currently, the CIC is still building a centralized credit information system. Garchitorena earlier said the CIC should have at least five credit bureaus under its wing working on and expanding databases dealing with the credit activities of individuals, groups, and corporations by December.

The CIC plans to draw data from utility firms, telcos, state-pension funds, and other government agencies aside from financial institutions to help create this registry.

Since having a “good” credit history would help individuals take out loans for business ventures, properties, or vehicles in the future, Garchitorena said the public, especially those in their 20s and 30s, should make sure all their credit behavior should be attributed to them.

For one, individuals should get a postpaid line as soon as they can and make that their starting point for building a credit history.

“The only excuse people use to not get a postpaid line is they don’t want to exceed their limit but telcos have responded to this already… so you can easily cut-off at say, the P400 that you can afford to pay,” Garchitorena explained.

Another consideration for young professionals should be the electricity and water bills they are paying especially if they are renting an apartment or a house.

“Chances are, the [electric or water] meters are in the name of the owner… so you’re wasting all that good credit behavior because it’s in the name of somebody else,” Garchitorena stressed.

He also noted parents should also consider transferring the name registered with water and electric companies to their children so the latter could have his or her own credit history.

“Now you have to make sure that all the good credit behavior data that you can gather is now attributed to you,” Garchitorena said.

At present, the CIC has “very limited” information on the credit behavior of individuals and businesses, and none of these data are connected.

However, Garchitorena is confident that the CIC will be able to gather records easily and be able to launch credit scores in 2017 as the agency has already started extracting information from various databases.

The government owns 60 percent of the CIC, while the remaining 40 percent is held by the Bankers Association of the Philippines, Chamber of Thrift Banks, Rural Bankers Association of the Philippines, Philippine Cooperatives Center, and the Credit Card Association of the Philippines.

It was created in 2008 to establish a central system for credit information partly to ease the access of individuals and corporations for loans.

Read more on The Philippine Star.

source: www.abs-cbnnews.com

What is an FHA loan?

In 1934, the long road to recovery began for the U.S. economy. For the housing market, this meant the creation of the Federal Housing Administration (FHA) loan.

The loans issued under this program are insured by the federal government, decreasing the risk of loss for lenders. With its less stringent rules, more borrowers were able to qualify, which gave a boost to the housing market.

Much has changed since 1934, but the FHA loan has basically remained the same. Here are eight things to know about this government-backed mortgage.

1. Down payment as low as 3.5%

Unlike most conventional mortgages, which require 5-20% down*, the FHA loan can have a down payment requirement as low as 3.5%. This makes it much easier for lower income borrowers to purchase a home. There are even government-assisted programs available that offer grants for down-payments.

*Fannie Mae and Freddie Mac now offer a conventional mortgage program that requires 3% down.

2. Perfect credit isn’t needed

When making any large purchase, your credit score is an important number. When it comes to FHA loans, a credit score of 580 or higher will get you a down payment around 3.5%.

If you have a credit score between 500 and 579, you’ll have to put at least 10% down. For those with credit scores under 500, unless you qualify for “nontraditional credit history or insufficient credit”, you will probably not qualify for an FHA loan.

Also, if you have ever made an appearance on the governments’s Credit Alert Interactive Verification Reporting System (CAIVRS), you will have to clear your name to become eligible for an FHA loan.

3. Financial relief is possible

If the borrower is struggling to make their mortgage payments due to a legitimate financial hardship, the lender can choose to offer a temporary period of forbearance, a loan modification, or a deferral of part of the loan balance.

4. Lender must be FHA-approved

While the FHA does insure the loans, they don’t lend them, so borrowers must find an FHA-approved lender. Just like with conventional loans, lenders will offer different interest rates and fees on identical loan types.

5. Two-part mortgage insurance is required

All FHA loans require two mortgage insurance premiums. There’s an upfront premium, paid once the borrower receives the loan, which is 1.75% of the total loan amount.

Then there is the annual premium, whose title is somewhat deceiving as it’s paid on a monthly basis. The length of the loan, the amount borrowed, and the initial loan-to-value ratio (LTV) all affect how much a borrower will have to pay.

6. Funds for a fixer-upper are available 

The FHA’s 203k loan is geared specifically toward buyers who plan to purchase and renovate their home. Structural alterations, modernization and improvements to the home’s function, a roof replacement, and septic system repair are all eligible projects, along with many others.

7. No closing costs are possible

Closing costs are another upfront fee that can be challenging for some borrowers to pay. Recognizing this fact, the FHA permits sellers/builders/lenders to offer deals around closing costs.

8. Loan could be assumable

FHA loans can be assumable, meaning a buyer will purchase the home and take on the mortgage of the current owner. Everything is the same: the rate, the repayment period, the principal balance.

In the right circumstances, this process can be simpler and less costly than getting a new mortgage. It’s particularly attractive when rates are rising.

If an FHA loan sounds like the option for you, click here and get started today.

source: totalmortgage.com

Why Your Mortgage Lender Asks for More Than Is Required

It’s no secret that there is a lot of confusion surrounding mortgages. One of the main gripes is that requirements aren’t the same across different banks and lenders.

See why every mortgage lender will disappoint you for more on that.

Unfortunately, it’s very difficult for lending standards to be uniform from bank to bank because of the complexities of mortgage financing.

First off, no two borrowers are the same, so just because your neighbor got approved over at Wells doesn’t mean you will.



The same goes for properties – like snowflakes, no two are exactly the same…well, maybe some tract homes are, but their locations aren’t.

There are also many different types of loans, including those backed by the government, such as FHA and VA, and those quasi-backed by the government, such as Fannie Mae and Freddie Mac.

For the record, that latter group of mortgages is also backed by you, the taxpayer, thanks to the reckless lending that took place before the latest mortgage meltdown.

The risk appetite of lenders is also quite variable.

Overlays Add to the Confusion

On top of this already confusing situation is the prevalence of credit overlays, which are additional requirements individual banks and lenders put in place above what is asked of them when receiving a guarantee from Fannie, Freddie, and Ginnie Mae.

For example, even though you technically only need a 500 credit score to qualify for a FHA loan per HUD, most lenders ask for much higher scores.

This is a common type of overlay, in fact, the most common, according to a recent survey conducted by Fannie Mae.

But instead of originating mortgages based on agency guidelines, skittish lenders are requesting higher credit scores, lower LTV limits, lower DTI ratios, and more paperwork.

Just take a look at the chart above and you’ll see that nearly half of banks that impose overlays want a higher-than-necessary credit score.

If you’re wondering why they do this, it’s for two main reasons. First, they want to make higher quality loans, which should keep their default risk low and profits high.

Secondly, they implement such overlays to reduce the chances of having to repurchase loans they sell to investors.

Call the overlays a buffer or a cushion to keep the lender at arms length from any nasty situations that may arise, even if unnecessary.  It’s like when you overpack your suitcase just in case…

Finding a Lender That Doesn’t Impose Overlays

While you might be annoyed that your lender is requiring more than Fannie, Freddie, or Ginnie require, know that not all lenders impose overlays.

In fact, only about 41% of lenders that deliver loans to the GSEs or Ginnie Mae said they apply overlays.

And most (64%) do so on a “limited basis,” meaning on 20% or fewer of their loans.

However, overlays are more common on loans acquired or originated via the wholesale channel, which includes correspondents and mortgage brokers. If it’s not happening under their roof, requirements will likely be more stringent.

For the record, large and mid-sized lenders are the most likely to apply overlays, while smaller institutions are more likely to originate based on agency guidelines.

Credit unions are the least likely to impose overlays (84% don’t), followed by depository institutions (73% don’t).

Conversely, 61% of mortgage banks are likely to ask for more than is necessary.

So if you can only qualify for a mortgage based on the agency guidelines, perhaps seeking out a smaller credit union or local bank is the way to go.

Of course, results may vary, but this does give us an idea of where it might be easier to get a loan.

source: thetruthaboutmortgage.com

Tips to Ensure Your Bad Credit Doesn’t Cost You a Job

Unbelievably your bad credit can cost you a job. Employers can examine you and if they discover your credit score is low, they may decide not to employ you.

Why is this?

They believe it is a mark of a lack of responsibility. Someone who cannot take care of their finances should not have a position of responsibility within the company. It is a hard reality to deal with. There are actions you can take to ensure this does not happen, though.

Establish a Secure Line of Credit

Store cards and cards for people who have bad credit are an ideal way to begin rebuilding your credit score. There are two main features to these lines of credit:

1. They have higher interest rates.

2. You can expect them to have far lower limits.

They are like the training wheels of the financial world. Once you learn how to use these correctly, you can graduate to riskier cards with higher limits and lower rates.

Utilization Rates

You should never use more than 30% of your credit limit at one time. This is known as the utilization rate. If you have a utilization rate of 30% or over, this is a sign you are financially irresponsible. It is an example of you relying on your cards to survive, and that is not a good sign.

Only go over these limits in an emergency, and make sure you get below this limit as soon as you can to preserve your credit score.

Pay On-Time and in Full

Late and partial payments have the biggest detrimental impact on your credit score. Whenever you make a purchase on a card, you should always check whether you can meet the repayment by the deadline. If you cannot do not make the purchase.

When Your Score Improves

As your score creeps towards the 680 mark this is where you start to appear on the databases of credit card companies. This is where they are interested in sending you offers for higher tier credit cards. Acting in the wrong way here can cause your score to plummet once again.  Just be sure that there are some things that can kill your credit score.

If you want to keep your chances of getting that job high, stick to the same principles as before. Only take higher tier credit cards if you know you can make the repayments and prevent yourself from getting carried away.

On the other hand, dealing with higher amounts of credit successfully can continue to push your credit score ever higher. A bad credit score can destroy your ability to get a job, but a good credit score can enhance it.

Conclusion

It is unfair that something like personal finance can now come into finding a job. However, we cannot do anything about it. Your only option is to work on improving your credit score.

It really depends on the type of job you are applying for, though. Remember that good personal finance is a mark of responsibility and integrity. If you are applying for a position that requires both of these things, expect them to check your score. If not, you might not need a good credit score.

Have you ever encountered a situation where a credit score has held you back from getting a job?

source: 20smoney.com

Rebuilding Your Credit in 10 Simple Steps

No one wants to have bad credit. A lot of doors will close on you financially. You might not get qualified for loans and in some cases, employers check credit reports before deciding to hire you. Rebuilding your credit doesn’t have to be complicated and along with a little patience and some planning, you can obtain an excellent credit rating. To make a little improvement on credit scores, we’ve come up with a few guidelines to walk you through and bump up your score to the “good range”.

Here are 10 simple yet effective steps on rebuilding your credit score:

1.    Watch out for those credit card balances and make payments on time. It is best to always double check your statement when your bill arrives to ensure that the charges are correct and accurate. Check out and see if the credit card issue will accept multiple payments throughout the month if you’re able to. Making payments on time may seem the most obvious out there but be aware that late payments are the most negative information that can appear on your credit report. It’s essential that you at least pay the minimum amount in a timely manner, without exceptions.

2.    Keep your credit balances low. Your credit cards, as well as your payment history on those credit card accounts impacts your score. Prove that you are actively reducing the balances while being a responsible card user.

 3.   Leave “good” old debt on your report. Once you have paid off the balances on your debt, don’t go and hurriedly call to close off and have it removed from your credit report. This is considered good debt and it’s good for your credit. The longer the history of good debt you have, the better your credit score is.

 4.   Apply for credit only if it’s needed. It might be tempting to open up a new charge or credit card account when you go shopping for big items and they would offer great financing deals on large purchases with that retailer. Think this thoroughly because each time you apply for a credit, it could cause a small dip on your score that lasts a year because if you make multiple applications for credit, it means that you want to use more credit.

 5.   It’s best to separate accounts after a divorce. The information on each person’s credit report will impact their spouse’s and when the divorce proceedings move forward, make sure that everything is paid off and close all joint accounts or have one name removed from each account. As long as both names appear on the account, both parties are still responsible for its activities.

 6.   Make sure old information is removed and correct inaccurate information on your credit reports.

 7.   If possible, avoid bankruptcy at all cost. This should be considered as the last and final solution if everything did not work out at all. It’s one of the worst things you can do to your credit and it will continue to haunt your credit report up to 10 years even if you would have recovered already.

 8.  Don’t risk it. Missing payments and paying less or charging more than you normally do could sink your credit score.

 9.   Avoid excessive inquiries. Each time you’d apply for any type of loan or a credit card, potential creditors will inquire on credit reporting agencies about your status. Having multiple inquiries in a short amount of time can drastically reduce your credit score.

10.  Negotiate with your creditors. A lot of creditors are willing to understand your situation as it also impacts their business. It never hurts to ask and they could offer you a resolution that’s acceptable and within your financial means.

Don’t obsess. Just be focused on your score when you know that you’ll need credit. As long as you are being financially responsible and diligent in making payments up-to-date and learn from your previous mistakes, you’ll be on your way to financial stability and managing your credit properly. Should you need any further assistance in working on your credit score, you can go to Trust Deed Scotland and let them help you in rebuilding your credit.

source: everybodylovesyourmoney.com

6 Ways to Lower Your Interest Rate

If you’re in the market to buy a house, you probably see dozens of advertisements from lenders trumpeting interest rates that seem impossibly low.

Actually those are real rates—but they are reserved for a very elite few borrowers with the best credit, the largest down payments, and the ability to qualify for pretty much any loan amount. The rest of us never see those kinds of rates.

Many factors determine the rates lenders charge. These include their cost of money, which is a function of a long list of factors ranging from the prime rate that the Federal Reserve charges banks to the cost of money in the global economy. The amount they want to make on the loan, the risk each borrower presents, and even the lender’s location all impact the actual rate that the lender will quote you when you apply for a loan.

You can’t do much about these factors, which is why it is wise to shop around widely for a lender. After all, you are about to take out the biggest loan of your life. However, there are a number of factors that determine your interest rate that you CAN do something about.

Knowing what they are and know how to influence them can save you hundreds of thousands over the life of your mortgage.

1. Credit score

Your credit score helps lenders predict how reliable you’ll be in paying off your loan. Your credit score is calculated from your credit report, which shows your payment history on loans and debt over the past seven years.

Other factors, such as the amount of credit you can access and recent requests for credit reports from lenders, also impact your credit score. In general, if you have a higher credit score, you’ll be able to get a lower interest rate.

Before you begin shopping for a home, review your credit report carefully. Clean up errors. Make sure you pay every bill promptly and don’t take out credit cards or lines of credit that you don’t need. If you have too much credit, pay off some of your cards and close the accounts. Avoid applying for new credit until after you close on your home.

Only apply for your mortgage with lenders you have researched and are serious about; every time your credit history is pulled, even if you never do business with the lender who makes the inquiry, it hurts your credit rating

2. Loan amount

Typically, you’ll pay a higher interest rate if you’re taking out a particularly small or particularly large loan. If your loan exceeds the loan limits for FHA, Fannie Mae and Freddie Mac, you will have to take out a jumbo loan, which could raise your rate by several points.

In 2015, the loan limits for single family homes range from $417,000 to $625,000, depending on location. Just because you are pre-approved by a lender to borrow a large amount, be prepared to pay a higher rate if you decide to borrow the maximum.

As a general rule, it is not wise to end up with a mortgage at the upper limits of your pre-qualified or pre-approved ceiling. You are taking more risk in a depressed market, like the one that hit in 2007, you could find yourself “house poor” and under-equitied, leaving yourself vulnerable to foreclosure.

3. Down Payment

The amount of your down payment affects your interest rate because larger down payments lower the amount of the loan and, therefore, lower the risk that the lender incurs.

Lenders will reward larger down payments with better rates; they want borrowers who are willing to put a larger personal stake in the property. So if you can put 20 percent or more down, do it—you’ll usually get a lower interest rate. You will also pay less interest over the life of the mortgage.

4. Loan Terms

Shorter term loans have lower interest rates and lower overall costs but higher monthly payments. Interest rates come in two basic types: fixed and adjustable.

Fixed interest rates don’t change over time but adjustable rates have an initial period—usually five to seven years–that is lower than a fixed rate. At the end of the initial period, they “reset” and fluctuate based on market factors.

5. Loan Type
You may have wider variety of loans from which to choose than you realize and these may have different interest rates. If you are a veteran, you may qualify for a VA loan. An FHA loan will get you a lower down payment than a conventional loan because the government is taking on most of the risk.

Many state and municipal housing authorities offer loans similar to FHA loans at lower down payments and rates than commercial lenders. Most have income limits and some down payment assistance programs are limited to first-time home buyers.

6. Timing and Locking

In mortgages, timing is everything. Mortgage rates can change quickly and missing a “bottom” as interest rates change can cost you a lot over the life of a mortgage. Follow the financial news carefully. Try to time your house search to correspond with changes in rates. If you think rates are going to rise, act quickly. If they are falling, take hour time until you think they won’t fall further.

When your loan application is approved, lenders are obligated to offer you an agreed-upon rate regardless of whether mortgage rates have changed between the time of the loan approval and the closing date.

However, many lenders will let your rate continue to float until you close so that you can lock in the best rate during the lock-in period. A rate lock is a guarantee from a mortgage lender that they will give a mortgage loan applicant a certain interest rate, at a certain price, for a specific time period.

The price for a mortgage loan is typically expressed as “points” paid to obtain a specific interest rate. (Points are basically prepaid interest, so the more points you pay, the lower the interest rate; 1 point equals 1 percent of the loan amount.) Locked in rates are good for 30, 45 or 60 days and can be extended if closing takes longer.

source: totalmortgage.com

What Does It Mean to Be Pre­-Approved for a Mortgage?

Wouldn’t it be nice to know what you can afford before shopping for a house? With a mortgage pre-­approval, this is exactly what happens. Getting pre­-approved for a mortgage isn’t required to look at properties or bid on a home but there are advantages to meeting with a lender beforehand.

Pre-approvals help eliminate the guesswork when shopping for a property. Mortgage lenders can determine early on whether you qualify for a home loan and how much you can afford. Therefore, you don’t waste time looking at houses outside your budget.

A pre­-approval also tells realtors and sellers that you’re a serious buyer. It might come as a shock, but some sellers will not accept offers from bidders who are not pre-approved. Since sellers are eager to sell their homes and move on, they don’t want to take a chance with someone who might not be able to get financing.

Pre­-Qualification vs. Pre-Approval

It’s important not to confuse a pre-­approval with a pre-­qualification. Both are preliminary steps in the mortgage process, but there are differences.

A pre­-qualification is an initial assessment of whether you meet the qualifications for a mortgage, but it doesn’t guarantee financing. Pre-­qualifications are based on the information you provide on a pre-­qualifying form, which only asks for basic information like monthly income and an estimation of your credit score.

Understand, however, you can’t get a mortgage off a pre-­qualification. A pre-qualification says you might be a good candidate for a mortgage. A pre-approval, on the other hand, goes a step further. Getting pre­-approved for a mortgage involves completing an official loan application with the bank and going through the underwriting process.


Get started with your pre-approval today

What a Mortgage Pre­-Approval Entails?

With a pre-­approval, the mortgage lender will pull your credit and carefully scrutinize your credit activity and debts. You’ll have to submit your recent paycheck stub and tax returns from the past two years, plus provide copies of bank statements and disclose any assets you have.

Based on all of this information, the lender decides whether you’re eligible for a mortgage, and determines how much house you can afford. A pre­approval letter is the official green light to start looking for a house. If you must choose between a pre-­qualification and a pre-­approval, go with the latter. Unlike pre­-qualifications, pre-­approvals are practically written in stone, providing your credit, job status and income doesn’t change prior to closing.

Avoid Jeopardizing a Mortgage Pre­-Approval

It’s important not to make any significant changes to your personal finances after getting pre-­approved for a mortgage. Something as simple as getting store financing or financing a new automobile can jeopardize a mortgage approval.

This mortgage approval is based on your debt and income at the time of applying for the pre-­approval. Getting a new auto loan or acquiring some other type of debt before closing increases your debt­-to-­income ratio. And with a higher debt-to-­income ratio, there’s the risk of being disqualified for the mortgage. So wait until after closing to apply for financing.

The lender will check your credit about one or two days before closing to ensure no changes to your credit history and score. If everything checks out fine, you can proceed with closing and get the keys to your new house.


source: totalmortgage.com

How a former 'credit card-aholic' got out of debt

MANILA – When a bank offers you a credit card with a P200,000 credit limit, annual fees free for life, and only proof of employment as requirement, will you accept it?

For then-office employee Aldwin Tanjutco, who admitted that his salary wasn’t enough to buy the things he wanted, the decision was easy.

“I felt empowered because I’ll be able to buy already the things that I want to buy even without earning money first. It gave me the illusion of cash, cash that I don’t even have — unlimited cash. With the card, I just spend and spend and spend,” he told ANC’s “On The Money.”

Tanjutco said he had second thoughts on using his credit card for purchasing items, but he gave in to the temptation to spend.

The high credit limit, unfortunately, became a spending target for Tanjutco.

“I thought about it, but the temptation of spending overcame the intention on how I’m going to pay for it,” he said.

In just five months, Tanjutco maxed out his credit card and found himself in huge debt. He also started to incur a large amount of interest because he wasn’t able to pay his monthly dues.

“I am spending more than I’m earning, so I wasn’t able to pay it in full, in fact I was only paying the minimum. Sometimes, even below the minimum. So you can imagine just how much interest they are charging,” he said.

He began paying off a chunk of his debts with mid-year and Christmas bonuses, and when he felt that he could handle his debt, he asked the bank to increase his credit limit.

His credit limit was increased to P230,000, which for Tanjutco, meant he could spend more.

When Tanjutco again found himself struggling to pay off his monthly bill, collecting agents began calling him, which made him realize the serious situation he put himself in.

Tanjutco said he was given a 25 percent discount to make it easier for him to pay off his debt in a 12-month period.

He learned that credit cards can be your friends, if you know how to use your credit wisely.

The next time Tanjutco applied for a credit card, however, he was denied because of his bad credit.

To clear his bad record, he sought the help of the Financial Consumer Affairs Group of the Bangko Sentral ng Pilipinas (BSP).

“I felt relieved because finally there was hope that I can clear my bad record in terms of credit score. After a day of two, a BSP director emailed me and forwarded my letter to the concerned bank,” Tanjutco said.

“I realized that I shouldn’t spend what I couldn’t pay for. I should spend below my means. If I have debts, 20 percent of what I earn, I just maintain it at that level so that I can manage it,” he added.

Tanjutco, who is now a business owner, admits that he still has debt, but now he knows how to manage it well.

“I felt empowered. I cannot say that I am 100 percent financially free, but I feel that I am moving towards what my goal is,” he said.

Abraham Co, board member at Credit Information Corp., advised consumers that being aware that there is consequence to how you behave financially, will change behavior.

“If you think that there is no consequence and you can get away with this, then you will continue your bad habits. But if you value your future, and know that there would be consequence, then that will change behavior,” he told "On The Money."

Credit Information Corp. board member Suzanne Felix, meanwhile, said credit card owners should be more responsible in their spending to protect their credit record.

“It’s about time as borrowers that we develop that sense of responsibility. The banks are doing their part, so the borrowers should also be doing their part,” she said.

source: www.abs-cbnnews.com

How to Improve a Bad Credit Score

There’s a lot of talk, especially with the debt free movements (which are great, btw), about credit scores. Some people will tell you that credit scores are only important if you plan on taking out debt. Other people, like me, know that they are used for so much more.

In fact, beyond getting a good interest rate on a loan your credit score is used in determining your insurance premiums and can be a factor on rental and job applications.

Having a good credit score can save you a TON of money. And luckily, credit scores aren’t permanent. It will take some time to raise a low one, but it can be done.

Here’s how to improve a bad credit score.

First, Know Where You Stand

Let’s treat this like a game. It makes the process more fun. Before you begin to work on improving your credit score let’s see where you stand.

You can get a completely free credit score from Credit Karma here. There are no gimmicks. It’s one hundred percent free. This is a great service you should be taking advantage of so go ahead and do so.

You can use Credit Karma to check your credit score on a monthly basis.

Get a Copy of Your Credit Report

Next you need to request a copy of your credit report. You can get one copy per year from each of the major credit bureaus at annualcreditreport.com

Look through your credit report for any discrepancies. If something is inaccurate dispute it with the reporting credit bureau.

If you have collection accounts on your credit report it’s important to note that paying those balances off early will NOT remove them from your credit report. They will stay on your report for seven years.

Lower Your Credit to Debt Ratio

One factor that plays a large part in your credit score is your credit to debt ratio. This is calculated by how much debt you owe compared to how much credit is available to you. The lower the debt to credit ratio, the better.

There are two ways you can lower this:

• Pay down your debt.
• Have your credit limits increased.

If you have a problem with debt and credit card usage then paying down your debt will be a better option than calling your credit card companies to see if you can have your limits increased.

Pay Your Bills on Time

If you’re behind on your bills then you need to work on getting caught up. Paying your bills on time is a huge factor in your credit score. This proves your responsibility.

Make every effort to pay your bills on time each month. Even if this means you can only make minimum payments.

It’ll Take a While

You’re not going to see immediate improvements in your credit score, no matter what you do. However, if you can work on paying down your debt and make your payments on time each and every month then you should see an improvement in six months to a year.

source: everybodylovesyourmoney.com

Rejected for a Mortgage? Here Are Your Next Steps

There’s nothing worse than having a house all picked out, only to hear back from the bank that you’ve been rejected. You’re far from alone, though. In 2013, about 14.5% of all new purchase loans were denied by lenders, and that number climbed to 22.7% for refinances.

Where you go from here depends on many factors—why you were rejected, what your individual finances look like, etc.—but here are a few ideas you should definitely consider.

Try a different tactic

Occasionally, it is possible to turn around and apply with a different lender who has fewer restrictions. This is because some lenders tack additional guidelines onto those that are required by law, making it more difficult to qualify. On your second go around, try a local bank—they often more willing to work with individuals.

If that isn’t an option, you may want to consider applying for a different loan program. A normal 30 year fixed may be considered the standard, but that doesn’t mean it’s for you. Mortgages backed by the government—FHA, VA, and USDA loans—tend to have less strict requirements (FHA, for instance, allows a credit score as low as 580).

Work on your credit

Credit issues are one of the top reasons lenders reject loan applications. Often, people only realize their credit is a problem when the time comes to make a large purchase, but ideally, you would be keeping an eye on your credit situation well in advance.

If your problem is your credit, start by paying off as many cards as you can (but don’t close them immediately—your score takes into account how much credit you have open to you vs. how much you’ve used). Even once you’ve cleaned up your act, it can take time for your credit to recover—one to three months, or even longer if you’ve done severe damage.

Troubleshoot your appraisal

Another very common reason loans are rejected is that the appraisal came in too low, leading the bank or lender to think that the property isn’t worth the investment on their part. Sometimes a low appraisal is a fluke. Often, all you can do is move on to a different lender, or, if it happens a second time a different house.

Find a cosigner

If you’re having trouble qualify for credit, debt, or income reasons, asking a close relative to cosign the mortgage with you may be the helping hand you need.

This isn’t always recommended, though. Cosigners are legally responsible for the debt, too, which can raise their debt-to-income ratio and make it difficult for them to make large purchases in the future. Plus, money and family don’t typically mix well.

source: totalmortgage.com

Credit Card Mistakes That Can Keep You From Getting a Mortgage

If you’ve worked consistently for the past two years, and you’ve been saving your pennies for a downpayment and closing costs, you may feel nothing can stand in your way of qualifying for a mortgage. And in all likelihood, you’re the ideal candidate.

However, what you may not realize is that certain credit card habits can stop a mortgage approval in its tracks. Not to say you can’t get a loan, but a bank may hold off approving your application until you get a handle on your credit cards. Here’s a look at five credit card mistakes that hurt your chances of buying a home.

1. Maxing out your credit cards

Unfortunately, making minimum credit card payments might not be enough to qualify for a mortgage loan. The lender looks at your entire credit history, and if you have maxed out credit cards, this raises your debt-to-income ratio and impacts whether you’re able to qualify for a mortgage, or how much you receive from a bank.

Basically, the bank calculates the percentage of your monthly debt payments and compares this figure with your gross income. If your credit card payments are higher due to maxed out accounts, your debt-to-income ratio may exceed what’s allowed by the lender, and the bank may not approve your application until you’ve paid off some of your accounts.

To avoid this problem, pay off credit cards every month, and make sure your balances do not exceed 30 percent of your credit line.

2. Past due accounts
You credit history might be stellar today, but if any credit card accounts have been 30 days or more late in the past 12 months, a mortgage lender may not approve your application at this time. It only takes one or two recent delinquent accounts to delay a home purchase.

Lenders are cracking down on late payments, and they typically allow no more than one or two 30-day late payments in a 12 to 24-month period (based on the type of mortgage).

3. Closing credit card accounts

If you’re weaning yourself off credit cards, you might close accounts to avoid additional debt. In hindsight, this is a good plan. But unfortunately, closing a credit card account can increase your credit utilization ratio, which can also drive down your credit score.

Credit utilization ratio is your total available credit in relation to your total credit lines. Let’s say you have two credit cards each with a $1,000 credit line (a total credit line of $2,000). One credit card has a $1,000 balance, and the other card has a zero balance. In this case, your credit utilization ratio is 50 percent, since you’re using half your total available credit.

In an effort to control spending, you might decide to close the account with a zero balance. Unfortunately, closing this credit card account increases your credit utilization from 50 percent to 100 percent — in other words, you’re now using 100 percent of your available credit, and your credit score will suffer as a result. The way credit scoring models work, the wider the gap between your balances and available credit, the better. Even if you decide not to use a credit card, it’s often better to keep accounts open.

4. Applying for too many accounts

Applying for too many credit cards doesn’t look good from a lender’s standpoint. When lenders check your credit history, the bank also looks at your number of recent credit inquiries. If you’ve applied for multiple credit cards in the span of just a couple of months, the bank may think you’re experiencing some type of financial hardship and in desperate need of credit.

Plus, each inquiry can reduce your credit score by approximately two to five points and they stay on your credit report for two years.

5. Being an authorized user

As an authorized user, you have permission to use another person’s credit card. The problem is that this credit account also appears on your credit report. Any action by the primary accountholder person—whether good or bad—affects your credit.

So, if the primary account holder pays the statement late or maxes out this credit card, this can hurt your credit score and make it harder to qualify for a mortgage. If you’re thinking about purchasing a house, request to have your name taken off any accounts where you’re an authorized user. Unfortunately, this doesn’t work if you’re a joint owner on the account.

The Bottom Line?

Buying a home is a big step. If you’ve spent years preparing for this move, don’t let bad credit card habits wreck your dream. If you use credit wisely and avoid maxing out your accounts, you’ll have a better chance of qualifying for a mortgage.

source: totalmortgage.com