credit score http://www.wisebread.com/taxonomy/term/8451/all en-US How a Goodwill Letter Can Save Your Credit Score http://www.wisebread.com/how-a-goodwill-letter-can-save-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-a-goodwill-letter-can-save-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/business_woman_working.jpg" alt="Business woman working" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Financial mistakes can cause hefty damage to your credit score. If you pay your credit card bill more than 30 days late, for example, your score can tumble by 100 points. If you have a foreclosure on your home, your score can fall by 150 points or more, depending on how long ago your lender filed for foreclosure. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <p>These mistakes stay on your three credit reports &mdash; one each maintained by Experian, Equifax, and TransUnion &mdash; for seven to 10 years.</p> <p>There may be some hope of removing those financial mistakes sooner, however. Consumers have had some success requesting that banks, lenders, and other creditors remove their late or missed payments from their credit reports early by writing what is known as a <em>goodwill letter</em> &mdash; letters sent to creditors outlining the reasons for their missed payments, explaining why they'll never miss a payment again, and requesting that these creditors remove the financial mistake from their credit reports.</p> <p>These letters offer no guarantee of success. Some creditors will simply respond that they are legally required to report the financial mistake for the set period of time. Others won't respond at all.</p> <p>But if there's even a slim chance that a goodwill letter will work, why not try it?</p> <h2>When goodwill letters do the most good</h2> <p>The most common financial mistake that ends up on credit reports &mdash; and the one that goodwill letters have the best chance of erasing &mdash; are late payments. It's important to realize, though, that late payments are only officially late for credit purposes when they are more than 30 days past due.</p> <p>Missed payments stay on your credit reports for seven years. How much these payments lower your FICO score varies depending on how high your score was to begin with and several other factors. But you can expect an immediate drop of about 100 points &mdash; a big hit, to be sure.</p> <p>As time passes and your late or missed payment gets older, the impact it has on your score will lessen. But it will remain on your reports for lenders to see until seven years has passed. That's where a goodwill letter comes in.</p> <h2>What a goodwill letter should say</h2> <p>A goodwill letter should say why you missed a payment. Maybe you lost your job. Maybe you were hit with a serious illness or injury. Maybe you were embroiled in a long divorce or legal battle. Whatever the reason, explain it clearly in your goodwill letter.</p> <p>The letter should also state that you won't pay late or miss a payment again. Your letter will work better if you don't have any other missed or late payments in your history, or additional financial blemishes on your report. Creditors probably will ignore it if your credit reports are filled with missed payments.</p> <p>Finally, close your letter with a request that the creditor remove your one financial mistake from your reports.</p> <p>There is a good chance that creditors will respond in the negative, if they even respond at all. Some creditors prefer to follow that seven-year guideline. But if you're lucky, and your case is strong enough, a well-written goodwill letter might work.</p> <p>When you're ready to send one, mail it to the address listed on your creditor's paperwork.</p> <h2>A goodwill letter example</h2> <p>Here is an example of a goodwill letter that could potentially help you in removing a missed credit card payment from your credit reports:</p> <p style="margin-left: 40px;">(<em>Your name</em>)<br /> (<em>Your address</em>)<br /> (<em>Your credit card account number</em>)</p> <p style="margin-left: 40px;">(<em>date</em>)</p> <p style="margin-left: 40px;">To Whom It May Concern:</p> <p style="margin-left: 40px;">I hope you are well. I'm writing because after checking my credit reports, I discovered that you have reported a late payment on (<em>date</em>) for my account, number (<em>list your account number here</em>), to the credit bureaus. I am writing today to request that you remove this late payment from my reports.</p> <p style="margin-left: 40px;">As you can see from my past financial history, I pay my bills on time and manage my credit well. This late payment was a one-time event, the result of a short-term job loss. (<em>Insert whatever actually caused you to miss your payment here.</em>) Because this is an isolated incident, and because my financial challenges are behind me, I would appreciate this help on your part.</p> <p style="margin-left: 40px;">My history of on-time payments since this late payment is proof that I take my financial obligations seriously. Please consider this history in making your decision.</p> <p style="margin-left: 40px;">If you have any questions, or if you would like to speak with me in more detail, please call me at (<em>your phone number here</em>) or send me an email at (<em>your email address here</em>).</p> <p style="margin-left: 40px;">Thank you for your time, and I look forward to hearing from you.</p> <p style="margin-left: 40px;">Sincerely, <br /> (<em>Your name here</em>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-a-goodwill-letter-can-save-your-credit-score">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/you-missed-a-student-loan-payment-now-what">You Missed a Student Loan Payment. Now What?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-credit-scores-and-reports-are-not-the-same">Here&#039;s Why Credit Scores and Reports Are Not the Same</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-fix-your-finances-after-missing-a-payment">How to Fix Your Finances After Missing a Payment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight">Pay These 6 Bills First When Money Is Tight</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance credit bureaus credit report credit score Creditors favors forgiveness goodwill letter late payments lenders Mon, 12 Jun 2017 08:00:09 +0000 Dan Rafter 1961857 at http://www.wisebread.com Can Too Many Credit Cards Hurt Your Credit Score? http://www.wisebread.com/can-too-many-credit-cards-hurt-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/can-too-many-credit-cards-hurt-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/business_woman_with_credit_cards.jpg" alt="Business woman with credit cards" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You're checking out at your favorite department store when the cashier asks if you'd like to apply for the store's credit card. Doing so will save you 10 percent on your purchase. Should you fill out the application? Or will having too many credit cards in your wallet ding your three-digit FICO credit score?</p> <p>According to myFICO.com, there is no &quot;golden number&quot; of credit cards that will hurt or help your credit score. What matters most is how you use those cards &mdash; namely, paying your bills on time. Still, there are a few important things to remember when you have multiple credit cards.</p> <h2>Inquiries ding your credit score</h2> <p>Whenever you apply for a new credit card, your FICO score will fall slightly. The creditor behind the plastic will order a copy of your credit report from one of the three national credit bureaus: Experian, Equifax, or TransUnion. This inquiry will then show up on your credit reports.</p> <p>An inquiry will temporarily drop your credit score because whenever you apply for new credit, there is a risk that you will borrow more money than you can afford to pay back. How much your score will drop varies, but myFICO says that for most people, a single inquiry will result in a drop of five points or less.</p> <p>The drop in your score might be steeper, however, if you apply for several credit cards in a short period of time. There's a statistical reason for this: myFICO says that people who have six or more hard inquiries on their credit reports &mdash; inquiries made by a lender with whom you've applied for credit &mdash; are up to eight times more likely to declare bankruptcy than consumers who have no inquiries. Hard inquiries remain on your credit reports for 24 months before falling off.</p> <p>The smart move is to apply for new credit if you need it and plan to use it. Don't apply for new credit cards just to get a store discount you'll use a few times.</p> <h2>Use your cards wisely</h2> <p>What's more important than the number of cards you have is how you use them. Paying your credit card bill late will send your FICO score tumbling, usually by 100 points or more. Your creditor will report a payment as officially late to the three credit bureaus if you're more than 30 days past due. That shouldn't be an excuse to regularly miss your due date (especially because most cards will charge you a late fee if you're even one day late), but it does mean you don't need to panic if you're only a few days behind.</p> <p>Making credit card payments on time is one of the surest ways to boost your credit score. Use your credit cards sensibly throughout the month, and whenever possible, pay the balance in full by the due date. That way, you won't have to pay interest. If you can't pay off the entire balance, at least pay more than the minimum. You'll still pay interest, but it'll be much less than if you only made the minimum monthly payments.</p> <h2>Keep unused credit cards open</h2> <p>You might think that closing a credit card account you never use will help your credit score. It won't. Actually, it can cause your score to fall.</p> <p>It all comes down to your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score" target="_blank">credit utilization ratio</a>. This measures how much available credit you are using by dividing your total credit card balances by your total credit card limits. For example, if you have $12,000 of available credit and a balance of $3,000, your credit utilization ratio is 25 percent. Credit utilization accounts for approximately 30 percent of your credit score, and many experts agree that the ratio should not exceed 30 percent. The lower, the better.</p> <p>Using more than 30 percent of your available credit will hurt your credit score. By closing a card, you're removing that line of available credit &mdash; therefore increasing your credit utilization ratio.</p> <p>Say you have $30,000 of available credit and you owe $10,000 on your cards. If you close a credit card with a $10,000 credit limit, you'll lower your total available credit to $20,000. That will bump your credit utilization ratio from 33 percent to 50 percent. That doesn't look good on your credit reports.</p> <p>Don't close a credit card just because you think you have too many cards. Even if you never use it, you might inadvertently hurt your credit score.</p> <h2>Older credit is better for your score</h2> <p>When it comes to credit cards, the longer you've had them, the better. The length of your credit history accounts for 15 percent of your FICO score. The older your credit history &mdash; paired with a history of making on-time payments &mdash; the better your credit score will be.</p> <p>If you apply for several new credit cards at once, you'll lower the overall average age of your credit accounts. That could have a slight downward pull on your credit score.</p> <p>Again, though, what matters most is not how many cards you have, but whether you pay them on time each month. Don't overanalyze the number of cards you are carrying. Instead, concentrate on never missing a payment.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/can-too-many-credit-cards-hurt-your-credit-score">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-7-debt-payoffs-that-boost-your-credit-score-the-most">The 7 Debt Payoffs That Boost Your Credit Score the Most</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-late-payments-affect-your-credit">How Late Payments Affect Your Credit</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-steps-to-getting-excellent-credit">5 Steps to Getting Excellent Credit</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance age of credit bills credit reports credit score credit utilization ratio monthly payments payment history too many credit cards Mon, 29 May 2017 08:30:16 +0000 Dan Rafter 1954617 at http://www.wisebread.com Here's How Often Your Credit Score Gets Calculated http://www.wisebread.com/heres-how-often-your-credit-score-gets-calculated <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/heres-how-often-your-credit-score-gets-calculated" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-629305628.jpg" alt="Woman learning how often her credit score gets calculated" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Achieving and <a href="http://www.wisebread.com/what-is-a-good-credit-score-range?ref=internal" target="_blank">maintaining an excellent credit score</a> may help you qualify for the best interest rates when you borrow money, potentially saving you thousands of dollars over the life of your loans. That's why it's especially important to check your credit when you begin to consider borrowing for a large purchase such as a home or car.</p> <p>It helps to first understand how your credit score is calculated, what you can do to change it, and how long those changes take to impact your score.</p> <h2>Factors determining credit scores</h2> <p>Credit scores derive from credit reports, which consist of information about your credit history and activity with various lenders and creditors. Credit reports are maintained by the major credit reporting agencies, Equifax, Experian, and TransUnion.</p> <p>FICO is the credit score provider most commonly used by lenders The <a href="http://www.wisebread.com/the-5-things-with-the-biggest-impact-on-your-credit-score?ref=internal" target="_blank">five factors that go into your FICO score</a>, broken down by how much they contribute to your score, are:</p> <ul> <li>Payment history (35 percent): How timely have you been with payments on credit card balances, student loans, mortgages, etc.?<br /> &nbsp;</li> <li>Amount you owe (30 percent): What are your credit balances and credit <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">utilization ratio</a> (your current balances compared to your credit limits)?<br /> &nbsp;</li> <li>Credit history length (15 percent): How many months or years have you had credit and maintained relationships with creditors?<br /> &nbsp;</li> <li>New credit (10 percent): How many new credit cards, loans, and credit-related accounts do you have? Too much new credit could make you appear desperate to lenders.<br /> &nbsp;</li> <li>Types of accounts or credit mix (10 percent): how many different types of accounts do you have (mortgage debt, car loans, credit cards, etc.)? The more types you have, the better it is for your score.</li> </ul> <p>Making timely payments, judiciously using available credit, maintaining long-standing account relationships, avoiding new credit, and holding diverse types of credit may influence your credit score positively.</p> <h2>How frequently credit scores get calculated</h2> <p>If you're working to improve your credit score, you may wonder how frequently your score is calculated and adjusted. Theoretically, knowing this frequency could enable you to monitor your credit score's movement, up or down, in response to your actions.</p> <p>According to Experian's Director of Public Education Rod Griffin, credit scores aren't ever truly adjusted. Instead, each and every credit score that's calculated is unique. It's a snapshot reflecting your creditworthiness at a particular moment in time. Your score is based on your credit report when a score is requested and the proprietary formulas created by lenders or credit score providers, such as FICO and VantageScore. In addition, these providers each have different scoring models for different lending purposes. (See also: <a href="http://www.wisebread.com/fico-vs-fakes-are-you-getting-the-wrong-credit-score?ref=seealso" target="_blank">What Do All the Different Credit Scores Mean?</a>)</p> <p>For example, if you're getting ready to borrow money to purchase a new home, your mortgage lender may use a FICO score that's indicative of your credit risk for mortgage borrowing.</p> <p>A few days later, you might decide to apply for a credit card. The card issuer may use a bank card scoring model in calculating this credit score. The number may be different from the mortgage-based score because it's based on a different formula and possibly new information on your credit report.</p> <p>Generally, your credit report is updated whenever new information becomes available, for example, when creditors report payments at the end of their billing cycles.</p> <p>Despite varying formulas and purposes, your credit scores tend to be similar, Griffin says. That's because scores are based on your credit reports, and the information contained in these reports tends to be consistent among reporting agencies.</p> <h2>Credit steps to take before a mortgage or car loan application</h2> <p>Griffin says reviewing your credit reports should be part of your financial routine. He emphasizes the value of keeping reports positive, not simply trying to fix your numbers: &quot;Taking care of your credit reports means taking care of your credit scores.&quot;</p> <p>But if checking your credit reports hasn't been on your to-do list, start paying attention to your information as soon as you think about borrowing for a major purchase and at least three to six months before applying for a loan. This time frame may allow you time to dispute any errors and make moves that could enhance your creditworthiness.</p> <p>Here are steps to consider taking.</p> <h3>1. Review credit reports for accuracy</h3> <p>Access your credit reports from the three major credit reporting agencies through<a href="https://www.annualcreditreport.com/index.action" target="_blank"> AnnualCreditReport.com</a>. Federal law mandates that you can get one free credit report per year from each agency.</p> <p>Review reports to make sure the information is accurate and up-to-date. For example, check home addresses and employer names. Notice whether outdated information lingers.</p> <p>If something's not right, you can <a href="http://www.wisebread.com/should-you-always-dispute-mistakes-on-your-credit-report?ref=internal" target="_blank">dispute errors on your credit report</a>. Contact the credit reporting agency and information source (such as a former creditor) to describe errors and request corrections. The Federal Trade Commission (FTC) provides useful sample dispute letters for<a href="https://www.consumer.ftc.gov/articles/0384-sample-letter-disputing-errors-your-credit-report" target="_blank"> credit reporting agencies</a> and<a href="https://www.consumer.ftc.gov/articles/0485-sample-letter-disputing-errors-your-credit-report-information-providers" target="_blank"> information providers</a> that can help you get an idea of what to write.</p> <p>You may be able to use dispute resolution processes offered by credit reporting agencies. For example, <a href="http://www.experian.com/blogs/ask-experian/credit-education/faqs/how-to-dispute-credit-report-information/" target="_blank">Experian's online dispute process</a> allows consumers to file a dispute from its website.</p> <h3>2. Look at your scores</h3> <p>Consider requesting a credit score to determine where you stand when trying to use your number to your advantage. A one-time report and score could be helpful to understand your current status and offer a baseline for monitoring changes in the future.</p> <p>You can get scores using these methods:</p> <ul> <li>Purchase a credit score as an add-on when you access one of your free credit reports.<br /> &nbsp;</li> <li>Buy a one-time report and scores from <a href="http://myfico.7eer.net/c/27771/93942/2185" target="_blank">myFICO</a> or other sources.<br /> &nbsp;</li> <li>Get a <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=internal" target="_blank">credit card that offers a free credit score</a> to its cardholders or try free services like <a href="http://www.kqzyfj.com/click-2822544-10817209" target="_blank">Credit Karma</a> and <a href="http://www.jdoqocy.com/click-2822544-12336148" target="_blank">Credit Sesame</a>.<br /> &nbsp;</li> <li>Purchase credit monitoring services that include credit scores. You can get these from myFICO.com, Equifax, Experian, and TransUnion. (See also: <a href="http://www.wisebread.com/7-apps-that-monitor-your-credit-for-you?ref=seealso" target="_blank">7 Apps That Monitor Your Credit</a>)</li> </ul> <h3>3. Monitor your scores</h3> <p>As you prepare for a major financial event, such as getting a mortgage or refinancing an existing home loan, consider monitoring your credit reports and scores over time to keep on top of any changes that occur.</p> <p>Credit monitoring is available for a fee from credit reporting agencies and other sources, such as<a href="http://myfico.7eer.net/c/27771/93942/2185" target="_blank"> myFICO</a>. You might also consider tracking your credit scores through free sources. For example, you might just keep note of scores offered by your credit card company every month.</p> <p>This scrutiny can be helpful but alarming. Griffin tells borrowers not to panic if they see changes from month to month, as credit scores move up and down frequently. He says that generally you don't need to be concerned with volatility as long as the scores trend upward over a longer time frame. (See also: <a href="http://www.wisebread.com/why-you-shouldnt-panic-if-your-credit-score-drops" target="_blank">Why You Shouldn't Panic If Your Credit Score Drops</a>)</p> <h3>4. Take actions as appropriate</h3> <p>When you receive your credit score, generally you'll also get a list of factors indicating why your number is less than perfect. These risk factors indicate where to focus your attention. (See also: <a href="http://www.wisebread.com/7-ways-to-increase-your-credit-score-quickly" target="_blank">How to Increase Your Credit Score Quickly</a>)</p> <p>When personal finance educator Kate Horrell's credit score fell from the 800s to 660s just a few months before a mortgage refinance, she realized that the decline reflected two factors: She had taken on new credit using a 0% APR credit card; and she had increased her credit usage to manage about $100,000 in home renovations.</p> <p>Still, Horrell was surprised at the impact on her scores, considering her stellar history. She couldn't do anything about the new account but found ways to pay off the card balance quickly. When she applied for the mortgage refinance a few months later, her score had increased to the mid-to-high 700s, enabling her to snag a 3.125 percent rate.</p> <p>Griffin emphasizes that the risk factors named with your credit score don't always warrant action. In some cases, it's not worth it to address risk factors just to raise your score a few points.</p> <p>For example, my lack of both credit diversity and recent installment loans dings my score, which is still above 800 and considered &quot;exceptional.&quot; However, I don't plan on taking out a new loan just to try to boost my number.</p> <p>While you can't predict the precise impact of specific actions, you can learn what moves reflect positively on your credit report. As your credit report is updated (with new and hopefully, improved, information) your credit scores could trend upward, potentially enabling you to take advantage of your numbers for cost savings.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/julie-rains">Julie Rains</a> of <a href="http://www.wisebread.com/heres-how-often-your-credit-score-gets-calculated">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-apps-that-monitor-your-credit-for-you">7 Apps That Monitor Your Credit for You</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-the-new-credit-card-formula-means-for-your-wallet">What the New Credit Card Formula Means for Your Wallet</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-read-a-credit-report">How to Read a Credit Report</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/once-bitten-twice-shy-what-is-credit-security-worth-to-you">Once Bitten Twice Shy: What is Credit Security Worth to You?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance credit history credit score credit utilization ratios debt Equifax Experian fico TransUnion Tue, 16 May 2017 08:30:14 +0000 Julie Rains 1946266 at http://www.wisebread.com 3 Ways Student Loan Debt Can Affect Your Mortgage Application http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-ways-student-loan-debt-can-affect-your-mortgage-application" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-164113230_0.jpg" alt="Learning how student loan debt affects your mortgage loan application" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>You're ready to buy a home, but you're also paying back federal or private student loans. Will this make it more difficult to qualify for a mortgage?</p> <p>Yes. But that doesn't mean qualifying for a mortgage while paying off student loans is impossible. Here's what you need to understand before starting the home buying process.</p> <h2>Debt-to-income ratio</h2> <p>When determining whether to approve you for a mortgage, lenders look at something called your debt-to-income ratio. This ratio shows how much of your gross monthly income &mdash; your income before taxes are taken out &mdash; your monthly debts eat up. If your debt-to-income ratio is too high, lenders won't approve you for a mortgage because they worry that you won't have enough money each month to handle this significant payment.</p> <p>It's important to remember that mortgage lenders aren't as concerned about your total student loan debt as they are about the size of your monthly student loan payments. Lenders typically want all of your monthly debts, including your new mortgage payment, to equal no more than 43 percent of your gross monthly income. So, if your total debts &mdash; again, including that new mortgage payment &mdash; are at or under that percentage, your odds of qualifying for a mortgage loan are higher.</p> <p>Your student loan payments are considered part of your monthly debt by lenders. For example, if you are paying $300 a month on your student loans, your lender will count that amount when calculating your debt-to-income ratio. If that $300 payment pushes your debt-to-income ratio past 43 percent, you might not be able to qualify for a mortgage.</p> <h2>A deferment won't help</h2> <p>Your student loan might be in deferment while you are applying for a mortgage, meaning you won't have to start making payments on it for six to 12 months. You might think this will help your debt-to-income ratio. After all, when you're applying for your mortgage, you aren't making those student loan payments.</p> <p>But this isn't the case. Lenders will still count your student loan debt against you. That's because lenders know that long before you pay off your mortgage, you'll have to eventually start making those monthly student loan payments. Lenders don't want your mortgage payment to be affordable for 12 months but then suddenly turn into a burden once your student loan payments kick in. When your monthly debts suddenly rise, you might no longer be able to afford those mortgage payments that you were once able to handle.</p> <p>Loans insured by the Federal Housing Administration, better known as FHA loans, were once an exception to this rule. In the past, student loan debt that was deferred for more than 12 months before a mortgage's closing was not counted in applicants' debt-to-income ratios. That changed last year, when the FHA amended its rules. Now, if the lender doesn't know what the monthly student loan payment amount will be when the deferment ends, it must count 2 percent of applicants' total student loan debt as part of their monthly debt.</p> <p>So if you have $30,000 worth of student loan debt, under the new FHA rules, $600 will be added to your monthly debt levels, a figure that could push you over that 43 percent threshold.</p> <p>Borrowers might actually help themselves by getting their student loans out of deferment. That's because their actual monthly payments could be far lower than 2 percent of their total student loan debt. If loans aren't in deferment, lenders will use the actual amount borrowers are paying each month on their student loans. (See also: <a href="http://www.wisebread.com/4-things-you-need-to-know-about-deferring-student-loans?ref=seealso" target="_blank">4 Things You Need to Know About Deferring Student Loans</a>)</p> <h2>Missed student loan payments can hurt, too</h2> <p>Student loan debt doesn't just make reducing your debt-to-income ratio harder. It can also hurt your credit score, if you're not careful about making your payments on time.</p> <p>In addition to debt-to-income ratios, lenders also rely on borrowers' FICO credit scores when determining who qualifies for a mortgage. Most lenders consider FICO scores of 740 or higher to be exceptionally strong. If your score is under 640, you'll struggle to qualify for a mortgage without paying high interest rates. If your score is under 620, you'll have a hard time qualifying for a mortgage at all.</p> <p>Paying your bills late is one of the biggest reasons for a low credit score. Your student loan payment is officially considered late when it is 30 days or more past due. A single late payment can sink your credit score by 100 points or more. On the other hand, making your student loan payments on time every month will help your score, making you a more attractive borrower.</p> <h2>What you can do about student loan debt</h2> <p>What can you do if your student loan debt is hurting your debt-to-income ratio? You can always improve your ratio by earning more income each month, perhaps by taking on a second job. The more income you make without increasing your monthly debt, the lower your debt-to-income ratio will be. (See also: <a href="http://www.wisebread.com/15-ways-to-pay-back-student-loans-faster?ref=seealso" target="_blank">15 Ways to Pay Back Student Loans Faster</a>)</p> <p>You might also try to consolidate your student loan payments into one loan with a lower monthly payment. That will reduce your overall monthly debt obligation, again improving your debt-to-income ratio.</p> <p>Reducing other monthly debts &mdash; anything from trading in a car with a high monthly payment to paying off your credit cards &mdash; can help, too.</p> <p>Then there's your choice of home. Buying a lower-priced home will result in a lower monthly mortgage payment. That will also reduce your future monthly debt and lower your debt-to-income ratio.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-valuable-rights-you-might-lose-when-you-refinance-student-loans">8 Valuable Rights You Might Lose When You Refinance Student Loans</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">How to Make Ends Meet When You&#039;re House Poor</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-you-shouldnt-buy-a-house-yet">5 Reasons You Shouldn&#039;t Buy a House (Yet)</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/youve-defaulted-on-your-loan-now-what">You&#039;ve Defaulted on Your Loan. Now What?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Real Estate and Housing credit score debt to income ratio deferment home loans missed payments mortgages student loans Mon, 01 May 2017 08:30:13 +0000 Dan Rafter 1935490 at http://www.wisebread.com 3 Ways Retirees Can Build Credit http://www.wisebread.com/3-ways-retirees-can-build-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/3-ways-retirees-can-build-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-471849363.jpg" alt="Learning ways retirees can build credit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>You might think that once you reach retirement, your credit score is just one of those things you get to stop worrying about. While it's true that most retirees won't be applying for mortgages, it's not true that you don't need to maintain a decent credit score. What if you want to apply for a car loan? What about credit cards? You certainly won't get the lowest interest rates and best rewards programs possible without a good credit score to back you up.</p> <p>A low credit score can also hurt you if you want to downsize to an apartment, or even move into a senior living facility. You might need a solid credit score to qualify.</p> <h2>Why it's hard for retirees to build credit</h2> <p>According to FICO, to have a credit score, you must have at least one credit account that is at least six months old. You must also have at least one account that has been updated by a creditor or lender during the last six months.</p> <p>If you aren't paying a mortgage, paying off an auto loan, or using credit cards, you might not meet any of these requirements. This might lead to you becoming what FICO calls an &quot;unscorable,&quot; a consumer who has no credit score at all.</p> <p>Fortunately, there are ways for retirees to continue building credit. They require the same good financial habits you've been practicing before retirement.</p> <h2>Use the credit cards you have</h2> <p>You might prefer paying for items in cash. Instead, make small purchases throughout the month with your credit card. If you pay off your entire card balance each month, you'll continue to boost your credit score. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score" target="_blank">How to Use Credit Cards to Improve Your Credit Score</a></p> <p>Make sure that you don't charge more than you can pay off by the due date. If you do, you'll be stuck paying interest.</p> <p>Never pay late. If you pay your credit card 30 days or more late, your card provider will report your payment as late to the national credit bureaus of TransUnion, Experian, and Equifax. This will cause your credit score to plummet. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <h2>Keep unused credit card accounts open</h2> <p>You might have a credit card that you never use, but don't close it. Having open credit card accounts helps your credit score, thanks to something called a <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a>.</p> <p>This ratio measures your credit card balances against your total available credit limits, and it accounts for 30 percent of your score. Using too much of your available credit will cause your score to drop, while using a modest amount will help it rise. It's typically recommended that you not let debt tip this ratio beyond 30 percent. If you have a paid-off credit card that isn't getting much use, closing it will lower your overall available credit limit and your utilization ratio will then increase. (See also: <a href="http://www.wisebread.com/how-to-ditch-a-credit-card-without-dinging-your-credit-score?ref=seealso" target="_blank">How to Close a Credit Card Without Dinging Your Credit Score</a>)</p> <p>So, keep those unused cards tucked in your wallet. Having that extra credit that you're not using will provide a boost to your score.</p> <h2>Apply for a secured credit card</h2> <p>If you no longer have any credit cards, and you've become an unscorable, you can still build your credit. Your first step should be applying for a <a href="http://www.wisebread.com/the-5-best-secured-credit-cards?ref=internal" target="_blank">secured credit card</a>.</p> <p>You don't need a credit score to qualify for one of these cards. Their line of credit is based on the amount of money you deposit into an account with the financial institution issuing the card. (See also: <a href="http://www.wisebread.com/a-secured-credit-card-can-repair-your-credit-score-heres-how-to-pick-the-best?ref=seealso" target="_blank">How to Pick the Best Secured Credit Card</a>)</p> <p>If you deposit $1,000 into an account, you can then charge up to $1,000 on your secured credit card. Every time you use your secured card and pay off these charges on time, you'll get a boost to your credit score. Do this long enough, and you can build a score that's high enough to qualify for a traditional credit card.</p> <p>Again, take the same precautions you'd take with a traditional credit card. Pay your bill on time each month, and never charge more than you can afford to pay in full by your due date.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/3-ways-retirees-can-build-credit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-ditch-a-credit-card-without-dinging-your-credit-score">How to Close a Credit Card Without Dinging Your Credit Score</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-your-credit-score-matters-in-retirement">Why Your Credit Score Matters in Retirement</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-myths-about-credit-cards-that-wont-go-away">5 Myths About Credit Cards That Won&#039;t Go Away</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-moves-to-make-if-your-loan-gets-denied">5 Moves to Make If Your Loan Gets Denied</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Retirement building credit credit score credit utilization ratio debts fico retirees Wed, 26 Apr 2017 20:00:10 +0000 Dan Rafter 1934072 at http://www.wisebread.com 5 Questions to Ask Before Signing Up for a New Credit Card http://www.wisebread.com/5-questions-to-ask-before-signing-up-for-a-new-credit-card <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-questions-to-ask-before-signing-up-for-a-new-credit-card" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-534306478.jpg" alt="questions to ask before signing up for a new credit card" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>There's no shortage of attractive offers for new credit cards. The credit card industry is extremely competitive, and you are likely to come across advertising for new cards on television, in print, online, and even on airplanes. But as compelling as these offers can be, you still need to think carefully before applying. (See also: <a href="http://www.wisebread.com/pre-approved-for-credit-card-offers-are-you-pre-qualified?ref=seealso" target="_blank">Pre-Approved for Credit Card Offers: What Does It Mean?</a>)</p> <p>Opening a new credit card account is an important financial decision, and you should consider these five things first.</p> <h2>1. Can you manage a new credit card account?</h2> <p>Before you even begin to consider which credit card to apply for, think about if you need a new credit card at all. If there's any chance that having a new credit card will entice you to overspend and incur debt, then it's best not to apply. (See also: <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=seealso" target="_blank">The Fastest Way to Pay Off $10,000 in Credit Card Debt</a>)</p> <p>Keep in mind, too, that each new credit card you have will generate a new statement to review each month, and another bill to pay. If your new card is from a different issuer than your other cards, then you'll need to create a new online login and you might want to download a new mobile app. Having more cards than you can keep track of increases your chances of losing them or having one stolen.</p> <h2>2. Does this credit card meet your needs?</h2> <p>Just as there are dozens of different cars made for nearly any kind of use, there are hundreds of different credit cards designed to meet every conceivable need. If you tend to carry a balance on your credit cards, then you should be looking for a card with the lowest possible interest rate.</p> <p>You could also look for a card with an interest-free promotional financing offer, to help you pay off your debt sooner. (See also: <a href="http://www.wisebread.com/how-to-pay-less-interest-on-your-credit-card-debt?ref=seealso" target="_blank">How to Pay Less Interest on Your Credit Card Debt</a>)</p> <p>If you always avoid interest charges by paying your entire statement balance in full, then you should be earning rewards for your spending in the form of points, miles, or cash back. (See also: <a href="http://www.wisebread.com/cash-back-vs-travel-rewards-pick-the-right-credit-card-for-you?ref=seealso" target="_blank">Cash Back vs Travel Rewards: Pick the Right Credit Card for You</a>)</p> <h2>3. What interest rates and fees will you have to pay?</h2> <p>Before you apply for a credit card, you should understand all of the costs of the card. Fortunately, credit card issuers are required to prominently disclose the important rates and fees in a standardized table. Any time you see a credit card application, you can look for a link to the &quot;terms and conditions&quot; or &quot;rates and fees.&quot; There, you will find a list of fees including the annual fee, late fee, cash advance fee, balance transfer fee, and foreign transaction fees, if any. It will also show you the standard interest rate and any promotional rates for new purchases, balances transfers, and cash advances. (See also: <a href="http://www.wisebread.com/simple-guide-to-evaluating-a-credit-card-with-an-annual-fee?ref=seealso" target="_blank">Simple Guide to Evaluating a Credit Card With an Annual Fee</a>)</p> <h2>4. Do you qualify for approval?</h2> <p>There's no point in applying for a credit card if you won't be approved. First, you need to look up your credit score. Most credit card issuers now offer free access to your credit score online, and there are several websites that can also provide you with a free credit score.</p> <p>Next, you need to research the credit cards that you are applying for, and learn what kind of credit score is needed. For example, a credit card issuer's website may list each card according to the type of credit history needed, such as &quot;Average&quot; or &quot;Good.&quot; In addition, many credit card issuers will have special cards designated for people who are rebuilding their credit. Finally, you can assume that the most competitive premium rewards credit cards will only be offered to applicants with excellent credit. (See also: <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=seealso" target="_blank">How to Use Credit Cards to Improve Your Credit Score</a>)</p> <h2>5. Is this the most competitive offer available?</h2> <p>It's easy to find credit card offers, but it can take some time to locate the most competitive offer for your needs. If you are looking for a card with the lowest interest rate, then you need to look at the terms and conditions of multiple cards to find the best offer. And if you are trying to earn rewards, then you need to estimate the value of the rewards you would receive from the card, based on your own personal spending habits. Finally, you also need to take into account the value of any cardholder benefits offered, and the cost of the annual fee and other fees. (See also: <a href="http://www.wisebread.com/5-best-sign-up-bonuses-for-airline-miles-credit-cards?ref=seealso" target="_blank">Credit Cards With the Best Sign Up Bonus Offers</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/jason-steele">Jason Steele</a> of <a href="http://www.wisebread.com/5-questions-to-ask-before-signing-up-for-a-new-credit-card">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/stop-making-these-5-costly-credit-card-mistakes">Stop Making These 5 Costly Credit Card Mistakes</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-your-unused-credit-cards-may-be-costing-you">How Your Unused Credit Cards May Be Costing You</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-surprising-things-lenders-check-besides-your-credit-score">4 Surprising Things Lenders Check Besides Your Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards applications competitive offers credit card offers credit history credit score interest rates terms and conditions Tue, 18 Apr 2017 08:30:11 +0000 Jason Steele 1926749 at http://www.wisebread.com 6 Things You Should Know About Joint Checking Accounts http://www.wisebread.com/6-things-you-should-know-about-joint-checking-accounts <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/6-things-you-should-know-about-joint-checking-accounts" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-646688660.jpg" alt="Couple learning things about a joint checking account" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Joint checking accounts offer convenient money management for many different types of relationships, including married and cohabiting couples and adult children and their parents.</p> <p>But the convenience of joint checking accounts potentially comes with a cost that families need to consider before signing up. Here are six issues you need to think through before you open a joint checking account with a spouse, a significant other, an adult child, or a parent.</p> <h2>1. There is no accountability for withdrawals</h2> <p>Generally, couples tend to open joint accounts because they are sharing a home and expenses. That means that it's in their best interests to be responsible with the money, since it will affect them both if the rent money is spent on a weekend in Vegas. However, if one person is unreliable with money, or planning to leave the relationship suddenly, a joint account can be dangerous for the other account holder.</p> <p>This issue can be more difficult when the two account holders are parent and child. Often, an adult child will request that they be added to their elderly parents' checking account to help protect dear old Mom or Dad. They can help pay bills, and make sure that there is no fraudulent activity on the account. The problem is that both account holders have every right to withdraw money from the account &mdash; which an unscrupulous adult child could take advantage of.</p> <h2>2. Joint accounts are vulnerable to the financial mistakes of both owners</h2> <p>If either account owner has unpaid debts that go into collection, the creditor has every right to use the joint account to satisfy those debts. This means you might potentially find your joint checking account completely drained in order to pay off debts you are unaware that your co-owner has run up.</p> <p>In addition, if there is a legal judgment against either account owner, the money in the joint account could be considered part of the assets awarded in the judgment. For instance, if Jane is sued because she crashed into a bus, then the assets in the joint account she holds with her elderly father are considered part of Jane's assets in terms of the lawsuit &mdash; even if the account was originally solely in Dad's name.</p> <h2>3. A joint account could hurt your credit</h2> <p>Although your spouse or child's credit rating can't ding your score, the way they handle their money can hurt your credit if you share a joint account with them. Since creditors are required to report joint account information, an account holder who struggles with debt and paying bills on time will negatively affect the co-owner's credit rating &mdash; unless and until the money behavior improves.</p> <h2>4. A joint account can affect eligibility for financial assistance</h2> <p>If either account owner needs to qualify for any kind of financial assistance, from financial aid for college to Medicaid, the money in a jointly held account is included in the eligibility calculations for the financial aid. That means you might end up forfeiting your ability to qualify for the financial assistance if your account co-owner holds more cash in the account than you would as a sole account owner.</p> <h2>5. Your co-owner can close the account without your permission</h2> <p>Certain banks require consent from both parties to close a joint checking account, but most do not. Typically, state laws dictate that any person who can write checks on the account can close it, at any time, regardless if their co-owner is present or even aware. The benefit to this is if one party relocates, passes away, or otherwise becomes incapacitated, there are very few issues the remaining co-owner must go through to close the account. The danger, however, lies in the potential for one co-owner to simply deplete the funds, close the account, and disappear. Always make sure you're sharing a checking account with someone you trust.</p> <h2>6. Parent/child joint accounts can have estate implications</h2> <p>A joint account holder retains sole control of the money in the account in the event of the co-owner's death. In the case of spouses or other cohabiting couples, this kind of financial transfer in case of death is not a problem. However, if the account owners are a parent and child, the issue is much more complicated.</p> <p>That's because the money in the checking account stays with the surviving account holder, bypassing whatever the deceased account holder may have put in their will. For instance, Loretta has three children and has specified in her will that her assets will be distributed evenly among them. But Loretta has a sizable joint account with her son Jason, and upon her death the money in that account will be solely under his control. Unless Jason feels like splitting up the money in the account three ways, his siblings are not going to see that portion of their inheritance.</p> <h2>Merge with caution</h2> <p>While joint checking accounts offer convenience to couples and parent/child relationships, they also come with a number of potential headaches. Make sure you know what you are signing up for before you and your potential co-account owner start picking out your personalized checks.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/emily-guy-birken">Emily Guy Birken</a> of <a href="http://www.wisebread.com/6-things-you-should-know-about-joint-checking-accounts">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/6-reasons-average-people-should-consider-a-prenup">6 Reasons Average People Should Consider a Prenup</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-your-taxes-will-change-after-you-have-a-kid">Here&#039;s How Your Taxes Will Change After You Have a Kid</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-put-your-spouse-on-a-budget-without-ruining-your-marriage">How to Put Your Spouse on a Budget Without Ruining Your Marriage</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-times-dad-was-right-about-money">5 Times Dad Was Right About Money</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/12-money-saving-tricks-to-know-before-buying-an-engagement-ring">12 Money-Saving Tricks to Know Before Buying an Engagement Ring</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Banking Family children credit score debts estate planning joint checking accounts marriage parents shared finances spouse withdrawals Mon, 17 Apr 2017 08:30:13 +0000 Emily Guy Birken 1927307 at http://www.wisebread.com What to Do If You Have a Tax Lien On Your House http://www.wisebread.com/what-to-do-if-you-have-a-tax-lien-on-your-house <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/what-to-do-if-you-have-a-tax-lien-on-your-house" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-523154492_0.jpg" alt="Woman learning what to do with a tax lien on her house" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>The government doesn't play around with taxpayers who skip out on what they owe. When you ignore your federal, state, or property tax bills &mdash; and you don't make any attempts to pay the balance &mdash; the government can place a tax lien on your house.</p> <p>A tax lien is a legal claim on property for failure to pay taxes owed. It gives the tax authority (also known as the lienholder) first rights to your property over other creditors.</p> <p>A lien differs from a levy in that the government doesn't seize your house or other property. Keep in mind that a lien can become a levy at some point if you never pay your taxes or never make arrangements to satisfy the debt. The tax authority decides when to impose a levy. You'll receive written notice of the levy at least 30 days before it takes place.</p> <p>A lien is a serious matter because it can negatively affect your credit. Unpaid tax liens can remain on credit reports indefinitely, whereas paid tax liens can remain for up to seven years from the date filed.</p> <p>Of course, the best way to handle a tax lien is to avoid one in the first place. But if the damage is done, here's how to put this ugly mark behind you.</p> <h2>1. Dispute a filing error</h2> <p>It's not uncommon for mistakes to appear on credit reports. In fact, according to recent data from the Consumer Finance Protection Bureau, 76 percent of the 185,700 credit-reporting complaints they've received since 2011 are related to errors &mdash; including state or federal tax liens that mistakenly appeared on credit reports.</p> <p>If you check your credit report and find a lien reported in error, don't ignore this mistake. This can lower your credit score. Contact the IRS or your state tax office to file a dispute. If a review of your account proves that you don't owe the debt, the government withdraws the tax lien (as if it never happened). A withdrawal also removes the lien from your credit report.</p> <p>Thankfully, the number of tax liens reported in error should be dropping. In response to criticisms by the CFPB, the top consumer reporting agencies &mdash; Experian, Equifax, and TransUnion &mdash; issued a new provision. As of July 1, 2017, tax lien and civil judgment data will <a href="http://www.nasdaq.com/article/clearing-misconceptions-about-new-consumer-data-laws-cm772651" target="_blank">only be included on credit reports</a> if they contain three pieces of information: the person's name, address, and Social Security number or date of birth. This information must be current according to court records as of the last 90 days.</p> <p>The association representing the credit bureaus expects half of the consumers with tax liens on their credit reports will see them removed.</p> <h2>2. Pay your tax bill in full</h2> <p>Parting with your hard-earned money isn't easy, but paying your tax bill in full is one of the fastest ways to get the government off your back and move on with your life.</p> <p>Typically, the government releases tax liens within 30 days of full payment of an outstanding debt (including penalties and interest). A release removes the lien from the property.</p> <p>Unfortunately, paid tax liens can still remain on your credit report for up to seven years. However, under the IRS's Fresh Start Program, after paying your balance in full, you can submit a request to have a federal tax lien withdrawn from your credit report before the seven-year mark. Some states also give taxpayers the option of requesting an early withdrawal of a state tax lien from their credit report once they've paid their debt in full.</p> <h2>3. Set up an installment plan</h2> <p>If you can't pay what you owe in full, set up an installment plan with the government. This lets you pay off your tax debt over time. The tax authority releases the lien once you've set up a payment plan.</p> <p>In the case of federal debt, the IRS allows individual taxpayers to set up monthly direct debit payments on debt amounts up to $50,000 for up to six years. Go to IRS.gov and apply for installment payments through the online payment system. If you owe more than $50,000, or require longer repayment terms, request installment payments by completing and mailing Collection Information Statement Form 433-A or Form 433-F.</p> <p>Taxpayers who owe less than $25,000 and who've made at least three consecutive direct debit installment payments also can request to have the lien withdrawn from their credit report. However, defaulting on an installment agreement can trigger a new tax lien.</p> <p>Some states also allow installment plans to repay a tax debt, though the criteria for these plans varies by state.</p> <h2>4. Sell the property</h2> <p>If you don't have money to pay an outstanding tax debt in full, and you can't afford an installment plan, another option is selling the property and satisfying the debt with proceeds from the sale. However, this method only works if the sale price is high enough to pay off the lien and any existing mortgages on the property. If the sale won't generate enough proceeds to pay off attached liens, you can't sell the property. If you're able to sell the home, the company handling your escrow account forwards payment to the lienholder after closing.</p> <p>Keep in mind that you'll need to contact the lienholder before closing to request a lien release. In the case of federal taxes, this involves requesting a Certificate of Discharge from the IRS. If the request is approved, this document releases (or removes) the lien from the asset being sold (though it stays in place in every other way), and allows the property to transfer to the new owner lien-free.</p> <h2>5. Refinance the property</h2> <p>Then again, maybe you don't want to sell your home. There's also the option of refinancing and borrowing cash from your home equity to satisfy a state or federal tax lien on the property. Since refinancing replaces an existing mortgage with a new loan, mortgage lenders will not approve your loan application unless they have first lien position on the title. This puts the lender in priority position to benefit from liquidation if the property goes into default. For this to happen, you'll have to request a lien subordination from the IRS or your state tax office before applying for the loan.</p> <p>Subordination doesn't eliminate a tax lien &mdash; rather, the lien becomes secondary to a lender's lien on the property. And with the lender's security interest first, you're more likely to acquire a new mortgage.</p> <p>Be aware that your ability to refinance depends on how the tax lien impacted your credit. A tax lien will reduce your credit score, and to refinance, you'll have to meet a lender's income and credit score requirements. You need a minimum credit score of 620 for a conventional loan and a minimum credit score between 500 and 580 for an FHA loan.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/what-to-do-if-you-have-a-tax-lien-on-your-house">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-what-happens-if-you-dont-pay-your-taxes">Here&#039;s What Happens If You Don&#039;t Pay Your Taxes</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/9-money-moves-to-make-the-moment-your-credit-cards-are-paid-off">9 Money Moves to Make the Moment Your Credit Cards Are Paid Off</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-easy-way-to-do-your-taxes-without-paying-someone-else">The Easy Way to Do Your Taxes (Without Paying Someone Else)</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-can-you-do-if-you-cannot-afford-to-pay-your-taxes">What can you do if you cannot afford to pay your taxes</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/top-three-tax-facts-to-know-for-2016">Top Three Tax Facts to Know for 2016</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing Taxes credit report credit score federal filing errors government IRS payment plans property refinancing state tax bills tax liens taxpayers Mon, 17 Apr 2017 08:30:08 +0000 Mikey Rox 1928274 at http://www.wisebread.com 5 Steps to Getting Excellent Credit http://www.wisebread.com/5-steps-to-getting-excellent-credit <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-steps-to-getting-excellent-credit" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/woman_happy_tablet_618935990.jpg" alt="Woman taking steps to get excellent credit" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Having an excellent credit score is not as elusive as it seems. You simply must trade in your bad financial habits, no matter how innocent they seem, for these five healthy habits. (See also: <a href="http://www.wisebread.com/5-best-credit-cards-for-people-with-excellent-credit?ref=seealso">5 Best Credit Cards for People With Excellent Credit</a>)</p> <h2>1. Always pay your bills on time</h2> <p>One late payment can send your credit score spiraling. Even if you <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=internal">forget to pay a credit card</a> with a minuscule balance leftover, it will still negatively impact your credit score. About two years before my husband and I bought our first home, I forgot I had a Victoria's Secret credit card. The balance owed on the card was very little &mdash; less than $20. But since I forgot I owed money on it, I didn't pay the card for three months.</p> <p>Fast forward two years, and the ding from the unpaid Victoria's Secret card was keeping my credit score a few points away from being excellent. We ended up putting the home loan under just my husband's name to ensure we got the best rate. All that hassle for a forgotten credit card bill two years prior. (See also: <a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash?ref=seealso">Prioritize These Bills When You Are Short on Cash</a>)</p> <h2>2. Don't use all of your available credit</h2> <p>Those with excellent credit scores use less than 30 percent of their available credit. One factor considered when calculating your score is your <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal">credit utilization ratio</a>. Your credit utilization ratio compares your balance to your total credit limit. If this ratio is too high, your credit score begins to suffer. For example, $2,000 of debt on a card that has a $10,000 limit looks much better to creditors that $250 of debt on a card with a limit of $500. Even though the first example owes more money, the utilization is only 20 percent, whereas the latter example is at 50 percent.</p> <p>You can lower your credit utilization ratio in two easy ways. First, calculate how much credit card debt you need to pay off in order to get your utilization ratio under 30 percent, and start making payments to get there. Second, call your credit card company and ask for a limit increase, which will in turn lower your credit utilization ratio. Most creditors would be happy to raise your spending limit, especially if you are in good standing with them. Just be sure not to increase your spending, too. (See also: <a href="http://www.wisebread.com/4-questions-to-ask-before-getting-a-credit-increase?ref=seealso">4 Questions to Ask Before Getting a Credit Limit Increase</a>)</p> <h2>3. Hang on to old credit card accounts</h2> <p>Another factor considered in calculating your credit score is the age of your overall credit history. Being a card holder with one company for over a decade will look better on your account than having several new cards opened or closed within the span of several years.</p> <p>Building up a longer credit history takes time. Figure out which card or account is your oldest, and use the card periodically. For example, say you have an old card that doesn't offer you many benefits, so you rarely use it. Don't just close this old account. Instead, call them and ask if you can get an upgrade to a card that earns better rewards. This way, you can use the card periodically, earn better rewards, and still benefit from a longer account history. (See also: <a href="http://www.wisebread.com/how-to-ditch-a-credit-card-without-dinging-your-credit-score?ref=seealso">How to Close a Credit Card Without Dinging Your Credit Score</a>)</p> <h2>4. Monitor your score</h2> <p>If you are not already monitoring your score, then start today. You need to know where your credit score stands at least quarterly. This will help you catch any mistakes or fraud quickly. (See also: <a href="http://www.wisebread.com/the-5-best-credit-cards-that-offer-free-credit-scores?ref=seealso">Best Credit Cards That Offer Free Credit Scores</a>)</p> <p>Back in college, my husband never thought to check his credit score. Every time he would apply for a credit card, he would instantly be rejected. When he finally checked his credit history, he discovered the bureau mixed up his name with his father's. His history showed that he already had a bankruptcy and foreclosure at the ripe old age of 19.</p> <p>Along with knowing your score, you also want to prevent people from running your credit unnecessarily. Car dealerships are notorious for this. Instead, get preapproved for a loan from your local credit union and refuse the dealership's request to run your credit.</p> <h2>5. Live within your means</h2> <p>The only way to live a financially responsible life, which is reflected in your credit score, is to live within your means. Pay off <a href="http://www.wisebread.com/5-ways-to-pay-off-high-interest-credit-card-debt?ref=internal">outstanding credit card debts</a> and other high interest loans, and then commit to only charging what you can pay for in full. Build up a reliable emergency fund, contribute to a retirement plan, and invest. There are no tricks to getting excellent credit. It all comes down to being consistent with good financial habits. (See also: <a href="http://www.wisebread.com/7-habits-of-the-financially-successful?ref=seealso">7 Habits of the Financially Successful</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/5-steps-to-getting-excellent-credit">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-3"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/your-bad-credit-isnt-the-end-of-the-world">Your Bad Credit Isn&#039;t the End of the World</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-how-often-your-credit-score-gets-calculated">Here&#039;s How Often Your Credit Score Gets Calculated</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/avoid-these-5-common-mistakes-while-rebuilding-your-credit">Avoid These 5 Common Mistakes While Rebuilding Your Credit</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-your-dog-is-ruining-your-credit-score">3 Ways Your Dog Is Ruining Your Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bill payments credit history credit reports credit score debt good habits high interest Thu, 06 Apr 2017 08:30:16 +0000 Ashley Eneriz 1922592 at http://www.wisebread.com How to Make Ends Meet When You're House Poor http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-make-ends-meet-when-youre-house-poor" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-608518550.jpg" alt="Woman learning how to make ends meet when she&#039;s house poor" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Your home is supposed to be a source of joy, your respite from the rest of the world. But if you can barely afford your housing expenses each month, the pride of owning a home can quickly turn to dread. (See also: <a href="http://www.wisebread.com/8-signs-youre-paying-too-much-for-your-mortgage?ref=seealso" target="_blank">8 Signs You're Paying Too Much for Your Mortgage</a>)</p> <h2>Being house poor</h2> <p>Mortgage lenders say that your total monthly debts, including your mortgage payment, should never equal more than 43 percent of your gross monthly income, your income before taxes are taken out. Financial professionals also say that your housing costs alone ideally should never exceed more than 28 percent of your gross monthly income.</p> <p>If you ignored those percentages when taking out your mortgage, or if a job loss or other financial crisis has reduced your income since you originally bought your home, you might now be feeling the financial pinch of paying for a house that simply consumes too much of your monthly income.</p> <p>Sometimes being house poor is a temporary condition. Maybe you've lost a job, but know that you can afford your home once you find a replacement. Maybe you've suffered an illness or injury that has kept you from working, but you will soon recover enough to begin earning again. Other times, it's a more permanent condition. You simply have a house that is too expensive for your income, even when that income is at its normal levels.</p> <p>If you're in the latter situation, the best decision might be to move and buy a home that is more affordable. If the house-poor problems you face are only temporary, though, you might be able to hold on until your financial situation improves.</p> <p>Fortunately, there are steps you can take if you find yourself struggling to make those housing payments each month.</p> <h2>Can a loan modification help?</h2> <p>Lenders might be willing to modify your mortgage to make it more affordable for you. Modifications might be simple and temporary, such as suspending your mortgage payments for two or three months as a way to allow you to resolve a temporary financial crisis without missing a payment. Or a modification can be more substantial: Lenders might change the terms of your loan, perhaps turning your 15-year loan into a 30-year one, leaving you with smaller monthly mortgage payments. They might also reduce your interest rate, again dropping your monthly payment.</p> <p>Lenders are not obligated to modify your mortgage loan, of course. But you won't find out if they're willing to make these changes if you don't call.</p> <h2>Refinancing might help</h2> <p>You might also <a href="http://www.wisebread.com/refi-shy-how-to-determine-if-now-is-the-time-to-refinance?ref=internal" target="_blank">try to refinance</a> your existing mortgage to one with a lower rate or longer term. This will drop your payments, maybe to a level that you can more easily afford.</p> <p>Be aware, though, that refinancing isn't free. It might cost you $2,000, $3,000, or more to refinance, depending on the size of your loan &mdash; though you can usually roll these closing costs into your new loan instead of paying them upfront in one lump sum. Refinances take time, too. It can take 30 days or more for a refinance to close, so make sure you don't miss any payments during this time.</p> <h2>Cutting expenses</h2> <p>If staying in your home and reducing your monthly financial stress is a priority, then cutting expenses is a crucial step. You might not be able to lower your mortgage payment or property taxes, but you may be able to lower your utility bills. Cutting an expensive cable package or adjusting the thermostat by a few degrees can save you a substantial amount of money each month.</p> <p>Take a hard look at your budget and make the cuts. You might miss fun events and spend more time batch cooking, but it's worth it if you can keep your home. You might also take bigger steps. Is your monthly auto payment high, too? Consider selling your expensive car and buying one that comes with a smaller monthly payment.</p> <h2>Get a side gig</h2> <p>You can also boost your monthly income by taking a side job &mdash; anything from driving for a ride-sharing service like Lyft, to freelance writing, to a shift at your local grocery store. (See also: <a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job?ref=seealso" target="_blank">15 Ways to Make Money Outside Your Day Job</a>)</p> <p>These jobs might not be glamorous, but if they boost your income each month, they can make those housing payments seem less fearsome. Again, you'll have to determine if working extra hours at a side job is worth being able to stay in your home.</p> <h2>Prioritize your home spending</h2> <p>Your mortgage is just one cost of owning a home. There's also the cost of maintenance, which financial experts say you should expect to spend about 1 percent of your home's purchase price on each year.</p> <p>You can't avoid maintenance. If you do, that dream home of yours might fall down around you. But you can prioritize your spending, something that can trim your monthly expenses. Don't spend money on a major bathroom remodel, or other purely cosmetic changes. But if your gutters need cleaning, your walls need painting, and your driveway needs sealing, do spend on those fixes, and do as much of it as possible on your own. Much of the cost in home repairs is in the labor. If you can do something safely and properly, doing it yourself will save a lot of money. Never try something that is beyond your skill and knowledge. YouTube videos can only take you so far. (See also: <a href="http://www.wisebread.com/the-top-10-diy-jobs-homeowners-should-avoid?ref=seealso" target="_blank">10 DIY Jobs Homeowners Should Avoid</a>)</p> <h2>Consider selling</h2> <p>If you are in danger of missing your mortgage payments, a refinance or modification isn't possible, and budget cuts won't make enough of an impact, it is time to consider selling your home.</p> <p>No one wants to give up on their home, especially if you consider it a dream residence. But it's simply not viable to think you can live 15 or more years scraping together for housing payments.</p> <p>If you want to sell quickly, a short sale might help. In a short sale, your lender allows you to sell your home for less than what you owe on your mortgage. For instance, if you owe $250,000 on your loan, your lender might approve a short sale for $225,000. By offering your home at a lower price, the hope is that it will sell at a faster pace, before you have to miss any mortgage payments.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/how-to-make-ends-meet-when-youre-house-poor">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">3 Ways Student Loan Debt Can Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/should-we-all-just-stop-paying-the-mortgage">Should We All Just Stop Paying the Mortgage?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-biggest-regrets-of-new-homeowners">8 Biggest Regrets of New Homeowners</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Make These 5 Money Moves Before Applying for a Mortgage</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-times-you-need-to-walk-away-from-your-dream-home">8 Times You Need to Walk Away From Your Dream Home</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing credit score foreclosure home loans house poor lenders missed payments modifications mortgage payments refinance Mon, 03 Apr 2017 08:30:12 +0000 Dan Rafter 1917875 at http://www.wisebread.com Pay These 6 Bills First When Money Is Tight http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/pay-these-6-bills-first-when-money-is-tight" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-503389404.jpg" alt="Man paying certain bills when money is tight" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>Is your money situation a little tight this month? It happens to the best of us. What if you don't have enough money this month to pay every bill by its due date? For the time being, you might need to prioritize your payments.</p> <p>This isn't the ideal solution. Far from it &mdash; paying any bill late could result in a late fee. But thanks to a bit of leeway when it comes to credit reporting, paying bills <em>just a bit late </em>might not hurt your all-important FICO credit score.</p> <p>This makes it a bit easier to determine which bills you absolutely <em>must</em> pay on time, and which bills you can more easily tackle after their due dates pass.</p> <h2>1. Mortgage</h2> <p>It's important to keep the roof over your head. And not paying your mortgage payment on time can send your credit score plummeting by 100 points or more. Credit scores are important: Lenders rely on them to determine if you qualify for a loan and at what interest rate.</p> <p>There is some leeway, though, with mortgage payments. First, lenders can't report your payment as late to the credit bureaus until you're at least 30 days past due. This means that paying your bill one, two, or three weeks late won't hurt your credit score.</p> <p>Second, according to the U.S. Department of Housing and Urban Development, lenders usually won't start the foreclosure process until three to six months after your first missed mortgage payment.</p> <p>Even though these safeguards are built in, you don't ever want to take the chance of losing your home. Make sure to pay your mortgage as soon as you can.</p> <h2>2. Rent</h2> <p>If you're renting an apartment, do everything you can to pay this bill on time. Your landlord can send you an eviction notice if you're just one day late with your rent payment. Now, actually evicting you will take time, and most landlords probably won't file a notice that quickly. But you don't want to give your landlord any excuse to start this process in motion.</p> <h2>3. Car payment</h2> <p>As with your mortgage, there is a grace period before your late car payment starts to affect your credit score. Your auto lender can't officially report your payment as late to the credit bureaus until that payment is more than 30 days past due.</p> <p>However, you need to be aware that if you stop making car payments, your vehicle can be repossessed. If this happens, your credit <em>will </em>suffer the consequences &mdash; by up to 100 points. Auto lenders can repossess your vehicle quickly, too. In fact, in most states they have the legal right to repossess your car as soon as you miss a single payment. It's unlikely that your lender will move to take your car that quickly, but why take that risk? If you're prioritizing your bills, this is definitely one to move to the top of your list.</p> <h2>4. Utility bills</h2> <p>Typically, you'll receive plenty of advance warning before your utility providers shut off your services. But you will have to pay these bills eventually to keep them on. Put these bills at the top of your priorities list.</p> <p>If you are struggling to pay these bills, don't ignore them; call the utility company. Utilities will often work with homeowners who are struggling financially. They might lower your bill for a period of time or defer your payments for a few months to allow you to rebuild your finances.</p> <h2>5. Student loans</h2> <p>Student loan debt is a financial burden for many, but you might be able to work out a new repayment plan with your lender if you are struggling. This is usually easier to do with federal student loans. You might qualify for a deferment, depending on your financial situation. But even if you are struggling to pay private student loans, call your lender. The company issuing your loans might be willing to work with you to keep you from falling into default. (See also: <a href="http://www.wisebread.com/8-surprising-ways-to-pay-off-your-student-loans?ref=seealso" target="_blank">8 Surprising Ways to Pay Off Your Student Loans</a>)</p> <h2>6. Credit cards</h2> <p>Yes, your credit card issuer can hit you with a late fee if you miss a payment. And yes, your card's interest rate might then soar. But credit cards don't need to be at the very top of your priorities list if you are struggling with critical bills like your mortgage.</p> <p>Your credit card provider can't throw you in jail if you miss payments, and it can't take your house or car. So paying this provider <em>after</em> making your mortgage and car payments is OK in a financial pinch.</p> <p>It typically isn't a smart move to pay only the monthly minimum on a credit card, because it's often such a small amount. However, if you're really struggling with money, this is another temporary option you can take. This will keep you current on your bill, and you can always boost your payments back up again once you've regained financial footing. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-financial-mistakes-that-wont-hurt-your-credit-score">5 Financial Mistakes That Won&#039;t Hurt Your Credit Score</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-late-payments-affect-your-credit">How Late Payments Affect Your Credit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/prioritize-these-5-bills-when-youre-short-on-cash">Prioritize These 5 Bills When You&#039;re Short on Cash</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/manage-your-fixed-expenses">Manage your fixed expenses</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance Debt Management bills car loan credit score late fees late payments mortgage rent repossession student loans utilities Fri, 31 Mar 2017 08:00:16 +0000 Dan Rafter 1915858 at http://www.wisebread.com How to Close a Credit Card Without Dinging Your Credit Score http://www.wisebread.com/how-to-ditch-a-credit-card-without-dinging-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-ditch-a-credit-card-without-dinging-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-654999932.jpg" alt="get rid of a credit card without damaging your credit score" title="" class="imagecache imagecache-250w" width="250" height="140" /></a> </div> </div> </div> <p>It might seem like common sense to think that individuals would be rewarded (or at least not penalized) for closing a credit card. Doesn't it show good credit sense? Whether you want to close a credit card to remove the temptation of using credit you can't pay back, or you have other credit cards that offer better rewards and benefits, you may be surprised to find that closing an account may negatively affect your credit score. (See also:<a href="http://www.wisebread.com/the-5-things-with-the-biggest-impact-on-your-credit-score?ref=seealso" target="_blank"> The 5 Things With the Biggest Impact on Your Credit Score</a>)</p> <h2>Why a closed account dings your score</h2> <p>It's important to know why closing a card negatively affects your credit score. Here are the two main reasons.</p> <h3>Your account history is shortened</h3> <p>If you close an account that you have had for several years, then you are cutting your account history short. Closing a credit card that you have had for almost a decade will have a bigger impact on your score than closing a card you've had less than a year.</p> <h3>Your credit utilization rate changes</h3> <p>If you currently have $2,500 in credit card debt, but have three cards that give you a total $15,000 credit limit, your current <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization rate</a> is just over 16 percent. However, if you cancel one of the cards, and that card had a credit limit of $8,000, then you just decreased your overall credit line to $7,000. Your credit utilization ratio will now increase to over 35 percent. Having a credit utilization rate over 30 percent will negatively impact your credit score.</p> <h2>Ask for a card change instead of canceling</h2> <p>If you want to ditch a certain credit card due to high annual fees, you may be able to downgrade your card without canceling the account. Call the creditor and ask if you can change to a lower or zero fee card.</p> <p>Asking for a card change is also important for those who are <a href="http://www.wisebread.com/heres-what-the-successful-use-of-secured-credit-cards-looks-like?ref=internal" target="_blank">using a secured card</a> to boost their credit score. Some secured cards may automatically upgrade your account to an unsecured one, but not always. If your account is in good standing, the creditor should move your account to a better card. (See also: <a href="http://www.wisebread.com/the-5-best-secured-credit-cards?ref=seealso" target="_blank">Best Secured Credit Cards</a>)</p> <h2>Ask for credit limit increase on other cards</h2> <p>If you are still set on closing your credit card account, you can minimize the damage by asking for a credit limit increase from other cards you're keeping. This will prevent your credit utilization ratio from changing dramatically.</p> <h2>Close the newest cards first</h2> <p>Choose a newer card to cancel rather than an old one. This will prevent your score from dropping too much from a shortened overall account history. Don't close any accounts if you are planning to apply for loans soon. It will take your score a few months to recover. If a lender pulls your report shortly after you've closed your accounts, they'll see some account activity that may make them less likely to approve a loan, not to mention your sudden drop in score.</p> <p>Finally, be sure to monitor your credit score for a few months after you close your account to ensure everything went smoothly and no errors were reported. (See also:<a href="http://www.wisebread.com/5-ways-to-improve-your-credit-score-fast?ref=seealso" target="_blank"> 5 Ways to Improve Your Credit Score Fast</a>)</p> <h2>Why not just keep the card?</h2> <p>Credit card accounts in good standing will continue to positively impact your account for many years. Unless you're paying an annual fee for a card you're no longer using, it may be just as effective if you put it away in a safe place. This way you won't risk lowering your credit score.</p> <p>However, if you do decide to close some accounts, keep these things in mind so it has a minimal impact on your score.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/ashley-eneriz">Ashley Eneriz</a> of <a href="http://www.wisebread.com/how-to-ditch-a-credit-card-without-dinging-your-credit-score">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/fico-vs-fakes-are-you-getting-the-wrong-credit-score">FICO vs. Fakes: Are You Getting the Wrong Credit Score?</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-is-a-good-credit-score-range">What Is a Good Credit Score and Why Is It Important?</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-read-a-credit-report">How to Read a Credit Report</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/building-a-credit-history">Building a Credit History</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score">This One Ratio Is the Key to a Good Credit Score</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Credit Cards closing credit cards credit bureaus credit score credit utilization ratio fico limit increase Wed, 29 Mar 2017 08:30:17 +0000 Ashley Eneriz 1917874 at http://www.wisebread.com 5 Financial Mistakes That Won't Hurt Your Credit Score http://www.wisebread.com/5-financial-mistakes-that-wont-hurt-your-credit-score <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/5-financial-mistakes-that-wont-hurt-your-credit-score" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-623515998.jpg" alt="Learning which financial mistakes won&#039;t hurt your credit score" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Certain financial mishaps can cost you dearly when it comes to your FICO credit score. Pay your credit card bill more than 30 days late, and your score can drop by 100 points. Declare bankruptcy or lose a home to foreclosure? Your score will fall by even more.</p> <p>In general, lenders today consider a FICO credit score of 740 or higher to be a very good score. They consider anything over 800 to be excellent. Keeping your score in these ranges requires that you pay your bills on time each month and keep your credit card debt low.</p> <p>But here's a secret about FICO scores: They don't measure all of your financial activity. It's possible to suffer a few financial setbacks, or make some money mistakes, without seeing your credit score take a dive.</p> <p>Here are five financial mishaps that, though they might cause problems in your daily life, won't hurt your credit score.</p> <h2>1. Paying your credit card bill just a little late</h2> <p>You should always <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=internal" target="_blank">pay your credit card bills on time</a>. And ideally, you should pay off your cards in full each month. But if you miss your deadline by two days or three weeks, it won't impact your credit score.</p> <p>Your credit card provider will only report a payment as late to the three national credit bureaus &mdash; Experian, Equifax, and TransUnion &mdash; if you are at least 30 days late on it. As long as you pay before that 30-day deadline passes, your credit score will remain intact. (See also: <a href="http://www.wisebread.com/how-late-payments-affect-your-credit?ref=seealso" target="_blank">How Late Payments Affect Your Credit</a>)</p> <p>Of course, this doesn't mean that you won't take a financial hit. Your credit card provider could raise your card's interest rate and levy a late fee &mdash; usually around $35 &mdash; against you.</p> <h2>2. Forgetting to pay your doctor's bill</h2> <p>Not all bills are equal in the eyes of your credit score. Pay your credit card or mortgage payment more than 30 days late, and you can expect your FICO score to plunge. Do the same with your doctor's or dentist's bill, and your credit score won't budge.</p> <p>That's because medical providers don't report late payments to the credit bureaus. So paying your dentist bill 40 days late won't hurt your credit score.</p> <p>Again, though, you need to be careful. Paying your medical bills late could have other financial consequences. Your medical provider might tack on additional fees to your bill if you don't pay on time. And if you put off paying that bill for too long, your medical provider might send a collections agency after you. This <em>will</em> be reported to the credit bureaus, and it will cause your credit score to fall.</p> <h2>3. Not paying your phone or utility bill on time</h2> <p>Your phone, electrical, gas, water, garbage, and cable bills are much like your medical ones: The providers of these services don't report to the credit bureaus. You can pay these bills late without suffering a hit to your credit score.</p> <p>Again, be careful. You don't want your utility company shutting off your service or sending your late bill into collections, something that will hurt your credit score.</p> <h2>4. Paying your apartment rent late (usually)</h2> <p>It used to be that apartment rent payments were never reported to the credit bureaus. Today, that is slowly beginning to change, with some services popping up that will report on-time, and late, rental payments to credit bureaus.</p> <p>But the majority of renters still don't see their monthly rent payments reported to the credit bureaus. That's bad news for renters who pay their rent on time each month; those on-time payments could boost their credit scores if they were reported. It's a better deal for those renters with a history of late payments, as these financial mistakes won't hurt their credit scores.</p> <h2>5. Losing a job</h2> <p>You might be surprised to learn that your annual income has no impact on your FICO credit score. Your credit score only tracks how well you pay your bills and manage your credit. It does not care whether you make a $1 million or $10,000 a year.</p> <p>If you lose your job and your income suddenly dips, your credit score won't budge.</p> <p>If your reduced income causes you to run up your credit card debt or start paying your bills late, though? That will hurt your credit score.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/5-financial-mistakes-that-wont-hurt-your-credit-score">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/pay-these-6-bills-first-when-money-is-tight">Pay These 6 Bills First When Money Is Tight</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-late-payments-affect-your-credit">How Late Payments Affect Your Credit</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/heres-why-you-shouldnt-freak-out-if-you-miss-a-payment-due-date">Here&#039;s Why You Shouldn&#039;t Freak Out If You Miss a Payment Due Date</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-fix-your-finances-after-missing-a-payment">How to Fix Your Finances After Missing a Payment</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/8-credit-repair-mistakes-that-will-cost-you">8 Credit Repair Mistakes That Will Cost You</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance bills collections credit score fico financial mistakes late fees late payments utilities Thu, 23 Mar 2017 10:00:11 +0000 Dan Rafter 1911510 at http://www.wisebread.com Make These 5 Money Moves Before Applying for a Mortgage http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/make-these-5-money-moves-before-applying-for-a-mortgage" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-506317138 (1).jpg" alt="Making money moves before applying for a mortgage" title="" class="imagecache imagecache-250w" width="250" height="141" /></a> </div> </div> </div> <p>Each year, millions of people apply for a mortgage and purchase a home. This, however, shouldn't convince you that getting a home loan is a piece of cake. In reality, a mortgage is one of the hardest loans to qualify for. But if you make these money moves before meeting with a lender, you can swing the odds in your favor.</p> <h2>1. Pay off debt</h2> <p>Getting approved for a mortgage doesn't require zero debt, but the more you currently owe, the harder it can be to qualify for a desired amount.</p> <p>To avoid any roadblocks along the way, come up with a clearsighted plan to pay off as much of your debt as possible, especially <a href="http://www.wisebread.com/the-fastest-method-to-eliminate-credit-card-debt?ref=internal" target="_blank">credit card debt</a>. A high <a href="http://www.wisebread.com/this-one-ratio-is-the-key-to-a-good-credit-score?ref=internal" target="_blank">credit utilization ratio</a> &mdash; which is your credit card balance compared to your credit limit &mdash; can lower your credit score and make it difficult to qualify for a mortgage or trigger a higher mortgage interest rate.</p> <p>As a personal goal, keep credit card balances below 30 percent of your credit limit. To attain this, stop using cards and pay more than your minimums every month. Also, ask creditors to lower your interest rate. If you can pay less interest, you'll reduce the principal faster.</p> <p>Take it a step further and make higher monthly payments on other types of debts as well, such as a car loan, student loan, etc. This is to your advantage because the less expenses you have, the easier it'll be to adjust to a mortgage payment.</p> <h2>2. Determine what you're comfortable spending</h2> <p>Your mortgage lender decides an affordable amount based on your income and existing debt. Still, it helps to have an idea of what <em>you </em>are comfortable spending on a house before meeting with a bank. Typically, banks allow borrowers to spend between 28 percent and 31 percent of their gross monthly income on a mortgage payment.</p> <p>Do the math and calculate 31 percent of your gross monthly income, and then review your budget to see if you can realistically afford this amount on a monthly basis. After determining a comfortable monthly payment, use a mortgage calculator to estimate the maximum you can borrow based on the desired payment range.</p> <h2>3. Devise a savings plan</h2> <p>Qualifying for a mortgage entails money &mdash; lots of it. Not just money for the monthly payment, but also <a href="http://www.wisebread.com/4-easy-ways-to-start-saving-for-a-down-payment-on-a-home?ref=internal" target="_blank">cash for a down payment</a> (between 3.5 percent and 20 percent of the home's value), plus there's the cost of closing. These fees can run up to 5 percent of the purchase price.</p> <p>Even if you can afford a house payment at a certain price point, you'll only qualify for a particular amount if you have enough in reserves for mortgage-related fees. Let's say you want to purchase a $300,000 house. Your income may show an ability to afford the monthly payment. But if you only have $7,500 in savings for a down payment, instead of the required $10,500 (assuming you get an FHA home loan), you can't purchase the home. You then have two options &mdash; purchase a cheaper home, or postpone buying until you save additional cash.</p> <p>Once you have an idea of how much you'll spend on a property, devise a plan to save for your down payment and closing costs. Based on your amount of disposable income each month and your desired time frame for purchasing a property, decide how much to save. Keep this money in a designated high-yield savings account.</p> <h2>4. Pay your bills on time</h2> <p>There are no hard rules regarding how many late payments a lender allows within 12 or 24 months before applying for a home loan. If there are late payments on your recent credit history, it's up to your lender to calculate the risk level and determine whether you're creditworthy. To do this, some lenders request an explanation to assess whether lateness was due to irresponsibility or circumstances beyond a borrower's control. (See also: <a href="http://www.wisebread.com/5-simple-ways-to-never-make-a-late-credit-card-payment?ref=seealso" target="_blank">5 Simple Ways to Never Make a Late Credit Card Payment</a>)</p> <p>Either way, late payments in your recent history can result in a higher interest rate, which means you'll pay more for your home loan in the long run. Therefore, aim to pay all your bills on time. If you often forget due dates, set up recurring or automatic monthly payments.</p> <h2>5. Shop around for lenders</h2> <p>According to the Consumer Finance Protection Bureau, 47 percent of homebuyers don't compare mortgage lenders when applying for a home loan. What's even more surprising, 77 percent apply to only one lender at all. It might seem convenient to get this step out of the way ASAP, but it just doesn't make smart financial sense.</p> <p>When you're ready to apply for a home loan, you need to do research and shop around. Don't just settle for the first mortgage lender who approves you. You might be eager to get the process underway, but be patient. The first person to give you the green light might not be offering the lowest interest rates (or charging the lowest fees), which could mean the difference between thousands of dollars. Maybe they're just not the right fit for you, or they don't take the time to really earn your business. You won't know unless you compare, and that step can save you a lot of stress (and money) down the line. (See also: <a href="http://www.wisebread.com/4-mortgage-secrets-only-your-broker-knows?ref=seealso" target="_blank">4 Mortgage Secrets Only Your Broker Knows</a>)</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/mikey-rox">Mikey Rox</a> of <a href="http://www.wisebread.com/make-these-5-money-moves-before-applying-for-a-mortgage">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-reasons-why-youre-too-old-or-too-young-for-a-mortgage-loan">4 Reasons Why You&#039;re Too Old — Or Too Young — For a Mortgage Loan</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/everything-a-first-time-home-buyer-needs-to-buy-a-house">Everything a First-Time Home Buyer Needs to Buy a House</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/3-ways-student-loan-debt-can-affect-your-mortgage-application">3 Ways Student Loan Debt Can Affect Your Mortgage Application</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/do-you-really-need-a-20-percent-down-payment-for-a-house">Do You Really Need a 20 Percent Down Payment for a House?</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-reasons-you-shouldnt-buy-a-house-yet">5 Reasons You Shouldn&#039;t Buy a House (Yet)</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Real Estate and Housing buying a home credit history credit score debt repayment down payments home loans mortgages saving money tax deductions Mon, 20 Mar 2017 10:30:21 +0000 Mikey Rox 1908934 at http://www.wisebread.com 4 Questions to Ask Before Getting a Credit Increase http://www.wisebread.com/4-questions-to-ask-before-getting-a-credit-increase <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/4-questions-to-ask-before-getting-a-credit-increase" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock-503776840.jpg" alt="Woman asking questions before getting a credit line increase" title="" class="imagecache imagecache-250w" width="250" height="142" /></a> </div> </div> </div> <p>Feeling penned in by the low credit limits on your credit card? You might be able to boost your credit limit to a higher amount. Often, all it takes is a single call to your card provider. The bigger question, though, is whether you're financially prepared for a higher limit.</p> <p>Your credit card providers will always set a credit limit on your cards, the maximum amount you can borrow. If you have a short credit history or a low FICO credit score, your credit limits might be low ones, sometimes under $1,000. If you have a long credit history and high scores, your limit might be $10,000, $20,000, or more.</p> <p>How do know if you're ready for the financial responsibility of a higher credit limit? Here are some questions to ask yourself.</p> <h2>Do You Pay Your Credit Card Bill Late?</h2> <p>Do you pay your credit card bills by their due dates every single month? Or have you missed payments in the past? If it's the latter, you might want to hold off on requesting a higher credit limit.</p> <p>Paying your credit cards 30 days or more late will cause your FICO score to drop by 100 points or more. Your credit card provider will also charge you a penalty, and your card's interest rate might soar. If you have a higher credit limit and a high balance, an interest rate spike could cost you quite a bit in extra interest payments.</p> <p>Having a history of late payments will also give your credit card provider pause; the financial institution might not want to boost your limit if you don't always pay your bill on time.</p> <h2>Do You Carry a Balance on Your Card?</h2> <p>The smart way to use a credit card is to pay off your balance in full each month. This way, you <a href="http://www.wisebread.com/how-to-use-credit-cards-to-improve-your-credit-score?ref=internal" target="_blank">boost your credit score</a> by making on-time payments, and you won't get hit by the high interest that is often attached to credit card debt.</p> <p>But what if you never pay your balance off in full? What if you roll your credit card debt over from month to month, watching it grow each 30 days as you do so?</p> <p>If that describes you, don't worry about increasing your credit limit. Instead, focus on <a href="http://www.wisebread.com/fastest-way-to-pay-off-10000-in-credit-card-debt?ref=internal" target="_blank">paying off your credit card debt</a> in full. It's easy to let this debt get out of control because it tends to grow so quickly. You don't want to waste your money paying off interest each month.</p> <p>If you think you need a higher credit limit to manage your bills, the better thing to do is to stop and assess your situation. A higher credit limit might save you for a few months, but you'll end up even worse off due to the high interest debt that you're accruing while your financial situation continues to spiral out of control. Make the tough cuts in your spending and <a href="http://www.wisebread.com/5-day-debt-reduction-plan-pay-it-off?ref=internal" target="_blank">create your debt payment plan</a>.</p> <h2>Have You Maxed Out the Limits on Your Cards?</h2> <p>You never want to hit the maximum credit limit on your credit cards. If you've already done this on other credit cards, it's a sign that you need to get your spending under control, even if your credit card limits are relatively low ones.</p> <p>Asking for more credit is not the right solution to <a href="http://www.wisebread.com/oops-i-maxed-out-my-credit-cards-now-what?ref=internal" target="_blank">maxing out your credit cards</a>. The better move is to stop charging and start paying down those balances. Don't even think about asking for more credit until you pay off your credit card debt in full.</p> <p>If instead you find you're bumping into your maximum even though you're able to pay it off each month (for example, you're trying to put your regular expenses on your card that you've been paying with cash or debit but there isn't enough credit available), that would be a good case for you to make in asking for a higher limit.</p> <h2>Do You Miss Other Bill Payments?</h2> <p>Are you constantly struggling to pay your auto, mortgage, or student loans on time? If so, you might consider higher credit limits to be a solution. After all, if you can charge more purchases each month, you might free up more cash to put toward those other bills.</p> <p>This, though, is flawed thinking. If you're struggling to pay your monthly bills, you either don't make enough money, or you're spending too much. The better solution is to <a href="http://www.wisebread.com/build-your-first-budget-in-5-easy-steps?ref=internal" target="_blank">draft a realistic household budget</a> showing how much money you're spending each month and how much you're earning. Armed with these numbers, you can then change your spending habits, make the move to a more affordable house or apartment, or search for a side job to bring in more income. (See also: <a href="http://www.wisebread.com/15-ways-to-make-money-outside-your-day-job?ref=seealso" target="_blank">15 Ways to Make Money Outside Your Day Job</a>)</p> <p>Simply asking for more wiggle room on your credit cards is not addressing your money struggles. That's trying to avoid them.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/dan-rafter">Dan Rafter</a> of <a href="http://www.wisebread.com/4-questions-to-ask-before-getting-a-credit-increase">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-put-your-spouse-on-a-budget-without-ruining-your-marriage">How to Put Your Spouse on a Budget Without Ruining Your Marriage</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/why-the-age-of-your-credit-history-matters">Why the Age of Your Credit History Matters</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-a-goodwill-letter-can-save-your-credit-score">How a Goodwill Letter Can Save Your Credit Score</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-ways-life-is-amazing-with-an-800-credit-score">5 Ways Life Is Amazing With an 800 Credit Score</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/what-do-you-and-a-credit-card-thief-have-in-common">What Do You and a Credit Card Thief Have in Common?</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Personal Finance carrying a balance credit limits credit score debts increase on time payments paying bills spending Wed, 15 Mar 2017 10:00:11 +0000 Dan Rafter 1908842 at http://www.wisebread.com