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Tuesday September 26th 2017

Step-by-Step Guide to Lower Credit Card Interest Rates

Credit card companies compete with each other using their individual interest rates. The following is a method in which you can use a credit card company’s competitive mindset to lower your credit card interest rates.

Getting the Best Rate

Credit card companies are in the business of making money. If they could charge you a hundred percent interest rate they would. However, credit card companies are constantly competing with each other for customers on a daily basis. No one would use a credit card that charged a hundred percent interest, thus a credit card company with a hundred percent interest rate would become bankrupt in a matter of days. Just how much you do pay can depend on how far you’re willing to go to get the best rate.

Gather Your Information and Start Calling

First off you need to get your credit card statements together and call the customer service number that is list on your credit card statement. This will call will take a while and probably try your patience but it could save your hundreds of dollars in the future so stick with it. Go through the recording and push the necessary numbers until you get a hold of one of your credit card company’s representatives.

Negotiating a Better Rate

Now that you have an actual person on the phone you can start step two. Simply ask the representative to lower your credit card’s interest rate. Make sure you point out that you constantly pay your bill on time. If you make a lot of late payments you may be unable to lower your interest rate at all.

Be Nice

It is absolutely essential that you keep a polite tone. You are trying to get the credit card company to do you a favor; people do not do favors for people that show hostility towards them. Stay polite and the customer service representative will be more willing to help you out however he or she can.

Be Persistent

If your credit card company can’t lower your rate then request detailed information on why they aren’t willing to lower your interest rate and how you can qualify for a lower rate in the future. You may need to simply wait a few months before calling again. It is actually a good idea to call every few months whether they approve a lower interest rate or not. You want to get as close to zero percent as possible.

Lastly, pay your bill in full each month. If you pay your bill in full you make sure your credit card company doesn’t have a reason to increase your interest rate. The longer you pay your bill in full each month without any troubles the more of a reason your credit card company will have to lower your interest rate next time you call.

Politeness and manners are the keys to lowering your credit card interest rates. Those who ask nicely and frequently are more likely to receive lower credit card interest rates than those who demand and never ask. One phone call could save you hundreds of dollars each year


What You Should Know About Hard And Soft Credit Inquiries

A credit report is the key to your financial security. Credit reports tell lenders all of the information they need in order to determine your creditworthiness. They look at your credit score and base credit decisions and interest rates off of that. There are many components that make up your credit score. Payment history, average age of accounts, debt to credit ratio, and several other components go in to calculating the credit score a lender will see. One component involved in the credit score is the number of inquiries you have. A credit inquiry exists in two forms. A hard inquiry is one that counts against your score while a soft inquiry does not.

Essentially, a hard inquiry is initiated by you. When you apply for a new loan or a credit card, a company will run your credit. Rather you are approved or not, that inquiry will count against your score for up to two years. This means that when you open up a new credit account, your score will lower a bit because of the inquiry and the reduction in the average age of accounts. As you make regular payments, they will outweigh the score impact of the inquiry and improve your credit score.

There are many examples of hard inquiries. Opening a new loan such as car or home loan is one of them. Credit cards also count as hard inquiries. Some banks may also cause a hard inquiry when opening a new account for you. In addition, some utilities and cell phone companies that run your credit may also result in a hard inquiry. One thing you should know is that when you are applying for a car or home loan, you are allowed to rate shop. This means that within a 14-45 day span depending on the credit bureau, all of your auto applications will count as one hard inquiry against your score even though all will be listed on your credit report. The same rule does not apply for credit cards.

In addition to hard inquiries, you will also see soft inquiries listed on your credit report. Soft inquiries are listed on your credit report but have no impact on your score. The most common soft inquiry is when you pull a copy of your own credit report. Also, many lenders will initiate a soft inquiry in order to prequalify you for a loan or credit card. These soft inquiries result in the offers you get in the mail. If you don’t initiate the process, that inquiry won’t hurt you. However, if you respond to an offer you receive in the mail and apply for a credit card through that it will count as a hard inquiry at that point.

Employers nowadays also check credit when screening applicants. When they do it will count as a soft inquiry. Insurance companies and several utilities also use soft inquiries. These are needed services, so you do not hurt your credit by using them. Lastly, if you have an existing account with a company they might check your credit periodically. This is what leads to credit limit increases with a credit card company or a change in interest rates with a bank.


Five Steps to a Better Credit Score

No it’s not a game. Although a credit score may seem like an abstract number with little relevance to your every day life, a low credit score may eventually have very negative ramifications. A credit score can be the determining factor of whether or not someone can afford a new home. A credit score is even used by some employers as part of the hiring process.
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FHA Loan Changes are Coming

In the last few years, private mortgage lenders have been reluctant to approve new loans. As a result, the government-backed FHA has substantially increased its loans. Today, according to the CMPS Institute, FHA mortgages comprise nearly 30% of all existing loans compared to only 3% in 2006. FHA loans require only a 3.5% down payment compared to traditional mortgages which require 20%.

Unfortunately, this rapid growth has created increased risks and led to higher loan losses. According to the Department of Housing and Urban Development, 21.1% of FHA mortgages that originated in 2007 are now in either foreclosure, bankruptcy or delinquent over 90 days. This compares to 14.2% just a year ago. Of the loans originated in 2008, 17.3% are in this category compared to only 8.4% the year before.

The FHA’s loan loss reserve has fallen dramatically. As of September 30, 2008, the loan loss reserve stood at $19.3 billion. Now, as of June 30, the reserve is only $3.5 billion. The financing account of the FHA, which uses reserve funds to pay for loan losses, has risen from $9 billion at September 30, 2008, to the present level of $29.6 billion.

The FHA is concerned that the reserve fund and the financing accounts could be depleted if housing prices continue to decline. The FHA has implemented changes to strengthen the reserve accounts and to lessen future risks of loan defaults.

Increased Annual Insurance Premiums

The agency plans to increase the annual premium to a range of 0.85%-0.90% from the present range of 0.50%-0.55%. This premium, or PMI, is included in the monthly mortgage payment. However, the FHA will probably lower the mandatory upfront premium to 1.00% from the present 2.25%.

The FHA expects these changes to produce a net increase in premium income, which will provide more funds to cover future loan losses and reduce the decline in the loan loss reserve account.

Reduction in Seller Closing Cost Contributions

Previously, sellers could contribute up to 6% of mortgage closing costs. This will be reduced to 3%, which will increase the buyer’s financial commitment towards the purchase of his house.

Higher Credit Score Requirements

In the past, the FHA did not have an official minimum required credit score. That determination was left to the individual loan underwriters. Now, the agency has proposed a minimum required credit of 500 with a down payment of at least 10%. In order to qualify for a 3.5% down payment, the credit score will have to be at least 580. Nevertheless, these credit score minimums are still below the requirements of a conventional mortgage, which are 660 to 720 with a 10% down payment.

The FHA is also asking lenders to tighten underwriting criteria by more closely examining a borrower’s cash reserves, debt-to-income ratio and credit history. The effects are already apparent. As of April 2010, only 2.4% of FHA loans had credit scores less than 620 compared to 37.5% in January 2008.

While FHA requirements are still generous compared to traditional mortgage loans, they are becoming more stringent and qualifying will become much more difficult in the future.


Don’t be a Horror Story: Protect Yourself from Identity Theft

Protecting yourself from identity theft can almost seem like a job in itself, and it seems like the criminals are always one step ahead of the good guys. If you’re like most people though, you probably know someone, or have at least heard a good horror story or two, from people who have suffered identity theft. And more than likely it took these poor souls a lot of work to straighten out the issues created by the theft of their identity — issues you would probably like to avoid.

If you would prefer to be proactive to the threat of identity theft rather than reactive, here are a few steps you might take that can help you protect yourself.

Mail and Documents

Knowing when particular bills and account statements arrive can be instrumental in recognizing when something might be amiss. Not receiving regularly scheduled bills, or account statements coming in haphazardly might indicate a case of identity theft. On the other hand, receiving similar documents for accounts that you don’t recognize but are in your name could also be a red flag that someone has opened accounts in your name without your knowledge. Getting bills and statements online might be one way to circumvent the possibility of identity theft through the mail.

It is also important to remember that once these types of documents enter the house, they still aren’t completely safe. Should you throw paper statements away in the trash, you are risking the chance that they might fall into someone else’s hands. Therefore, if you plan to dispose of such documents, typically the safest way is either by burning them or cross-cut shredding them.

General Security

Some documents like house or car titles, tax information, and other paperwork with critical personal information contained upon it, can’t be shredded or destroyed. It might therefore be pertinent to rent a safety deposit box which may be used to hold some of these documents. However, a safety deposit box might not be feasible for all documents since it might be troublesome to go back and forth to obtain needed information or you might just have too much.

Therefore, you might want to have a central location in your home for your important documents that you may need to refer to on a regular basis. With a space in which this information is filed neatly and orderly, you can tell if something has been disturbed should a break-in of your home occur.

Internet

The internet is probably one of the easiest ways to have your identity stolen these days. With the proliferation of online shopping, phishing scams, viruses and keystroke capturing programs, the internet is full of potential threats to your personal and financial information. By making use of virus scan software, only using known and trusted internet sites, and restricting the amount of information you provide over the internet, you can better protect yourself from threats. You might also reduce the risk of financial security breaches by using payment programs like PayPal to make internet purchases.

Credit Reports and Common Sense

Checking your credit reports can be another good way to protect yourself from or identify identity theft. At https://www.annualcreditreport.com/ you can start the process of checking your credit reports. You can select one free annual report each from TransUnion, Experian, and Equifax, choosing to do all three at one time or spacing them out throughout the year. Spacing them out might allow you to keep a better eye on your credit so that there isn’t a year long gap between when your run the reports.

Using your common sense in situations in which you think something might be amiss or when you are uncomfortable providing personal information may also be key to protecting your identity. Strange calls from collection agents or charges for products or services you never requested might also be red flags that your personal information has been compromised.

For more information regarding identity theft, how to protect yourself, and what to do should identity theft occur, you can visit the FTC’s Identity Theft Website at: http://www.ftc.gov/bcp/edu/microsites/idtheft/.


How Does a Short Sale Affect Your Credit?

Many people often believe that a short sale does not affect their credit at all. For this reason, they choose this option when they are having difficulty making payments on their home. They believe that this is going to be better for them than an actual foreclosure. What most do not realize is there are negative effects to choosing this option, as well. In fact, the damage to your credit score may be just as harmful as a foreclosure.

First, it must be stated that a short sale, while it is not a foreclosure, will still put a mark against your credit. After all, the lender is going to be on the losing end of the deal and, with the high rate of foreclosures and short sales, they are taking too many big hits. In fact, the combination is why the government stepped in to bail out some of the lenders out. These lenders, when it comes to retribution, are not going to let the borrower get away without any concerns.

With this in mind, borrowers must realize there will be a consequence to their credit when choosing a short sale to sell their home. In fact, a recent study that was completed by VantageScore, a credit scoring company, revealed that there is only a difference of an approximate 10 to 20 point drop between someone going through a foreclosure and one going through a short sale. Both drops are significant, foreclosure causing a credit score to lower as much as 130 to 140 points, while a short sale was between 120 and 130 points drop.

Along with a lowered credit score, individuals who choose the short sale may also be responsible for paying the difference to the lender. This depends on which state you live in and whether or not the lender is pushing to get the money back. In truth, many lenders are choosing not to employ this option. However, this is something that you should not count on. If it is demanded and it is not paid back, this, too can mar the credit score and prevent one from financing another home in the future.

Borrowers will also find they are responsible for paying taxes on the difference between what the home sold for and the amount they owed on their loan. In many cases, the difference could be as much as $100,000. If not prepared for this outcome, individuals could find themselves in trouble with the IRS, as well as their lender. This is the last thing that anyone in this circumstance needs to add to their situation.

Anyone who finds themselves suddenly having difficulties trying to keep up with their mortgage payments may immediately think their home is going to be foreclosed on. This process actually takes several months to get underway and this may leave you time to consider a short sale on your home. While the short sale will cause some damage to your credit score, and even less if you keep your payments current, the records will also state that you did try to prevent your home from being foreclosed on. This, of course, will look much better than sitting back and doing nothing to stop it.

Whether the bank cares about that later on is anyone’s guess. Many advisors say that as long as you pay your bills on time for 24 months after any major credit damage, you should be able to get a loan. As your credit score plays a very important role in your life, do the research on your own particular situation to help you make the right decision for you and your family. As around to friends who have gone through similar problems and speak to a financial advisor.


Why Credit Scores are Important

Today’s economy has everyone thinking about their financial standing. Along with having enough capital on hand to pay living expenses, stash some away for savings, plan for college, and hope to have a retirement fund, making sure that your credit score is in good condition almost gets lost in the shuffle. In fact, with all of this fancy financial footwork going on, it’s easy to forget how important having a good credit score really is.

What Does my Credit Score do, Again?

Credit scores, or FICO scores, are a calculated measurement of how likely an individual is to pay off a loan, and range from 300 to 850. Basically, money lenders use this number to decide how risky it is to loan you money. Those with higher scores are safer to loan to because in the past they have a solid history of paying loans back on time and in full, while those who have lower scores have had problems with complying with loan repayments in their credit history, making them riskier to loan to. Again, this risk is defined as the likelihood of the borrower paying back the amount in full.

Based on your riskiness—measured by your credit score—money lenders decide first if they will loan to you or not. If they decide to loan money to you, they go back and consult that credit score again to determine how high of an interest rate to charge you. Again, the higher the credit score, the lower the interest rate and the lower the score, the higher the interest rate. The reason for this is because the lender is taking on more risk by loaning to those with lower credit scores, and the return on a higher interest rate is their reward for assuming that additional risk.

Why do I care about an Interest Rate?

Borrowers should care about the interest rate they receive on a loan because this is the amount of money they will pay to the lender for the privilege of borrowing the money. The higher the interest rate, the more it will cost the borrower to borrow the money; the lower the interest rate, the less it will cost the borrower to borrow it. For example, a let’s say a person with a high credit score—700 or above—goes to the bank to borrow $1,000. The bank looks at their FICO score and sees that they are in excellent financial health and the likelihood of them getting their money back is very high, so this individual is a very low risk. As a result, they issue this customer the line of credit at 3%. This means that it will cost this customer $30 to borrow $1,000; a very good deal indeed. Next, another person walks into the bank looking to borrow $1,000. The bank pulls this person’s FICO score also, and finds that their number is very low—620 or lower—signifying to the bank that there are most likely going to be problems getting their money back. Even though this customer is risky, they decide to lend the money, but do so at a significantly higher rate: 10%. This means that it will cost this individual $100 to borrow $1,000. The bottom line here is that individuals should care about their credit score because it can save them money at a time when they probably need it the most—when they go to borrow money.

How can I Improve my Credit Score?

The number one way to improve your credit score is to make your payments on time; even if all you are doing is making the minimum required payment, do so on time. This shows potential creditors that you favorably abide by your financial contractual obligations.

The next piece of advice is don’t take too much credit out, or apply too often for credit. If you take too much credit out you run the risk of not being able to pay it off, which will hinder your progress towards the first point here. If you apply too often for credit, this lowers your credit score because research has shown that those who open a large amount of credit within a short period of time are less likely to pay any or all of it off.

Check your credit score often. You can check it yourself without injuring the score, so do so frequently. This will allow you to make corrections if errors appear, and keep you informed to your general creditworthiness. To do so, contact one of the three credit rating bureaus:

• Equifax. P.O. Box 740241, Atlanta, GA 30374-0241; (800) 685-1111
• Experian. P.O. Box 2002, Allen, TX 75013; (888) (397-3742)
• Trans Union. P.O. Box 1000, Chester, PA 19022; (800) 916-8800