Informed People Make Better Decisions by Melissa Lange
Have you ever thought that making financial decisions was hard, and you try to avoid the situation as much as possible.. So many people have misconceptions on buying a home, credit, investing, and lending.
Well if you knew your finances then when making a financial decision you are already completely aware of the process, and what is entailed. But it is really not that hard if you are educated enough to what is good and what is bad.
Also, why do banks ask for so much information such as 2 years tax returns, banks statements, assets, and much more?
For example someone that doesn’t have credit will say that they can’t purchase a home because they don’t have credit, well that is not true. I can get a client a mortgage with no credit history versus have a bad credit history.
Well, they want to make sure that you are responsible enough to repay any method of borrowed money, and that will reflect your credit score.
The Horrible Part is that consumers are not aware of their finances, and all that is entailed.
For example: Are you aware that you have 3 credit scores, and one of which is your beacon. Which one is your beacon, and why are they called FICO scores?
Your beacon is a name given to the credit score published by Equifax, and that is referred to your middle score.
There are really three FICO scores computed by data provided by each of the three bureaus––Experian, Trans Union and Equifax. Some lenders use one of these three scores, while other lenders may use the middle score which is your beacon.
Did you realize that the higher credit score you have the better financing term you can receive. For example: Someone with a 640 credit score will receive an interest rate of 9-10% versus have a score over 700 and receiving an interest rate of 0-5%. The interest between the two could value up to $10,000 depending on the price of the car!!
Closing credit cards is a Big No No.. By closing your credit cards it closes your available credit, and that makes your credit score go down. For example: I had a client the other day, and he had a 700 credit score a year ago. Well, his bank told him that as he pays off his credit cards to close them so he and his wife wouldn’t be tempted to use them. So they did as they were told, and in a matter of a year they had closed over 20 credit cards. By doing that you are closing open available lines of credit and that only leaves the line of credit/credit cards with a balance open. It makes it as if you only have lines of credit with balances, and the more available credit that you have not being used is the BEST. So when a client comes in we give them handouts, and really stress simple ways to keep your credit score up!
You might ask yourself, “How do I Keep My Credit Score Up”?
1. The best way to build your credit is to have a checking account and pay everything with checks and keep all statements. That way you can prove all payment history. (Avoid NSF Charges)
2. Payment history is very important. YOU ALWAYS want to pay your rent, mortgage, car, installments loans, and credit cards ON TIME EVERY MONTH. (Especially the mortgage or rent)
3. You at least want to have 3 trade lines, installment, credit cards, or mortgage.
4. NEVER CLOSING ANY CREDIT CARDS.
5. DO NOT CHARGE OVER 40 % ON CREDIT CARDS, AND DO NOT MAX THEM OUT.
Example: A credit card with a $1,000 credit limit should only have a balance of $400.
6. If you are going to buy a house or refinance do not OPEN ANY NEW credit accounts.
(Don’t buy any new furniture, cars, and DO NOT let any one run your credit.)
7. If you have ever had a Bankruptcy keep all paperwork, and DO NOT acquire any new delinquencies on your credit report.
8. If you have been a divorce MAKE SURE that you keep your divorce decree.
9. If you receive child support keep proof that you actually receive it.
Five Cs of Credit The ability and willingness of a borrower to pay is determined by five criteria.
1. Capacity – The ability of a borrower to repay a loan.
2. Capital – The amount of money the borrower has invested into the property..
3. Character – The overall feeling regarding a borrower’s credibility to repay a loan; the borrower’s length of employment is a
4. Collateral – Guaranteed support for a loan, generally consisting of funds or real estate, that ensures added security to the lender. Collateral can also take the form of guarantees provided by third parties, i.e. guarantors.
5. Credit – The repayment history of the borrower.
Finally, do you realize that you home is your largest and longest debt that the average person will have? Also, have you ever wondered with the rate at which technology is advancing today is their a program available to homeowners that will help eliminate some of that interest? Have you ever wondered how to pay off your home earlier without sending extra principle payments from your own money out of your checking account? How about using the banks money to pay your home off earlier, and not feel the hit on your own cash flow? You hear about Mortgage Acceleration Programs, and you wonder “Could That Help Me”? Well, without refinancing, changing your current cash flow, and without your mortgage payments going up, YOU CAN!!
What would your life be like without a monthly mortgage payment? Ask me how to pay your mortgage in 1/2 to 1/3 the time without refinancing or changing your monthly budget ~ Melissa Lang, Eagle Nationwide Mortgage (P) 985-649-2300 www.mymoneymerge.us