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If you’ve applied for credit recently – maybe for a store card over the holidays – you may have come across the term “inquiry.” Even if you’re not familiar with credit inquiries, it’s critical to understand what they are, how different ones work, and what they mean. Fortunately, we have answers to your credit-inquiry questions here.
What’s a credit inquiry?
A credit inquiry is a credit check. It’s a request to view your credit by lenders — retailers, financial institutions and others who are legally allowed to see your credit report.
Types of inquiries: hard and soft.
A hard inquiry happens when a potential lender looks at your credit report and uses that information to decide whether to offer you credit and what the terms of the offer might be. Think of hard inquiries as the types of credit checks that happen when you apply for credit, whether it be a credit card, mortgage, car loan or other type of financing. Hard inquiries must be made with your permission and in connection with specific transactions.
A soft inquiry, on the other hand, is more of a routine credit check that doesn’t need to be done with your permission. Importantly, soft inquiries won’t show up on the credit reports potential lenders request to evaluate your creditworthiness. Soft inquiries can happen for a variety of reasons. One example is when potential lenders check your credit report to determine whether to make you eligible for any pre-approved offers. Another happens when one of your existing creditors checks your credit to make sure you’re still creditworthy. A soft inquiry is also triggered every time you check your credit.
One other thing to note: if you would like to see credit reports listing all your inquiries, soft and hard, check your free annual credit reports at AnnualCreditReport.com.
Why inquiries matter.
The first thing you should know is the kinds of credit reports potential lenders see will only list hard inquiries, not soft ones. In that sense, hard inquiries are the ones that “count.” That’s because credit scoring models usually factor in the number of hard inquiries you have when they’re calculating your credit score. Generally, credit scoring models tend to associate a high number of hard inquiries, especially if they’re made within a relatively short period of time, with a high credit risk. It’s important to watch the number of hard inquiries you make because too many of them may affect your ability to get credit at the lowest-available rates.
Do inquiries remain on your credit report forever?
In short, no. They are automatically removed 2 years from the date they first show up on your credit report. As with other aspects of credit, the more time that passes, the less effect hard inquiries may have.
Loan shopping and inquiries.
Let’s say you’re shopping for a mortgage or car loan and want to find one with a good rate and other terms that work best for you. After all, especially with big purchases, you want to make sure you get the best financing you can. But every time you apply for credit, a hard inquiry happens. Does that mean you shouldn’t shop around for a loan?
Fortunately, no. Credit scoring models tend to account for this kind of activity. Generally, credit scoring will count several inquiries made over a relatively short period of time, like 45 days, as one single inquiry. That way, you won’t necessarily get penalized for causing several hard inquiries while shopping for one loan.
Bottom line.
Inquiries are a key, and often misunderstood, part of credit. But they aren’t everything. While you want to pay attention to how frequently you apply for credit, credit health encompasses much more than just hard inquiries. Keep an eye on your hard inquiries, but don’t lose sleep over them, especially if you’re paying your bills on time, not using too much of your available credit, and otherwise practicing healthy credit habits. In other words, keeping your hard inquiries in check should be just part of a healthy-credit new year’s resolution!
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Everyone knows the story. Unemployment is up. FICO scores are down. Home values are down. And because home values are down, home equity has disappeared for millions of homeowners. And since home equity was the financial safety net millions of consumers used to pay off their credit card debt, well, you know the rest. Let’s just agree that, right now, millions of consumers have no way to pay off all of their credit card debt.
There are a variety of ways to get out of credit card debt, right? You can budget your way out of debt. You can file bankruptcy. You can enroll in a debt management plan (DMP) through one of the member organizations of the National Foundation for Credit Counseling, commonly referred to as Consumer Credit Counseling Service (CCCS). You can work with your credit card issuer directly and seek help through one of their hardship programs. You can attempt to settle the debt on your own. Or you can enlist the services of a debt settlement company.
Opinions vary on these options. They all have their pros and cons. The purpose of my article isn’t to explore each option. I’ll do that soon.
The purpose of this article is to explore debt settlement as an option.
Settlement is quite an easy concept to understand. You agree to pay your credit card issuer an amount of money less than what you really own them and they consider the debt to be paid in full. So, if you owe John Ulzheimer’s Bank $10,000 and I agree to accept $5,000 as “full payment” then you have settled your debt with John Ulzheimer’s Bank. The bank reports the settlement to the credit reporting agencies and sends you a 1099 for the forgiven amount. Settlement, incidentally, is considered one of FICO’s Seven Deadly Sins.
Settlement can be accomplished by working directly with your bank. You do not have to hire someone to do this for you. That’s a myth. In fact, many credit card issuers won’t even work with debt settlement companies so you have no choice but to deal with them directly. This is okay because all creditors have their version of a “Remediation” department, which is where you’ll likely end up if you call them asking for a settlement deal.
Now, let’s move on to the debt settlement companies. You’ve all seen their commercials. Distraught couples staring at their credit card statements magically turning into happy families playing with puppies in their front yard, all thanks to ye ole friendly debt settlement company. Heck, there’s even a version that has excerpts from one of President Obama’s speeches and a picture of a government building in the background. It’s clearly intended to come across as a governmental program. Of course, it’s not a government program.
Here’s how they work. First they find out how much debt you have. This is to determine if you’re even worth doing business with. If you have too little debt then they won’t make enough money working with you. That’s why their ads contain statements like “If you have more than $10,000 in credit card debt call now…” If you have enough debt, in their eyes, then they’ll sign you up.
When you sign up they’ll tell you to stop communicating with your credit card issuers. I’m not kidding, they really tell you this. That means no more payments and no more return calls. The hypothesis here is to get your credit card issuer so desperate for payment that they’ll accept a settlement offer.
At the same time you’ll be asked to make monthly payments to the settlement company. Why? Because you’re creating a war chest that serves two purposes. First, this is where their fees will come from. Second, this is where the settlement offer will come from.
After several months, or longer, there will be enough money for them to make some sort of offer to the credit card issuer. The issuer may accept the offer, or they may decline the offer. Either way, your fees to the settlement company have been paid.
So what happens during the period of time you’re paying the debt settlement company (and ignoring your creditors)? Well, since that’s not a part of the commercials I’ll have to be the one who breaks the bad news.
1.Your credit will be trashed.
The credit card issuer will report the ascending level of late payments to the credit bureaus, which remain on your credit file for seven years. Now the debt settlement guys will say “well, your credit is probably already trashed so no big deal.” Wrong, new (and numerous) late payments help to lock in lower scores for additional time. And it gets worse…
2. The card issuer will likely enlist the services of a 3rd party collection agency to collect the debt.
This means a brand new collection will be reported to your credit files. Again, this remains for seven years. And, these guys can pull your credit reports to find you and determine your ability to pay them. That means you’ll have to explain collection inquiries. You’re supposed to ignore these guys as well. And it gets worse…
3. That knock at your door…yeah, that guy is called a process server.
Your credit card company or a collection attorney has sued you for nonpayment of the debt. You can’t ignore him like you’ve been ignoring your credit card issuer. If you do choose to ignore the summons you’ll lose by default for not showing up to court. This is called a default judgment. And yes, the judgment can show up on your credit report for seven years. And it gets worse…
4. Become familiar with the term “Writ of Sequestration.”
In English this is either legal garnishment of your wages or seizure of your assets. If your wages are garnished your employer will now be made aware of your defaulted debt problems because they’re the ones who will hold back a portion of your salary.
You’ve totally lost control of the situation because you chose to ignore your creditors, at the request of a company trying to profit off of your debt situation. Smart? Or not?
And, just to tie a nice bow on the top of this one, the Attorneys General in the states of Florida and Alabama have shut down major debt settlement networks because, and I quote, “they’re a scam because consumers get no value for their fees.” I’ll write soon about the DSCPA (Debt Settlement Consumer Protection Act), which will put most of these guys out of business.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and the author of the “credit history” definition on Wikipedia. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. He has served as a credit expert witness in more than 70 cases and has been qualified to testify in both Federal and State court on the topic of consumer credit.
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If you’ve ever had a credit card, student loans, or other type of debt, you likely have a credit report. Credit reports serve as a record of how you have handled the repayment of any loan or debt that you’ve taken out. The items that are contained in your credit report primarily come from information collected by the three major credit bureaus.
Many lenders might look at your credit report when they are considering whether or not to extend you additional credit. Your credit score is also calculated in part from information that’s included on your credit report. These are two good reasons to regularly look at your credit report and make sure the information in it is accurate.
What Is a Credit Report?
At its simplest, a credit report is a compilation of information regarding past debts, loans, or credit card accounts that you’ve managed. Your credit report will contain basic information about you, as well as information on the various accounts you’ve had in the past. This might include the name of the creditor, the dates the account was open, the monthly payment amount, if applicable, and any current or outstanding balance.
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How Does a Credit Report Work?
The issuers of most credit cards, loans, or other forms of debt report information about that debt to the most popular credit bureaus — Experian, Equifax, and TransUnion. Each credit bureau compiles its own information, though there is usually a lot of overlap between the information that appears on credit reports from different credit bureaus. Lenders typically send updated information to the credit bureaus each month, or if any information about your debt changes.
Recommended: Tips for Using a Credit Card Responsibly
Credit Report Information and Your Credit Score
It’s important to understand the relationship between the information on your credit report and your credit score. While these two things are related, they are not the same thing. As information on your credit report changes, your credit score updates as well. This means that it’s possible for your credit score to change every month (or even more often).
Further, while the information on your credit report influences your credit score, you won’t find your credit report listed on your credit report. Rather, you’ll have to go to lenders or credit monitoring websites for that information, both of which can allow you to check your credit score without paying.
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Information Provided By a Credit Report
In addition to information about your accounts, your credit report may include other information about you. As one example, a credit report from Experian consists of four sections:
• Personal information: This includes details such as your name, address, employment information, and any past names you’ve used.
• Accounts: You’ll see both open and recently closed accounts listed.
• Inquiries: Both hard and soft credit checks will appear, though only hard pulls affect your credit score.
• Public records: This is information about you gathered from public records, including bankruptcies.
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How Is a Credit Report Made?
Each of the major credit bureaus has its own process for how it generates a credit report. It’s typical that the credit bureau will have an informational section with details about you, sourced from loan applications and/or public records.
Another section of most credit reports is a listing of your open and recently closed accounts. Lenders will often report to the credit bureaus information about the amount, payment history, and status of accounts you have with them.
Why Is a Credit Report Important?
Your credit report is important because it is one of the sources of information that’s used to calculate your credit score. And your credit score can help determine whether you are approved for other financial products, like a credit card. If your credit score is too low, you may not be able to be approved for a new credit card or loan, and if you are approved, you may have to pay a higher interest rate.
Additionally, your credit report matters because many lenders will often refer to it when determining whether to approve you and under what terms. Sometimes, they may look at what’s known as a tri-merge credit report, which combines the three credit reports from each of the major credit bureaus.
Recommended: How to Avoid Interest On a Credit Card
How to Get a Credit Report
One good way to get your credit report is through AnnualCreditReport.com . This is a website authorized by federal law and brought to you by the three major credit bureaus.
You are able to get a copy of your credit report from each of the credit bureaus every year. Note that you can only get your own credit report to review — checking someone else’s credit report isn’t an option.
When to Get a Credit Report
It is a good financial habit to regularly review your credit report. As mentioned, you can get a free copy of your credit report each year from each of the major credit bureaus.
By reading a credit report regularly, you can make sure that there’s no inaccurate information on your credit report. If you have incorrect information, it could have a negative impact on your credit score.
What to Look For in a Credit Report
As you regularly review your credit report, there are a few common credit report errors you’ll want to look out for. These include:
• Typos or incorrect information
• Information belonging to someone with a similar name
• Closed accounts that are still marked as open
• False late payment
• Duplicate debts or accounts
Monitoring Your Credit Report
If there is any incorrect or erroneous information on your credit report, you’ll want to dispute that with the credit bureau. Disputing a credit report is a relatively straightforward process, and it’s an important one.
Generally, most credit report disputes must be submitted in writing, and it’s a good idea to send the letter via certified mail. That way, you have proof that the credit bureau received your letter.
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The Takeaway
If you’ve been using credit cards, loans, or other financial products, it’s likely that you have a credit report with each of the three major credit bureaus. Your credit report contains identifying information about you as well as information about your open and recently closed credit accounts. Regularly monitoring your credit report and correcting any incorrect information is a good financial habit to have.
That’s because information from your credit report is used in the calculation of your credit score. Your credit score is used by potential lenders to decide whether they will approve you for new loans or credit cards. Having a good credit score makes it more likely that you’ll be approved for a new credit card, for example.
If you’re in the market for a new credit card, you might look at a rewards credit card like the SoFi Credit Card. With the SoFi Credit Card, you can earn cash-back rewards, which you can then use to invest, save, or pay down eligible SoFi debt. The SoFi Credit Card offers unlimited 2% cash back on all eligible purchases. There are no spending categories or reward caps to worry about.1
Take advantage of this offer by applying for a SoFi credit card today.
FAQ
Can negative information remain on my credit report for long?
Yes, negative information can remain on your credit report, even after you have closed your account. Most negative information will stay on your credit report for seven years, though some information (like bankruptcies) can stay on your credit report even longer.
How do I get my credit report?
You can get your credit report through AnnualCreditReport.com. You’re able to get a free copy of your credit report from each of the credit bureaus every year.
Who is eligible to view my credit report?
You can view your own credit report, but in most cases, you will not be able to check someone else’s credit report. The only time someone else can view your credit report is if they have a legitimate reason. This might include a potential lender that’s viewing your credit report to determine whether they want to extend you additional credit.
What errors might be present in my credit report?
While the major credit bureaus make every attempt to ensure that all credit reports are completely accurate, errors have been known to happen. Possible errors might include typos, accounts from someone with a similar name, duplicate accounts, or false late payments, among other errors. This is why it’s a good idea to regularly review your credit report and dispute any incorrect information.
What is the most important thing on a credit report?
Arguably all of the information contained in your credit report is important and worth taking the time to review. Perhaps most important is information on your accounts, as the details reported there have the potential to impact your credit score, and thus your borrowing opportunities.
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If you’ve bought life insurance before, you know it can be a bumpy ride.
The process can easily become overwhelming as you’re trying to decide between the thousands of different companies that are on the market. Luckily, there are independent insurance agents to make it simple for you. For the many in search of life insurance, an independent life insurance agent can play a vital part in obtaining the best policy.
While an exclusive agent is only able to offer insurance options from one company, an independent agent can offer insurance alternatives from a number of carriers. This has some similarities to the way that some insurance agencies will compare the rates of other companies.
What makes going through an independent agent more valuable than just receiving rate comparisons is that an agent can compare all the ins and outs of life insurance policies available through various companies.
Going through an agent can take a lot of the tedium out of wading through each insurer’s health and lifestyle requirements, premiums, coverage and the like.
Why Choose An Independent Agent
If a person seeking life insurance has conditions that might make obtaining a policy difficult, an independent life insurance agent may be able to assist in easing that process. An independent agent that concentrates in this area is known as an impaired risk specialist. This type of independent agent is well versed in the nuances of policies offered by several companies.
One insurance company may be more likely to insure someone with a heart health issue or be more prone to insure someone with a history substance misuse. One insurance company may be willing to offer more affordable premiums to someone who enjoys skydiving than any of the others. Some specialists can even pave the way with inquiries to companies before making an official submission. Whatever the case may be, an independent agent can navigate this so that a high risk client gets the best insurance choice possible.
No Conflict Of Compensation
Since an independent life insurance agent is considered an independent contractor, the agent draws no salary from any of the insurance companies that they represent. They work on a commission basis and as such have less interest in making sure that a person looking to be insured sign up with one particular company or another. This also increases the chances that both the insurer and the insured are pleased with their match. Through an independent agent, a person seeking to be insured may end up with the most suitable life insurance policy for them being with a company that hadn’t even been previously considered. This is also a way for insurance companies to reach out to previously untapped markets.
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Finding An Independent Life Insurance Agent
Through a bit of searching online, someone in search of life insurance can find an independent agent to work with. There are even independent insurance agencies through which one can find an agent. Anyone working as an independent agent has have proper state certification to sell life insurance in that state. An independent agent also has to have the permission of the insurance companies in order to represent them. For those looking to work with an independent agent, there are methods to verify an agent’s certification in that state. If an independent life insurance agent is needed, the right one for the job can be found.
Getting Lower Rates through an Independent Insurance Agent
We mentioned that working with an independent agent is a great way to do that, but it’s not the only get cheap coverage.They can search through all of the carriers and find the most affordable plan. Aside from working with independent brokers, there are some changes you can make yourself to save money.
Your rates are tied to your health. The better shape you’re in, the lower premiums you qualify for. Before you apply for a plan, get in shape. Your rate category is going to determine your rates, and if you want to be placed in a better category, improve your health.
After you’ve gotten in shape, you can continue your health journey by quitting your habits like smoking. Smokers are automatically given higher rates. You can’t smoke and get cheap life insurance, the two don’t mix.
Calculating Your Life Insurance Needs
Before you apply, you have to do some groundwork. One of the most important things to do is add up how much life insurance your family needs.
To get started with these calculations, gather all of your debts and add them up. Step one is to make sure your life insurance is big enough to pay off your debts.
Step two is to take your annual income and multiply it. We are assuming you have people who rely on your income. If you have those people, your life insurance needs to replace your paycheck.
There is no “perfect amount” of life insurance that works well for everyone. Each situation is different and everyone will have different needs, but most life insurance experts suggest getting anywhere from seven to ten times your annual income. In most cases, this will work fine, but it’s important that you calculate what your exact needs are.
Getting Life Insurance With An Independent Insurance Agent
Working with an independent agent is not only the best way to get affordable life insurance, it’s one of the easiest as well. Our agents can bring you all of the best rates and policies directly to you, which means that you don’t have to spend hours on the phone calling dozens of companies.
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“Apparently, I’m a financial unicorn,” says Lance Cairns of Georgia, Vermont. Cairns has worked his whole adult life to build a credit score higher than 800, a feat achieved by only 5.7% of all Americans, according to CreditKarma.com. That’s not exactly mythical, but is quite rare.
Cairns has maintained excellent credit since he began building his credit history in his early 20s. His 811 FICO score paid off when he secured low-interest rates on his mortgage and credit cards. But can someone who has accrued substantial revolving debt or made poor financial decisions in the past achieve such a score? Experts – and people who’ve done it – say yes.
Perks of the Credit Elite
Cairns was recently approved for a credit card with a 5.15% interest rate – lower than that of many fixed-rate conventional mortgages. The APR, or annual percentage rate, on his other major credit card is 7.25%. Thanks to his high credit score, Cairns also saves money on his car insurance.
Julie White, another member of the credit elite (her score is 813), enjoys multiple money-saving perks, as well as bragging rights. “My husband’s score is 793 and I lord those 20 points over him,” she jokes.
To start with, White recently obtained a 15-year mortgage with a 4.5% interest rate. “We also got lower fees on some closing costs associated with the bank, and lower homeowners’ insurance costs. Apparently, people with excellent credit are less likely to burn the house down,” she quips.
From 600 to 800+
Unlike Cairns, who has always had impeccable credit, White had a credit score in the low 600s in her early 20s. “When I was making less money, it was harder. I regularly carried balances until about 10 years ago,” she says.
Since debt utilization makes up 30 percent of your credit score – the second biggest factor after timely payments – carrying a balance can keep you out of the credit-elite category.
Once White was able to pay off those balances, her credit score spiked. She keeps it high by using Outlook reminders and online bill-paying so she never misses a payment. “Most of our household bills go on a cash-rewards credit card I pay off each month. I write only a few checks. This reduces the chance of a slipup,” she says.
Randy Mitchelson, owner of the Daily Dollar Newsletter personal finance blog, says White’s experience isn’t unusual. “Time heals all credit issues,” he says. “Assuming the consumer has perfect credit behavior for a 24-month period following bad credit behavior, he can earn a dramatically different score.”
Taking Your Credit from Excellent to Elite
Once you hit the 750 mark, it takes careful credit management to make the jump to 850. Some experts say there’s no real difference in 50 points when you reach the top of the pack, but others say that in today’s lending environment, every point helps. “A FICO score of 750 is great, but it’s no longer a guarantee for the best rates available,” says Wayne Sanford of YourCreditSpecialist.com.
Sanford points to the all-important debt-to-available-credit ratio as one way to give your score a nudge. “If you have a perfect payment history for six to 12 months, you may be able to get a credit line increase just by asking,” he says. That way, a credit inquiry won’t negatively affect your score, but you can lower your debt-to-credit ratio to gain points. “Credit unions and smaller banks are more likely to do this based on your credit history alone,” Sanford advises.
Another way to raise your score is to develop a variety of credit – a mixture of revolving and installment loans. “A good ratio is two revolving loans for every installment,” Sanford says. “So if you have a mortgage and a car loan, you should have four credit cards.”
Of course, you shouldn’t buy a new car just to improve your credit score. Sanford suggests adding your name to a spouse’s existing installment loan – another move you can make without a credit inquiry.
Credit inquiries account for 10 percent of your FICO score, so it’s a good idea to limit them if you intend to join the credit elite. “Retail store cards we apply for to get a discount, cell phone plans, auto loans, apartment rentals… these all count against our FICO score,” says Denise Winston, a money and time-saving expert. “I limit mine to no more than two per year.”
In general, the rules to join the credit elite are simple: make timely payments, keep your credit utilization up to about 25 to 35 percent of your available credit, and minimize credit inquiries.
In addition to the cost savings available to members of the credit elite, there’s another key benefit: peace of mind. The higher your score, the easier it is to stay within the “excellent” category should you make a small mistake. Mitchelson explains: “One late payment may bring you from 810 to 760 and keep you in the ‘A’ credit range, whereas a 720 person with a late payment will fall into the 600s and out of the ‘A’ range,” he says.
For more tips on improving your credit score, check out MintLife‘s Credit Score Primer.
Can You Increase Your Credit Score to 850 is provided by Experian.com
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Taking out a mortgage is the biggest financial obligation most of us will ever assume. So it’s essential to understand what you’re signing on for when you borrow money to buy a house.
What is a mortgage?
A mortgage is a loan from a bank or other financial institution that helps a borrower purchase a home. The collateral for the mortgage is the home itself. That means if the borrower doesn’t make monthly payments to the lender and defaults on the loan, the lender can sell the home and recoup its money.
A mortgage loan is typically a long-term debt taken out for 30, 20 or 15 years. Over this time (known as the loan’s “term”), you’ll repay both the amount you borrowed as well as the interest charged for the loan.
You’ll repay the mortgage at regular intervals, usually in the form of a monthly payment, which typically consists of both principal and interest charges.
“Each month, part of your monthly mortgage payment will go toward paying off that principal, or mortgage balance, and part will go toward interest on the loan,” explains Robert Kirkland, vice president, Divisional Community and affordable lending manager with JPMorgan Chase. Over time, more of your payment will go toward the principal.
If you default on your mortgage loan, the lender can reclaim your property through the process of foreclosure.
“You don’t technically own the property until your mortgage loan is fully paid,” says Bill Packer, executive vice president and COO of American Financial Resources in Parsippany, New Jersey. “Typically, you will also sign a promissory note at closing, which is your personal pledge to repay the loan.”
Key Takeaways
A mortgage is a loan that helps borrowers purchase a home. The home itself serves as collateral for the debt.
To qualify for a mortgage, you will need to supply proof of income, a list of your assets and debts, info for credit inquiries, and explanations of any financial gifts to purchase the home.
There are a variety of mortgage products available on the market.
Your monthly mortgage payment will include your loan principal and interest, plus your property taxes, homeowner’s insurance, and, if applicable, private mortgage insurance (PMI).
Learning mortgage lingo upfront can help you to be an informed borrower and ask the right questions throughout the application and payment process.
How does a mortgage work?
A mortgage is a loan that people use to buy a home. To get a mortgage, you’ll work with a bank or other lender. Typically, to start the process, you’ll go through preapproval to get an idea of the maximum the lender is willing to lend and the interest rate you’ll pay. This helps you estimate the cost of your loan and start your search for a home.
Starting the mortgage process
Applying for a mortgage is a thorough process, involving many steps on your end. To start, you’ll need proof of income (through paystubs and previous year’s tax returns), a list of assets (including brokerage statements, if applicable), a list of debts, personal data for credit inquiries, and letters explaining any financial gifts you receive for the home purchase such as help with a down payment from family members.
Once you gather your documents, you’ll apply for the mortgage through the lender’s website. Having all the documents ready to go can expedite the process of earning a pre-approval, since they can show their underwriters you indeed have the qualifications to pay for the mortgage.
Types of mortgages
There are several types of mortgages available to borrowers, including conventional fixed-rate mortgages, which are among the most common; adjustable-rate mortgages (ARMs); FHA, VA and USDA loans; jumbo loans; and reverse mortgages.
Conventional loans – A conventional mortgage is not backed by the government or government agency; instead, it is made and guaranteed through a private-sector lender (bank, credit union, mortgage company).
Jumbo loans – A jumbo loan exceeds the size limits set by U.S. government agencies and has stricter underwriting guidelines. These loans are sometimes needed for high-priced properties — those well above half a million dollars.
Government-insured loans – These include VA loans, USDA loans, and FHA loans, and have more relaxed borrower qualifications than many privately-backed mortgages.
Fixed-rate mortgages – Fixed-rate mortgages have a set interest rate that remains the same for the life of the loan (terms are commonly 30, 20, or 15 years).
Adjustable-rate mortgages – An adjustable-rate mortgage (ARM) has interest rates that fluctuate, following general interest-rate movements and financial market conditions. Often there’s an initial fixed-rate period for the loan’s first few years, and then the variable rate kicks in for the remainder of the loan term. For example, “in a 5/1 ARM, the ‘5’ stands for an initial five-year period during which the interest rate remains fixed while the ‘1’ indicates that the interest rate is subject to adjustment once per year” thereafter, Kirkland notes.
What is included in a mortgage payment?
There are four core components of a mortgage payment: the principal, interest, taxes, and insurance, collectively referred to as “PITI.” There can be other costs included in the payment, as well.
Principal – the specific amount of money you borrow from a mortgage lender to purchase a home. If you were to buy a $100,000 home, for instance, and take out a loan in the amount of $90,000, then your principal is $90,000.
Interest – interest, expressed as a percentage rate, is what the lender charges you to borrow that money. In other words, the interest is the annual cost you pay on the loan principal.
Property taxes – your lender typically collects the property taxes associated with the home as part of your monthly mortgage payment. The money is usually held in an escrow account, which the lender will use to pay your property tax bill when the taxes are due.
Homeowners insurance – homeowner’s insurance provides you and your lender a level of protection in the event of a disaster, fire or other accident that impacts your property. Often, your lender collects the insurance premiums as part of your monthly mortgage bill, places the money in escrow, and makes the payments to the insurance provider for you when the premiums are due.
Mortgage insurance – your monthly payment might also include a fee for private mortgage insurance (PMI). For a conventional loan, this type of insurance is required when a buyer makes a down payment of less than 20 percent of the home’s purchase price.
How to find the best mortgage rate
To identify the mortgage that’s best for your situation, assess your financial health, including your income, credit history and score, and assets and savings. Spend some time shopping around with different mortgage lenders, as well.
“Some have more stringent guidelines than others,” Kirkland says. “Some lenders might require a 20 percent down payment, while others require as little as 3 percent of the home’s purchase price.”
“Even if you have a preferred lender in mind, go to two or three lenders — or even more — and make sure you’re fully surveying your options,” Pataky says. “A tenth of a percent on interest rates may not seem like a lot, but it can translate to thousands of dollars over the life of the loan.”
Sign up for a Bankrate account to determine the right time to strike on your mortgage with our daily rate trends. Bankrate makes mortgage loan comparison simple, so that you can weigh the various options and decide what loan product best fits your situation.
Important mortgage terminology to know
Amortization describes the process of paying off a loan, such as a mortgage, in installment payments over a period of time. Part of each payment goes toward the principal, or the amount borrowed, while the other portion goes toward interest.
An APR or annual percentage rate reflects the yearly cost of borrowing the money for a mortgage. A broader measure than the interest rate alone, the APR includes the interest rate, discount points and other fees that come with the loan.
“Conforming” refers to a conforming loan, a mortgage eligible to be purchased by Fannie Mae or Freddie Mac, the government-sponsored enterprises (GSEs) integral to the mortgage market in the U.S. These standards include a minimum credit score and maximum debt-to-income (DTI) ratio, loan limit and other requirements. Fannie Mae and Freddie Mac buy loans from mortgage lenders to create mortgage-backed securities (MBS) for the secondary mortgage market.
A “non-conforming” loan or mortgage doesn’t meet (or “conform to”) the requirements that allow it to be purchased by Fannie Mae or Freddie Mac. One example of a non-conforming loan is a jumbo loan.
The down payment is the amount of a home’s purchase price a homebuyer pays upfront. Buyers typically put down a percentage of the home’s value as the down payment, then borrow the rest in the form of a mortgage. A larger down payment can help improve a borrower’s chances of getting a lower interest rate. Different kinds of mortgages have varying minimum down payments.
An escrow account holds the portion of a borrower’s monthly mortgage payment that covers homeowners insurance premiums and property taxes. Escrow accounts also hold the earnest money the buyer deposits between the time their offer has been accepted and the closing.
A mortgage servicer is the company that handles your mortgage statements and all day-to-day tasks related to managing your loan after it closes. For example, the servicer collects your payments and, if you have an escrow account, ensures that your taxes and insurance are paid on time.
Private mortgage insurance (PMI) is a form of insurance taken out by the lender but typically paid for by you, the borrower, when your loan-to-value (LTV) ratio is greater than 80 percent (meaning you put down less than 20 percent as a down payment). If you default and the lender has to foreclose, PMI covers some of the shortfall between what they can sell your property for and what you still owe on the mortgage.
The promissory note is a legal document that obligates a borrower to repay a specified sum of money over a specified period under particular terms. These details are outlined in the note.
Mortgage underwriting is the process by which a bank or mortgage lender assesses the risk of lending to a particular individual. The underwriting process requires an application and takes into account factors like the prospective borrower’s credit report and score, income, debt and the value of the property they intend to buy. Many lenders follow standard underwriting guidelines from Fannie Mae and Freddie Mac when determining whether to approve a loan.
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If your identity is stolen, you may have trouble obtaining credit or getting a good interest rate, and creditors may pursue you for debts you haven’t incurred. You may even encounter problems when applying for a job because of fraudulent, negative information that appears on a background check. For all of these reasons, and more, if you become a victim of identity theft, you need to begin working to clear your name immediately. Here are the basic steps to take.
File an Identity Theft Report
Get a physical copy of the report, as you’ll need it for later steps in the identity recovery process. Also, get the name of the officer who took the report, the report number and a phone number for follow-up inquiries.
Call Equifax, Experian and TransUnion
These are the three credit bureaus that will use their dedicated fraud reporting phone numbers and automated systems to place a fraud alert on your credit file. A fraud alert notifies the credit agencies that your identity has been compromised. An initial fraud alert lasts for 90 days, and an extended fraud alert lasts for seven years.
The initial alert is more appropriate when you aren’t yet certain that you’re a victim. For example, you would file an initial alert if your wallet was stolen but fraudulent activity hadn’t cropped up yet. The extended alert is more appropriate if you know you’ve been a victim, because it requires creditors to take extra steps to verify your identity before issuing new credit in your name.
If you want to take an additional step to protect your identity, place credit freezes on each of your credit reports. A credit freeze prevents new creditors from accessing your credit reports, which should prevent them from issuing new credit. Identity thieves will be locked out, but so will you. You’ll have to unfreeze your credit any time you want to apply for new credit. Placing and thawing a credit freeze normally costs money, but in some states this service is free to identity theft victims.
Close Affected Accounts
If you’ve had any sensitive information stolen, close all accounts associated with that information. For example, if your wallet is stolen, immediately close the accounts associated with all the credit cards in your wallet. If information about your checking account was in your wallet, close your checking account, too. If your driver’s license was stolen, contact your state’s department of motor vehicles to notify them of the theft, and request a new card. If your health insurance card is stolen, notify your insurance provider and request a new policy number to stave off medical ID theft.
Examine Your Credit Reports Carefully
Identity theft victims are entitled to a free copy of each of their credit reports. Request yours when you place the fraud alert. If you find any fraudulent activity, contact the creditors associated with that activity, and ask them to send your application and transaction records, which is your right under section 609e of the Fair Credit Reporting Act.
Creditors may require a copy of your police report before turning over this information, and you may have to wait several weeks to receive it, as the credit agencies have up to 20 days to send it to you. Once you receive the paperwork, provide the evidence of the fraudulent transactions to the police department that took your initial report to help build your case. Also, report the fraudulent accounts to the credit agencies using a correction of errors form. The Fair Credit Reporting Act requires credit bureaus to remove inaccurate, or fraudulent, information from your account.
Finally, send letters to the creditors, associated with the fraudulent activity, notifying them that the accounts are fraudulent, and that you want them blocked from your file. Use form letters ITRC 100-1 and 100-3, available for free, online, from the Identity Theft Recovery Center.
Obtain Letters of Clearance From Each of the Credit Reporting Bureaus
In these letters, the credit bureau acknowledges that an investigation proved that your case was identity theft. These letters will help you if fraudulent accounts resurface on your reports in the future. They will also help you if a collection agency contacts you to pay a debt an identity thief incurred using your information.
Keep a Close Watch on Your Bills and Mail
If your identity is stolen, more than one ill-intentioned person may end up with your data, because thieves sometimes sell stolen information. Even after you clear up the initial problem, a new problem may appear later on.
The Bottom Line
Keep records of all contacts with law enforcement, creditors, credit bureaus and debt collectors. Also, keep copies of all correspondence. Send any mailed correspondence by a traceable method that allows you to confirm and prove delivery. Get detailed, written confirmation of any steps third parties take on your behalf (such as closing fraudulent accounts). Keep receipts for any expenses you incur in the process of clearing your name.
“What To Do If Your Identity Is Stolen” was provided by Investopedia.com.
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What you’re looking at is a visualization of the changes in FICO scores for the 200 million U.S. consumers with FICO scores over 3 unique periods of time: 2008 to 2009, 2009 to 2010 and 2010 to 2011. The following are some things to consider as you’re reviewing these figures:
2008-2009 Timeframe:
48.1 million consumers saw their FICO scores drop at least 21 points, representing over 24% of the “scoreable” U.S. population. Scores dropping this much is likely because of negative information appearing on a credit report or the consumer taking on new credit card debt (or a combination of both).During the same time period 45.3 million consumers saw their FICO scores increase by at least 21 points.The increase in scores can be attributed to a reduction in credit card debt and negative information aging off of credit reports. 64 million consumers saw their FICO scores remain in a 20 point window, drifting plus or minus 10 points.This is healthy score movement and is a result of consistent credit management practices.
2009-2010 Timeframe:
The damage to consumer’s FICO scores isn’t as dramatic during this time period (vs.2008-2009), as 40.1 million consumers experience a FICO score drop of at least 21 points. 49.8 million have improved their scores by at least 21 points, which indicates more consumers were paying down credit card balances and avoiding negative credit information. 68.8 million see their scores remain within a 20 point window.
2010-2011 Timeframe:
The damage to consumer’s FICO scores continues to soften from the previous timeframe, with 38.4 million seeing their FICO scores drop by at least 21 points.Interestingly, all three timeframes saw score improvements outpace score decreases, suggesting that more consumers were able to defend their scores from the financial crisis than might be expected.The significant score decreases (those of 51 points or more) are likely caused by a variety of factors including the increase in negative mortgage related credit reporting (foreclosures, settlements, forfeitures of deed, and loan modifications) and the persistence of unemployment and underemployment, which likely resulted in fewer people being able to make payments on their liabilities including student loans, adjusting mortgages, and increasingly higher credit card payments. Further, the filling of income gaps with credit cards likely played a significant role in all score decrease scenarios.
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The Walmart MoneyCard is a reloadable prepaid debit card designed to provide a versatile financial solution for a range of consumers. This includes those who do not have access to conventional bank accounts or people seeking a tighter rein over their spending.
The MoneyCard is not tied to a traditional checking account, which eliminates the risk of overdrafting, offering a critical advantage over conventional banking.
Issued by the Green Dot Bank, the Walmart MoneyCard doesn’t necessitate a credit check or a specific credit score, thus making it easily accessible. This feature can be particularly useful for those wanting to avoid the credit scrutiny that comes with most credit card companies or people working on rebuilding their credit scores.
Getting Started with Walmart MoneyCard
The process to get started with a Walmart MoneyCard is straightforward. Customers can apply for the card online or buy a starter kit from any Walmart stores.
Once the card is registered and activated, you can load money onto it through various means. These include direct deposit, using Walmart Rapid Reload, or transferring money from a different bank account.
You can use the Walmart MoneyCard immediately for in-store and online purchases at any location that accepts Visa or Mastercard debit cards.
Walmart MoneyCard: Key Features
Cash Back Rewards
One of the Walmart MoneyCard’s standout features is its cash back rewards system. The card offers up to 3% cash back on purchases made at Walmart.com, 2% at Walmart fuel stations, and 1% cash back on purchases made in Walmart stores.
This feature can provide significant value, particularly for regular Walmart shoppers. Keep in mind that the total rewards are capped at $75 per year.
Free Cash Reloads
The Walmart MoneyCard makes it simple to add money to your card with free cash reloads in Walmart stores. This is a practical and convenient feature, especially for those who routinely shop at Walmart. It allows customers to top up their card balances during their regular shopping trips, making the process seamless and straightforward.
Walmart MoneyCard App
The cardholder gains access to a robust mobile banking platform via the mobile app. The app lets you deposit checks using the mobile check deposit feature, pay bills, transfer money to others, check your account balance, and set account alerts. Having all these capabilities in the palm of your hand simplifies managing your finances.
ASAP Direct Deposit
ASAP Direct Deposit is another noteworthy feature of the Walmart MoneyCard. With this feature, you can receive your paycheck or government benefits up to two days early, depending on your employer or benefits provider’s deposit schedule. This can offer considerable assistance, especially when budgeting around bill payments or other financial commitments.
Understanding the Fee Structure
Despite the various benefits the Walmart MoneyCard offers, it does come with a monthly fee of $5.94. This fee, along with potential charges for ATM withdrawals or balance inquiries, is vital to understand before getting the card. However, the monthly fee can be waived in any month where you have loaded $1,000 or more to your card in the previous monthly period.
Furthermore, it’s important to note that while Walmart Rapid Reload is free, using this service at non-Walmart locations may involve a fee. Similarly, while withdrawals at in-network ATMs are free, out-of-network ATM withdrawals come with a $2.50 fee.
Walmart MoneyCard: Main Benefits
No Overdraft Fees
One of the significant advantages of the Walmart MoneyCard is the absence of overdraft fees. With this prepaid card, you’re spending your own money that you’ve loaded onto the card, which means there’s no chance of incurring an overdraft fee or the risk of a bounced check.
This feature could provide peace of mind, especially for those who are worried about maintaining a positive balance in a traditional checking account.
MoneyCard Vault
The Walmart MoneyCard comes with a unique feature called the MoneyCard Vault. This tool acts as a savings account, allowing you to set aside money while earning interest. With the MoneyCard Vault, you can earn a 2% annual interest rate (APY) on your savings up to a $1,000 balance. This feature incentivizes saving by providing an opportunity to grow your money.
Cash Prizes
Not only does the MoneyCard Vault help you save, but it also offers an exciting chance to win cash prizes. For every dollar saved in the MoneyCard Vault, you earn an entry into a monthly drawing where 999 winners are chosen.
These winners could receive a cash prize of up to $1,000. This feature makes saving money even more enticing, offering a chance at a potential monetary bonus simply for practicing good saving habits.
Family Accounts
Finally, the Walmart MoneyCard offers a beneficial feature for families. The cardholder can create up to four additional MoneyCards for family members who are 13 years and older. This could be an excellent tool for teaching teens about financial responsibility or for managing a family budget effectively.
Potential Drawbacks and Limitations
While the Walmart MoneyCard offers several benefits, it does have potential drawbacks that must be considered. One such drawback is the monthly fee of $5.94. This fee can be waived if you load at least $1,000 onto the card in the previous monthly period, but for users who don’t frequently load large amounts onto their card, this cost might be a deterrent.
Although there’s the benefit of earning rewards, there are limitations. The cash back rewards are capped at $75 each year. Depending on your spending habits, this may be less generous than some rewards credit cards offered by traditional financial institutions or credit card companies.
It’s also important to note that while the card offers the ability to withdraw cash, out-of-network ATM withdrawals come with a $2.50 fee. Additional third-party fees might be charged at out-of-network ATMs and are not controlled by Green Dot Bank.
Security Features
Walmart MoneyCard provides several measures to ensure the safety of your funds. Firstly, your funds are held with Green Dot Bank, a member of FDIC, meaning your MoneyCard deposits are insured up to the standard deposit insurance limit.
The card also includes an EMV chip that provides enhanced security and is globally accepted. Additionally, customers can set up account alerts through the app to receive instant notification of any transactions or suspicious activity.
Another valuable security feature is the ability to instantly lock your card if it’s ever lost or stolen, directly from the MoneyCard App or website. This can prevent unauthorized use and provide peace of mind.
Customer Service and Support
Walmart offers various customer service channels for MoneyCard users. These include a phone number to call for live support and an online Help Center with answers to common questions. You can also receive assistance via the Walmart app or website, where you can report lost or stolen cards, check your balance, view transactions, and find the nearest Walmart store or ATM.
Remember that it’s always beneficial to research user reviews and feedback to get a sense of the overall customer service experience. While Walmart offers several avenues for support, it’s essential to ensure that the support meets your expectations and needs.
Comparing Walmart MoneyCard with Other Prepaid Cards
When compared to other prepaid cards on the market, the Walmart MoneyCard stands strong. Its cash back rewards program, free cash reloads at Walmart stores, and early access to direct deposits via the ASAP Direct Deposit feature set it apart from many competitors.
However, it’s crucial to remember that no single financial product will be the perfect fit for everyone. Other prepaid cards might have lower monthly fees or offer different benefits, like rewards on other types of purchases, no fees for ATM withdrawals at certain ATMs, or better customer service.
It’s essential to compare the Walmart MoneyCard with other prepaid debit cards and carefully consider your financial needs, habits, and preferences before making a decision.
Is the Walmart MoneyCard right for you?
The Walmart MoneyCard could be a good fit for those who shop frequently at Walmart, as they can earn cash back at Walmart.com, Walmart stores, and Walmart fuel stations. For those without a traditional bank account, or for those who wish to avoid overdraft fees and credit checks, the Walmart MoneyCard provides a flexible and accessible option.
Additionally, if you’re seeking a tool to help with budgeting or teaching family members about financial responsibility, the Walmart MoneyCard can be a valuable resource due to its reloadable nature and the option to create additional MoneyCards for family members.
However, if you’re not a frequent Walmart shopper, or if you plan to make regular ATM withdrawals, it’s important to consider the associated fees. The $2.50 out-of-network ATM fee and the monthly fee (unless waived) could outweigh the benefits for some users. Similarly, those who do not anticipate depositing $1,000 or more monthly might find the fee to be a deterrent.
As always, your individual financial habits, needs, and goals are key factors in determining whether a particular financial product, such as the Walmart MoneyCard, is a good fit for you.
Bottom Line
The Walmart MoneyCard offers a unique blend of features, such as the rewards program, no overdraft fees, and the MoneyCard Vault savings feature, that make it stand out among prepaid debit cards. Its ease of use, accessibility, and range of services offer an appealing package for many individuals.
However, potential users should be mindful of the associated fees and limitations. The potential for out-of-network ATM fees and the monthly charge (unless waived) should be weighed against the benefits that the card provides. Also, the card may not be the best fit for individuals who don’t frequently shop at Walmart or deposit less than $1,000 monthly.
As with any financial product, it’s critical to understand its fee structure, limitations, and potential downsides before deciding if it’s the right fit for your financial needs.
If you’re trying to perfect your credit score, it’s important to first understand what makes up your credit report and credit score. Your credit score is determined by an advanced algorithm which was developed by FICO and pulls the data from your credit report to determine your score. When calculating your credit score, the following information is going to affect your credit score in the corresponding percentages:
35 percent: History of on-time or late payments of credit.
30 percent: Available credit on your open credit cards
15 percent: The age of your lines of credit (old = good)
10 percent: How often you apply for new credit.
10 percent: Variable factors, such as the types of open credit lines you have
Many of this may be common sense or information that you’ve already learned over time, resulting in a good credit score but possibly not a perfect score. If you have a bad credit score, it could take a lot of time and work to increase your score and you may first want to consider repairing your credit. If your credit score is already above 700 but you’re trying to shoot for that perfect score of 850 to ensure the best deals and interest rates, here are 5 ways to perfect your credit score:
5 Ways to Get a Higher Credit Score
1. Maintaining Debt-To-Limit Ratio
To increase your credit score, it’s recommended that you keep your debt-to-credit ratio below 30% and, if possible, as low as 10%. The debt-to-limit ratio is the difference between how much you owe on a credit card versus how much your credit limit is. For example, if one of your credit cards has a credit limit of $5,000, then you should always keep the balance below $1,500 but preferably around $500. As you can see above, 30% of your credit score is determined by the available credit on your open credit cards, so keeping the debt-to-limit ratio will increase your available credit and also show that you’re responsible with your credit.
2. Keep Your Credit Cards Active
Make sure that you use your cards at least once a year to keep them shown as “active” credit and make sure that you never cancel your credit cards. 15% of your credit score is determined by the age of your lines of credit, so you should always keep your credit cards active to lengthen the age of your line of credit. Many people tend to cancel cards that they no longer use – many times because the rates aren’t very good or because they have another card with better benefits – but even if you don’t use the cards very often (just once a year is fine), you should keep them active. Typically, someone with a credit score over 800 has credit lines with at least 10 years of positive activity.
3. Always Pay Bills On Time
Probably the most well-known factor of a credit score and the factor that has the biggest impact on your credit score (35% of your score) is your history of paying your credit payments on-time. If you have a history of always making your credit card, mortgage, and car payments on time, you will greatly improve your credit score. This can also have an adverse effect as well, should you ever make a late payment. Unfortunately, it only takes one late payment to severely reduce your credit score so it’s crucial that you make sure to always make credit payments on time.
4. Dispute Errors On Your Credit Report
If you don’t already, make sure that you request a copy of your credit report once every year and review it for errors. It is actually quite common for credit reports to contain errors which can be disputed and potentially allow you to have negative items removed from your credit report. If, for instance, your credit report shows a late payment on a credit card but contained errors in the record, you can dispute the negative item and request to have it removed from your report. Having a negative item, like a late payment, removed from your report can improve your credit score significantly. While disputing errors on your credit report can be tedious and take a lot of time, it is usually worth it. Another option would be to contact a credit repair agency to help you dispute any negative items on your credit report.
5. Reduce The Number of Credit Inquiries
While this may only affect 10% of your credit score, keeping the number of credit inquiries down can still help to build that perfect credit score but is often ignored. You should never have more than one credit inquiry per year but many people do not realize how often this is done and often times have their credit checked more than once per year. If you’re applying for a car loan, checking your credit score online, or applying for a new credit card, these type of actions will almost always result in a credit inquiry and should be avoided if you’ve already had a credit inquiry earlier in the year. Make sure you do your research on what will result in a credit inquiry so that you don’t accidentally have more than one a year without realizing it.