2 Big Mortgage Programs Are Re-evaluating Credit Worthiness.
Due to a new rule issued on Tuesday by the mortgage-finance giants’ federal overseer, Fannie Mae and Freddie Mac, will have to consider new alternatives to FICO to determine an applicant’s creditworthiness. This ruling, executed by the Federal Housing Finance Agency, is extremely beneficial to the credit score system “VantageScore”, which is owned by the three credit reporting giants, Equifax, TransUnion and Experian.
“One of my priorities is to ensure that the American people have a safe and sound path to sustainable homeownership, which requires tools to accurately measure risk,”
FHFA Director Mark Calabria described in his written statement. Mr. Calabria later added that this new rule
“is an important step toward achieving that goal.”
“The FICO Score has been the industry standard for credit scores for decades because it is trusted by lenders to be independent, predictive and reliable, and we are confident that it will remain the superior choice by any measure established by [Fannie and Freddie],”
Joanne Gaskin, the company’s vice president of scores stated regarding the FHFA rule.
Small Lenders Make Big Impacts
Nonbank lenders have asked for the ability to use a credit score provided by VantageScore in the process of determining the creditworthiness of those applying for mortgages. These lenders, who make up more than half of the mortgage dollars issued in America, state that these alternative scores would allow for a greater amount of people to enter the mortgage market and lead to an increased number of mortgage approvals. The end result is hypothesized to provide a potential boost to home sales along with the economy in general.
A step in the right direction
Tuesday’s final rule is extremely advantageous to VantageScore because it abolishes language from a December proposal that would have prohibited any credit-score models developed by a company related to a credit-reporting firm. The FHFA eliminated that restriction amid pushback from the credit-reporting industry and congressional lawmakers. Without the beneficial addition of VantageScore to the lending scene, the monopolization of Fico when determining applicant's creditworthiness would keep us from progressing to a new age of economic well being. We as a company never really thought this day would come but it appears it has. Credit Law Center views this a positive movement for the credit industry and a huge step in the right direction.
If you would like any additional information, please feel free to call us at 800.994.3070. Click Here to set up a free consultation.
Even Heroes Need Credit Protection
It can be hard for military families to maintain good credit scores because of the constant moving, changes in their jobs, international deployments, and inconsistent income for military spouses. While these things can all make it challenging to maintain high credit, military families are also afforded other advantages that can help solve that issue.
Steer Clear of Bad Debt
Steering clear of bad debt is the best thing you can do to begin boosting your credit for anybody. Bad debt is just any debt that costs a lot of money in interest with minimal return. So, credit card companies and payday loans that charge high interest rates and don’t offer any return other than that short-term loan are perfect examples of bad debt.
While some people may claim that all debt is bad debt, that is not always the case. Mortgages and student loans can be beneficial for you in the long-term, as long as they charge lower interest rates, because they give you something in return. Paying these debts off every month can also help improve your credit! Credit card debt, however, lowers your credit score. Keeping that balance at zero is ideal because it is expensive to have credit card debt and it hurts your credit. Avoiding bad debt like this from day one will benefit you in the long run.
Look for Military Credit and Loan Benefits
For military personnel deployed overseas, there are regulations in place that dismiss all annual credit card fees. The Department of Veteran Affairs also offers VA Mortgage loans for the families of those with a military member on tour outside of the United States. VA Mortgage Loans are loans backed by the government that offer military families mortgage loans with lower interest rates, sometimes even if they have lower credit scores. The Servicemembers Civil Relief Act also offers help for military families through restricting fees, terms, and interest rates for things like home rentals, auto loans, credit cards, and mortgages.
All of these tools don’t necessarily benefit your credit score in a direct way, but they do improve your general financial position. By doing this, you now have the ability to raise your credit score through other means, for example, reducing your bad debt. That gives you more flexibility with your finances and thus the ability to manage your credit more successfully.
Find Military Friendly Bank Accounts and Credit Unions
USAA is a perfect example of a financial institution made for military families. To even join USAA, you have to be active in the military, a veteran, or the child of a veteran. There are other institutions that offer benefits for military families as well, though. US News and World Report claims that these are the top ten banks and credit unions for military families:
- Navy Federal Credit Union
- Arkansas Federal Credit Union
- Andrews Federal Credit Union
- Randolph-Brooks Federal Credit Union
- Fort Knox Federal Credit Union
- USAA Federal Savings Bank
- Langley Federal Credit Union
- First Citizens Bank and Trust Company
- Tyndall Credit Union
- Air Force Federal Credit Union
It is a misconception that you have to live near a branch of one of these institutions to utilize their advantages. Most of the time, you can join while even living across the country to receive the benefits they offer for military families.
Locate Other Organizations Specifically for Financial Help
There are many free resources and organizations set up to help military families with their credit and finances, especially if you live next to a military base. Many of the organizations help both those in active duty service and veterans. Here are some examples of organization to contact if you want some financial assistance:
- American Military Family
- Coast Guard Mutual Assistance
- American Red Cross
- Veterans of Foreign Wars Unmet Needs Program
- Navy-Marine Corps Relief Society
- Air Force Aid Society
- Operation Homefront
- Army Emergency Relief
The best thing you can do is take steps now to protect your financial future. Building and fixing credit can take a long time to do, so taking advantage of all the opportunities offered to military families early on can help set you up for financial success in the long run.
How Do Inquiries Impact My Score?
One of the common misconceptions about a credit score is that inquiries have a major role in the score. If you have looked at your credit score recently and feel that there are not many dings to the report that would cause your score to be low, take a few things into consideration first:
- Do you have two or more revolving lines of credit? If so, are these accounts at or below 30% of the limit?
- Now, are there any collections, charge-offs or other accounts that are in a negative standing? You’ll want to have these removed from the report.
- Lastly, do you have incorrect or inaccurate contact information on your credit report i.e addresses, names, etc?
All of the above scenarios should be looked at before jumping to what your inquiries look like.
One Too Many Inquiries
If you have been credit card or car shopping lately, you may notice a multitude of inquiries on your credit report. It is very common for a dealership to throw your information into their system to see if they can find you a low interest rate at a great loan term so they can sell you the car on their lot.
Understanding how this impacts your score allows you to walk into each situation prepared and knowledgeable. Whether you are applying for a new credit card or a car note a few things.
- When shopping for a car, research a Credit Union you could get a loan through, rather than the dealership financing option
- Know your credit score
- Don’t apply for credit when you don’t need it
Each time you apply or allow someone to check your credit score, you are allowing them to apply another hit to your credit profile.
The best rule of thumb for inquiries is no more than 10 “pulls” on your credit over a 12 month period.
Once you start running into more inquiries than this, your credit score will start to be impacted by them. Again, applying for unnecessary credit lines will start to impact you in a negative way.
I Have Been Denied Credit
If you have run into issues of hoping to start building credit, but have been denied credit cards over and over, there are a few options you have. Applying or inquiring for more and more credit is not helping your scores. You can try a few other options such as:
- Applying for a Secured Credit Card
- CD Builder Loans
- Second Chance Checking
You can look for other options for credit cards here
What My Credit Score Says
Your credit score tells a lender the likelihood of you to default on a loan in the next 12 months. Credit demonstrates your trustworthiness to pay your bills and loans on time. Keeping this in mind, it is easier to understand what your credit report says about you as a borrower.
If you have late payments, this impacts your score significantly.
If you look at the chart above, you notice that your payment history makes up 35% of the FICO score. Therefore a late payment will tank your score! Another large portion of the FICO score rating, is the amount you owe. If your credit card balances are high, the easiest and quickest way to start improving your score is to pay your cards down as low as you can, rather than making the minimum payments.
In order to have a healthy credit profile, it is recommended to have two lines of revolving credit, and two personal (like home and auto) loans. If you have questions about other reasons your scores may be low or would like to speak with an attorney today, please call 1-800-994-3070. We would be happy to assist you further or answering any questions you have concerning your score.
A Note From The Author: The opinions you read here come from our editorial team. Our content is accurate to the best of our knowledge when we initially post it.
Article by Breana Washington
Credit Alerts Worth Setting Up Now
In order to maintain great credit scores, keeping track of all the activity on your accounts is key! Smart phones are attempting to make our lives easier with a multitude of applications. All major banking institutions now have online banking or apps to make life easier on their customers. These apps have the ability to “control” what comes and goes out of your bank. Gone are the days of driving to the bank to make a deposit. You can now take a screenshot and deposit through mobile banking. The possibilities are endless! We’ve made a list of several other ways to get the most out of your banking apps, most of which are free! Here are a few other ways to use those apps:
Statement Notification: Many times it feels like the month flies by and bills are due once again. ‘Payment due’ is now one of the most used alerts on mobile apps. When the payment is due, an alert pops up, reminding you ahead of time when to make a payment and what the balance is. You can set it up to notify you as soon as you would like! While auto pay or auto draft is great, it is still important to double check that the payment was taken on time. For many families with many different bills due at a time, this is a great way to reduce the headache of having to remember one more thing on that laundry list of “to-do’s” for the week.
Payment Received: Having this notification can ensure that the payment successfully went through and will notify you immediately on your mobile device. One of the worst things that can happen is falling late on a credit card or payment. Many times if something happens with a card on file and the payment is not processed, consumers don’t catch it. This will ensure that you know those payments are made on time and for the correct amount. To set these up, you will want to download the credit card or bank app you use and turn the notifications on for all purchases and payments made.
Balance Notification: This is a great notification to have set up, as it is very important piece of the puzzle for your credit score. A great rule of thumb is to keep the balances below 30%. The best thing for your credit score is two revolving accounts and two installments in order to have a healthy credit profile. The lower the balance, the better the score is! So, if you’ve noticed your credit card keeps creeping out of your wallet, you can set up notifications at a certain balance so overspending is combated. It is almost like an accountability partner and is great if you find yourself overspending often!
- Suspicious activity- Your bank or credit card company will now send a text message to you if you would like if there is suspicious activity on the account. The message may sound similar to this: Please verify activity on ____ card ending in ___ at this Location. You can then confirm or deny this text. If you reply deny, a text follows up with a message that you will receive a phone call in the morning to go over the details. Easy enough, right?
- Card not present-Purchases made online will notify you with an alert. Online shopping has seen a dramatic spike in identity theft. For this reason, a feature such as this is a great to keep in mind.
- Gas-Any purchase made at a convenient store or gas station will alert you, if you wish. Unfortunately not every station requires a pin to make purchases.
- International Purchases-This is not a new feature but is great to keep in mind. If you are traveling, always notify your institution of the activity. Some will automatically turn the card off on you in order to protect the cardholder.
- Over limit-This notification is set up by the cardholder and notifies them any time a purchase is made over a certain price.
A note from the author:The opinions you read here come from our editorial team. Our content is accurate to the best of our knowledge when we initially post it.
Article by Breana Washington
How Would You Like To Communicate?
We took a recent survey on our Facebook page asking how users would like to be contacted; via phone call or text/email conversation. The results were not surprising! More than 90% of users voted text and emails. There seems to be a wave of change happening in the way our every day consumer takes in information.
Are you watching the news or your news feed for most recent events? Are your daily interactions on a device or a face to face debate?
If you are with the 90% of consumers that would rather communicate with no real human interaction, does this also apply to the way you purchase goods and services now too?
E-Commerce and E-Tail (Not Retail)
Apparently, it does!
So what did these companies do? They gave consumers what they wanted; convenience.
The Pros Of The “New Consumer”
Are there some products you are okay with buying online as opposed to others? Science says that for some people, purchasing an unfamiliar product they feel is more comfortable to buy in person. Have you gone to the store to try a new product, only to return it again a few days later? This proves the point that we will continue to buy familiar products over and over again. For those that do quite a bit of shopping online, they most likely stick to the same brands and services they have come to know and trust because they know the likelihood of having to return it is slim. That among the convenience of buying online makes the e-commerce option seem more appealing.
For Businesses, the pros are as follows:
- Customer Loyalty
- Brand Recognition
- Repeat Customers
- Customer Reviews/Satisfaction
Many of these pros play a very important role in the customer experience! For an online consumer, there is no long lines, and annoying check out attendant, just a basket of items to add and one click to check out. If the user experience is quick, easy and a great product, you better believe they will share it with all their friends (Facebook “friends” too).
The Cons on “Over Consuming”
While there are many reasons why the customer experience and the instant gratification with online shopping seems great, there are a few cons to the way we are making these transactions. While shopping in a store, there are several emotions that play into the purchase or “put back” of an item. Does this seem practical? Do I need it? What is my budget like?
You may feel you are getting great deals or that “time is money” but you may be overspending when it comes down to it. The same way that these businesses have marketed to you to show you that their way is better, are the same tactics they use to market more products and a need for more “stuff” that they have.