Monthly Archives: April 2013

Houses and Credit History

How Can I Lower My Monthly Mortgage?

A mortgage is a financial arrangement that usually attaches to a credit transaction, in most cases a loan. The same is utilized as a security arrangement to add more incentive to the borrower to make monthly mortgage payments on time and in full. The usual agreement involves a borrower promising to pay the principal and interest for a fixed number of times in specific intervals. Repeated defaults will result in the creditor charging additional interests, penalties AND the ability to take a promised property known as the security or collateral. The property is then applied as payment to the debt or sold and the proceeds applied to the debt.

Goal

Because of the economic downturn, most consumers are now asking how they can lower their monthly mortgage payments. This article will discuss just that. The discussion will differentiate between an existing mortgage and a mortgage soon to be applied for.

Credit Score

Any application for a loan or renegotiation of the same needs the best credit report and score that the consumer can muster. As such the same consumer must undertake credit repair a few months before loan take out or loan renegotiation. Credit repair can be subdivided into three phases:

  • Houses and Credit HistoryEmergency repair: This can up a few points (1 to 2 digits) in a matter of 3 days to 1 week.
  • Midterm repair: This takes 30 to 90 days. This involves disputing ruinous information that is false, inaccurate or obsolete.
  • Long Term: This takes 1 to 10 years. It involves sound financial planning, and waiting for long term information to be removed (i.e. charge off, bankruptcy, judgements, etc).

Starting Point

Only start negotiating or renegotiating after credit repair efforts have already paid off. You verify the same by pulling out new reports and comparing it to your older reports. Your goal is to have excellent credit scores or very near the same.

Mortgage as a Fact

If you already have an existing mortgage then you have to know exactly what the terms are. Make sure you understand the type of interest, interest rate, number of installments, any prepayment penalty, etc. You start with your current lender. Ask for a loan modification or refinance. Your goal is to lower the TOTAL of the monthly mortgage payments made.

The operative word is “Total”. This usually means converting ARM loans to fixed rate mortgages or getting a lower interest payment with the same number of payments.

Mortgage Before the Fact

If you are still shopping around for a loan and have finished with credit repair, it is now time to ask for pre-approval. Remember, ARM rates may be tempting, but take a second look at the same. Make sure that you are not just looking at the initial fixed rate, but at the expected and repeated rise of mortgage interest rates once the adjustable rate begins.

When you request for pre-approval, make sure that you know the average rates your credit score and particular loan application yields. You then compare the offers of different banks and lender, often times pitting one against the other. Tip: Ask for a written offer, and then let a competing lender peek at the same.

Getting Different Credit Scores

What Is the National Average Credit Score?

The national average credit score depends on several factors. It also depends on the entity you asked. Below are the basic parameters for the same. It is worth noting that the national average changes on a regular basis. If there is a range that is provided, use the higher value. If there is no range, add a few points.

FICO Score

This is arguably the most acceptable scoring model in the United States, and most other countries. FICO stands for Fair Isaac Corporation. This scoring system ranges from 300 to 850 (lowest to highest). As of the third quarter of 2013 (March), the average credit score for Unites States fluctuates at around 630 to 640. To put things in perspective, as of the last quarter of 2012 the national average was 634 (FICO).

VantageScore

Getting Different Credit ScoresVantageScore is another scoring method. The same is being popularized by the top three credit bureaus Equifax, Experian, and TransUnion. They utilize the same 5 categories used by FICO but with some modifications. This includes additional categories. This scoring system ranges from 501 to 990. Taking into account the different computation and the different point system, VantageScore has a different national average. As of the third quarter of 2013 the same fluctuates from 735 to 750. The Experian website has the average credit score at 736 (VantageScore).

State Average

Credit scores are also averaged per state. This may be higher, lower, or the same as the national average. Most experts believe that this is actually the score that is more relevant in the US. Other experts believe that the best way to determine the actual median score is to reference both national and state scores. You do not average this, rather you look at the higher score, and you consider that as your average. Strictly speaking the same may not be as accurate, but it is the better choice. Why? This is because the goal of the consumer is better served.

National Average by Age

Some inquiring entities also consider the national average per age bracket. Currently the most popular bracket type is:

  • 18 to 24
  • 25 to 34
  • 35 to 44
  • 45 to 54
  • 55 and above

This is relevant because it has been proven time and again that some age brackets are better equipped at handling their finances. The general rule is that the older one gets the higher the average.

National Average for Mortgages

If you are planning to take out a home loan, then you might want to refer to the national mortgage average. As of the last quarter of 2012 this was 734 (FICO). The same increased four points from the 2011 average. It is safe to assume that 734 (FICO) and above is your target score for 2013.

In Closing

If you fall below the average (national, state, age, mortgage, etc.) it does not mean you will get disapproved. It only means that the chance of disapproval is higher. The chance that you get the worst interest rate is even higher. If you are above the average, it does not mean you will get the facility of credit or loan approval. Bear in mind, the national average is not your goal, it is your starting point!

Credit Cards for Different Credit Scores

Quick Tips to Reduce Credit Card Fees

The popular misconception is that credit cards are free. And that so long as the consumer pays the minimum there is nothing to worry about. This cannot be farther from the truth. This article will discuss several practical ways to reduce credit card fees.

Credit Score

A high or low credit score determines in large part what type and what particular credit card provider will offer you the facility of credit. Simply put, the higher your credit score the better the offer. This is in terms of credit limits, interest rates applicable, penalties, reward points, etc. However, even the most excellent credit score cannot prevent credit card companies from charging you interest and penalties when you default.

Pay On Time and In full

If you pay before and during the due date, and in full, then credit card companies cannot charge you interest and penalties. This is the most basic advice given to every consumer. However, this is easier said than done. Below are a few tips that should help you prevent a default:

  • Credit Cards for Different Credit ScoresPay a few days before the deadline. This way you do not fall victim to emergency expenses, and even the occasional inability to make it before a bank closes for the day.
  • Auto debit: You can have your credit card fees automatically debited from your savings and/or checking account.
  • Online account: By enrolling your credit card account online, you can make payments using other accounts, usually form the same bank, to make the payment 24/7.
  • Take note of holidays and weekends. If your due date falls on a weekend or on a holiday, pay before the same. In some cases paying on the next business day is too late.

Annual Amount Charged

Most credit cards charge the user an annual membership fee. The higher the credit limit or more exclusive the card is the higher the annual fee. However, there is a way to have this waived. This is by charging an appropriate amount each year. If you meet that quota then the credit card company automatically removes the charge OR it can be easily removed with a single request. Contact you bank or lender, ask for the parameters on the same, and call every year. Do this one month before the month indicated on your credit card validity date.

Reward Points (good as cash)

By utilizing reward points you can effectively minimize any interest or credit card fees that you have paid. The same can be utilized to claim specific items or services, or it can be converted into virtual cash that will then be credited as payment on interests and penalties.

Negotiate with your Lender

If you already have a few defaults on your account, then you have already been charged interests and penalties. You can ask that the charges be reversed if you have a relatively good payment history with the same lender. You can site emergency expenses, hospitalization, loss of work, etc. Remember, sometimes all it takes to get a reduction of interest and/or penalties, is to ask for one.

Credit Card Interest Rates

Can I Pay My Taxes with a Credit Card?

We can pay taxes with our credit card if we really want to. On the internet, there are several websites that can show you the procedures to follow if you pay taxes through the internet. The Internal Revenue Service even has a website that guides taxpayers on how to pay taxes using a credit card. Some States like California and Pennsylvania have their own websites that dwell on the same topic of how to pay taxes with a credit card.

The real question is: do you really want to pay taxes using your credit card?

You Pay High Interest Charges

Credit Card Interest RatesCredit cards are noted for the high interest rates they charge on the cardholders.  If your credit card is one of those that cost less than 10% per year interest, paying your taxes with that card may be feasible. You must remember that when you pay taxes with a credit card, you have to pay a processing fee of around 2% that is charged by the service provider and this adds more to the high interest that you incur when you use your credit card.

Consider the Other Options Available 

If you don’t have sufficient funds to pay for your taxes, it may be wise for you to look for alternative financing.  Perhaps asking your relatives and friends to lend you money is a better option than using your credit card to pay your taxes. You can also refinance your home mortgage to raise enough funds to pay your taxes. The simplest way is to get in touch with the IRs and ask that you be allowed to pay your taxes on installment. You can also check if you are qualified to submit an Offer In Compromise that could lower your taxes which you have to pay in 60 -120 days.  Another option is to ask for additional time for you to pay your taxes.  You can use the Online Payment Agreement application for this or you can even phone the IRS directly.

Taxes that Can be Paid using a Credit Card

Generally, Federal and State taxes can be paid through credit cards. Federal and State personal income taxes, property taxes, Federal and State business taxes can all be paid through your card.  You have to check which cards are acceptable in your State and which cards are allowed by the IRS.

Advantages of paying taxes with a credit card

There are some advantages when credit cards are used to pay taxes. You will be paying online so your privacy and security are taken care of. There is little chance of errors to be made since you can easily correct the entries. Your payment is immediately effective as soon as the amount is charged on the card and the IRS can acknowledge receipt of your payment within two days. If you are entitled to a refund, you can receive it after two weeks. You can save valuable time and effort by preparing and paying both your State and Federal returns at the same time.

Getting Different Credit Scores

What is the Highest Credit Score?

The other term for credit score is called FICO score.  FICO stands for Fair Isaac Corporation, the general system to determine the credit score.  There are a lot of factors that affect our FICO scores.  The higher FICO score the individual has, the greater opportunities in the financial world.  There are actions to be taken to get a better score or if you may want to get the highest possible anyone can have.  The question is how we will be able to achieve the highest credit score?  What’s the range of the FICO score?

Range

The range of FICO scores can be from 300 to 850.  If we get the 850, the highest credit score which is next to impossible, well there is no harm in trying though; but once we achieve even near to that score, we will have more opportunities to get better interest rates when we apply for housing, car loan, business loan, etc.  In addition, there are several banks who will offer the best interest rates for getting new credit card accounts.  You will be receiving a huge number of marketing promotions and offers from financial institutions.  The advantage of having a high FICO score can give you the power to choose for the best credit card with no annual membership fees, lowest interest rates and excellent rewards program.

What are the determining factors to get a high credit score?

  1. Getting Different Credit ScoresThe most important factor is Payment History.  If we want to get a high score, making payments on time is a must.  We are judged as financial account holder mainly based on our previous and present payment history.  This factor contributes 35% of our credit score. 
  2. The next important factor is the severity of the amount we owe, our debts. If we have a lot of debts, it can lead to a lower score.  It is also important to know that using too much of your available credit is a no-no.

To be specific, if we have used up more than 30% of our available credit on our credit card, our credit scores will start declining.  So, monitoring our usage is a must.  This determining factor also contributes 30% of our credit score.

  1. Then, the longevity of your credit history with credit bureaus or credit reporting agencies plays a significant role in determining the credit score.  This means that closing our first and oldest credit card is a big mistake. 

When you decide to open a new account thinking you’re getting greater deals, you’re making such a huge mistake, because it is important to keep old credit card account than keeping new ones. New credit cards don’t create a big impact on credit scores.  The longevity of your credit file is 15% of your credit score.

  1. Another important thing to consider is the number of new credit card accounts you have or you keep acquiring.  The more new credit cards you have, the greater it will have a negative impact on credit score.  So, there is no need to get a new one if it’s not needed and being used. Because this factor contributes 10% of the FICO score.
  2. Collection or variety of financial accounts is also a plus when it comes to building a good credit score.  Financial accounts such as car loans, credit cards, home loans, and other type of credit accounts are greatly considered.  But if in case, you don’t need those other type of accounts, this can lower the formation of the credit score because this represents 10% of it.  This option though is advisable for account holders who are financially capable to manage all these accounts, but if not, it will not hurt to wait for the right time.  

So, there you go, we have all these determining factors to help us better understand the formation of credit scores.  It is up for us on how to put it into actions and start building our credit.  Credit rating is something that defines us.  If not totally, but this a great portion of oneself, it reflects who we are, what we do and how we stand in the society.

Credit Cards for Different Credit Scores

Credit Cards for People with Low Credit Scores

It is quite difficult for people who have low credit scores to be approved by major credit card companies that offer great deals and benefits.  However, there are companies that still provide credit cards to these customers who want to build or improve their credit.  Banks that offer these cards include First Progress, Capital One, National Express, Applied Bank, Open Sky, etc.

How can we determine if we fall under those people with low credit scores?

Mainly, if you filed for bankruptcy, debt settlement, have major delinquency records, several overdraft amounts from banks or credit card companies and bad payment history, expect low credit ratings.

What are the types of credit card available for them?

  • Traditional credit cards- with high interest rates, with annual membership fee, higher penalty fees for late payments, overdraft amounts and returned payments.
  • Prepaid Credit Cards- this works like a savings account.  You can use it like a credit a card; however the credit limit will depend on how much you deposited on it.

This type of credit card caters to teenagers who are not eligible to get a credit card yet.  First, due to being minors; second, they haven’t established their credit yet.

This helps their parents to train their children how to manage their finances well.  At an early age, it is advisable for parents to teach them how to be responsible cardholders to build a very strong credit.

  • Credit Cards for Different Credit ScoresSecured credit cards- these cards works like a regular credit card too, however, the account holder will need to deposit an amount to serve as secured funds to acquire a credit card.

Unlike prepaid credit cards that can be acquired by anyone, secured credit cards have age and income restrictions.  Even if we can deposit right amount to get it, there is a set of rules that should be followed.

The credit limit will not always depend on how much you put on it.  Lenders will determine how much your limit will be; these are 2 possible scenarios, either the full amount or a percentage of it.

For example, there are cases that an account holder deposited a secured fund for $1000, but the credit limit given by the bank is $700.  Though, lenders can also increase the credit limit based on payment history.

When planning to get a secured credit card, it is important to compare and review terms and conditions, the rates, membership fees, and all other fees associated before signing a contract.

It won’t hurt if we check all the details of each credit card companies that offer secured credit cards, because each of them might have the same or different deals, better rates and so on.

Do all credit card companies offer all these types of credit card?

The answer is, not all do offer these credit cards.  There are companies who only offer credit cards to those people who have a good or above par credit scores.  There are also companies who cater to those people with low credit scores or new to credit.

Once we have acquired for a new credit card, whether it is a traditional prepaid or secured credit card, what really matter now is to manage our finances well, established a good payment history and aim to get a higher credit score.  In the long run, you’ll see that all your efforts are worth it.

Credit Cards

Best Business American Express Credit Cards

American Express is a paramount world-wide credit card provider and one of the most popular companies in the world. It was recently ranked thirteenth among the top 50 of the most admired companies in the world by Fortune Magazine. It provides a compelling line up of credit cards both for business and personal use.

AmEx as what most consumers fondly call it is considered by many as the gold standard in the industry. It is not easy to secure an American Express credit card as it usually requires a superior credit score for an applicant to qualify for one. Despite the higher annual fees and interest rates, businessmen and jet shuttling corporate warriors have developed a fondness and a preference for AmEx cards. This is simply because every credit card from American Express comes packed with features, perks, and rewards no other credit card can match.

American Express probably understands the small business men better than anyone else in the industry. That is why it has developed a complete lineup of superior business credit cards that caters to their specific needs and wants.

Among the best business American Express Credit Cards are the following:

  • Credit CardsThe Gold Delta Sky Miles Business Credit Card for the small businessmen who do a lot of traveling –  This card awards you a mile for every dollar you spend on eligible purchases with participating outlets and 2 miles for every dollar you spend on Delta Air tickets. Not only that, the card lets you book a ticket with Delta anytime without worrying that the airline may have blocked out dates. Besides, you will be accorded priority boarding privileges and check in your first bag for free. You will also get 20% discount on in flight food and drinks. The best part is it won’t charge you an annual fee on the first year with a minimal $95 annual fee thereafter.
  • The Plum Card from American Express is the perfect credit card for small businessmen concerned with their company’s cash flow. This card not only gives you a 1.5% off on your credit card bills if you pay early, it also allows you to pay your credit card bills within 60 days from the due dates without charging any interest. This card gives you more cash flow flexibility by allowing you to set your own billing cycle. You can choose to receive your credit card bills at the start, in the middle, or at the end of each month. American Express pays for your first year annual fee and it will be $250 annually thereafter.
  • For the small businessmen who travel frequently and also make sizable office supplies and gasoline purchases regularly as well as dine out frequently, the True Earnings Business Credit Card from American Express and Costco allows them to enjoy the best of both worlds with remarkable cash back rewards and substantial discounts. The card doubles as a Costco membership card so you’ll enjoy an annual fee free shopping at any Costco outlet and take advantage of Costco’s low price products. Not only that, you will get up to 4% cash back on your gasoline purchases in any stand-alone gas station in the country including at Costco. You’ll also be entitled to 2% cash back at participating U.S. restaurants and 1% cash back on other purchases including those made at Costco. You’ll also be entitled to 2% cash back on travel expenses from a network of companies in the travel industry to include Jet Blue airlines and Hertz car rental services.

There are more than 20 American Express Business Credit Cards currently being offered to small businessmen by the company including the three we mentioned above. This means whatever your specific needs may be, there is an AmEx business credit card that will fit perfectly into your business. Unfortunately, your business has to be well established and you must have and an excellent credit score to be able to qualify for any of them.