Credit9 - Personal Loans

Obtaining A Mortgage After Bankruptcy

It is still possible to purchase a house after filing for bankruptcy. It can be challenging and you will have to wait some time before your finances are able to bounce back but it is doable.

The most common guideline you’ll have to follow to purchase a home after bankruptcy is to go through a waiting period. Most lenders and mortgage lending programs including FHA and VA usually require this.

The average waiting period is two years. Check with your state and lender to find out what applies your particular circumstances. If your bankruptcy is due to hardship outside of your control, such as job loss or extenuating circumstances, you may be able to reduce that time to one year.

Rebuild Your Credit Quickly To Get Even Faster Approval

Open a credit account or using an existing account, make payments on-time for at least 12 months. Do not close the accounts after paid off. Rather, keep them open and active. Always keep the ratio of what you spend to what’s actually available low. For example, on a $1000 credit card, have an open balance of no more than $300.

Open a secured credit card. Again, make monthly on-time payments to show a good payment history. You can use this card for minor expenses, such as gas, groceries or utility bills.

Show that you know how to handle other types of credit accounts. Whether student loans, personal loans or other types of credit, make regular on-time monthly payments so that you begin to develop a track record of success.

Talk to your lender about the requirements necessary to qualify for a mortgage loan. This includes minimum credit score, debt-to-income ratio, length of waiting period after bankruptcy discharge, if you have extenuating circumstances and if there is anything you can do to reasonably speed up the process.

Even More Tips To Help You Buy Your Home After Bankruptcy

Look for first-time homebuyer programs. If you’ve never purchased a home, look for first-time homebuyer programs. Check out the eligibility guidelines and see if there’s some flexibility for your situation, particularly if you’ve been able to find new employment after a job loss.

Bring more to the table. An FHA loan will normally allow you to purchase with as little as 3.5% down payment. Are you able to put down 5% comfortably? If so, this can only help you.

Look at the various lending programs within your bank to see which will be most attractive to your situation. It doesn’t hurt to ask and to begin preparation as soon as you know you want to buy a home. With planning, proper documentation and persistence, you can bounce back from bankruptcy and buy your new home.

Managing Debt

Managing your debt is something most of us do not even want to think about. It takes time, hard work, knowledge and dedication to get out of debt. However acting as if it doesn’t exist isn’t going to make it disappear. If you haven’t taken a look at your credit report lately, we strongly recommend taking a look at it. Everyone deserves financial freedom.

Managing debt is simplified when you use a credit monitoring tool that assists you with fraud protection, accuracy, disputes and a full detailed report of your credit. Getting out of debt will improve your credit score, and save you money.

Know How Much Financial Obligation You Can Take On

A key to managing debt is knowing how much new financial obligation you can take on at any one time. Set aside regular time to review your monthly banking and financial statements to get an overall picture of things.

How Much Debt Do You Already Have?

In order to know how much debt you can take on for a new car, home or educational purposes, you have to know how much debt you already own. Do you have an idea of the total amount of outgoing payments for life’s necessities? If you don’t, get started now figuring out your total payments on everything from utilities, to cable, insurance, loans and living expenses.

Break Your Variable Debt Payments Into Regular Installments

Managing your debt is easier when you break your payments down into regular installments. For example, if your utility bill, transportation and eating expenses vary each month, take a look at the average cost of these for the last 12 months. Then pull some money out of each paycheck to cover the total. That way you won’t get caught off guard and you can get a rough estimate of how much money you’ll spend, even if the total varies each month.

Begin To Save A Little More

Paying down existing debt goes hand in hand with managing it. Look for ways to get creative about current spending. If you need a new computer for school, perhaps one that is 2-3 years old will work just as well as a brand new one. Take the extra money and put it in your savings account.

Managing debt gets easier with practice. Invite your family along and make it a game. Have a contest to see who can save the most and at the end of the year reward the winner with a percentage of the total savings to splurge.

Check Your Credit Before Buying a Home

What is a Credit Score?

Imagine that a friend asks to borrow money from you. Assuming you had the money to loan, you might then ask yourself, “Did he pay me back the last time he borrowed money? Did he pay me back the full amount? On time?” When you approach banks and lenders for a loan, they go through a similar analysis, but since they don’t know you personally, they use your credit history to determine whether you will be a responsible borrower. Lenders learn about your credit history by looking at your credit report. You can get a free Credit Report Card that includes your free credit score right now!

Credit reports are developed by three separate credit agencies. These agencies (Equifax, Experian, and TransUnion) gather information about your credit history, and, using a formula developed by Fair Isaac Corporation (FICO), each assigns you a credit score. You will end up with three slightly different credit scores, each from one of the three agencies. Lenders typically look at your middle credit score (as opposed to the highest or the lowest), and you must provide all three of your credit scores (one from Equifax, one from Experian, and one from TransUnion), when applying for a loan.

Why are Credit Scores so Important When Buying a Home?

Your credit score helps determine the rate and conditions you receive on a loan. If your credit score is high, meaning that your credit history indicates that you’ve paid your credit card bills on time, haven’t “maxed out” your credit cards, etc., then lenders believe it’s a fairly good bet that you won’t have difficulty paying off your loan. They will see you as a low-risk investment and offer you a low rate on your loan with good conditions.

If your score is lower, lenders will think you’re a riskier investment, and charge you (by loaning you money at a higher interest rate, often including hidden charges) to take on the perceived risk. Get your free credit score now.

How do Credit Scores Affect You When Applying for a Loan?

Most lenders have a baseline credit score by which they largely make their decision to approve or deny mortgage applicants. The maximum credit score is 850 (though a score of 850 is rare, indeed. Only about 10% of applicants have a score over 800). Any score in the 700s or above is excellent and will get you a loan with the lowest interest rate. When you get into the 600s it starts getting dicey. A score of 680, for example, is still considered good, but when you get below 660, some lenders start saying, “No.”

For others, 640 or 620 is the line at which you won’t be considered for their better programs. Once you get into the 500s, you are a candidate only for what the industry calls subprime loans, those with interest rates that are a couple of percentage points higher than those offered to prime borrowers. Subprime loans also often come with a lot of hidden charges.

So you can see the importance of keeping a good score. It used to be okay to miss a credit card payment deadline. You might pay a $15 late fee. Big deal! But if you do this on a regular basis, it can savage your score and cost you many, many times that amount when you want to buy or refinance a home. That’s the bad news.

 

The good news: your credit score isn’t fixed in stone. If you have bad credit scores, there are ways to improve your credit health. If you find your scores are lower than you expected, you’ll need to engage in credit rehab. This is different from credit repair, defined as going to an outside company that promises to cure your problems and raise your scores. There may be some good ones out there (along with some disreputable ones) but they can’t do anything you can’t do yourself and you shouldn’t waste your time or money going to them for help.

From a financial standpoint, it is almost always better to take the time to improve your credit health, and make yourself eligible for a better interest rate, than it is to apply for a loan with a credit score that will only make you eligible for a subprime loan.

Find Out Where You Stand

You can check your credit score each month using Credit.com’s free Credit Report Card. This completely free tool will break down your credit score into sections and give you a grade for each. You’ll see, for example, how your payment history, debt and other factors affect your score, and you’ll get recommendations for steps you may want to consider to address problems. In addition, you’ll also find credit offers from lenders who may be willing to offer you credit. Checking your own credit reports and scores does not affect your credit score in any way.

The Real Reasons Retailers Push Branded Credit Cards

When shoppers hit the counter of their favorite retailer this holiday season, they may be asked to sign up for the store’s branded credit card in exchange for a discount on their purchase. The cards are often a better deal for the stores than they are for consumers.

There are some perks to consumers—store cards, or private label cards as they’re known in the industry, are a good starting point to build up credit score, and there can be rich rewards for frequent shoppers. In general, though, these branded cards carry higher interest rates than general purchase cards and have lower limits. That makes them more expensive for consumers.

For retailers, however, store cards are a growing profit center. Private label card use by consumers grew nearly 12 percent per year from 2009 through 2012, according to the most recent data from the Federal Reserve. They’re an easy way for stores to build loyalty, collect data, and—of course—earn revenue from consumers. Retailers are so invested in turning customers into private-label cardholders, that they often offer their sales clerks cash incentives for signing people up.

One big reason that retailers like store credit cards is that they encourage customers to spend more. More than 60 percent of consumers say that they shop more often with retailers with whom they have a store card, and they’re also more receptive to communication about events and promotions by that retailer, according to a market research report from Packaged Facts.

Not only do store cards encourage more spending and build loyalty for merchants, but they also give the stores access to valuable consumer data. Plus, they cost less to process than other forms of payment. They’re also often compatible with mobile pay systems, which are expected to grow more dominant in future years.

Since retailers often control the approval process, they’re able to give cards to consumers who might not qualify for general-purchase cards, and to charge them interest on the balance.

In 2014 private-label credit and debit cards generated $254 billion in sales, according to Business Insider. They account for a large share of purchases at major retailers, used for nearly 60 percent of sales at Kohl’s and nearly 50 percent of sales at Macy’s last year, per an analysis by credit card consultant Ryan Douglas at First Annapolis.

The growing importance of private-label and general credit cards reflects a shift among consumers, who shied away from credit in general after the Great Recession. The average number of credit cards held by consumers has been ticking up in recent years according to the Consumer Financial Protection Bureau. Those numbers could continue to increase as cashiers suggest new credit cards over the coming months.

Clear Language Establishes Trust, Minimizes Anxiety

How financial concepts are presented can have a big impact on how people feel about their bank statement. In August, Credit Karma worked with Qualtrics to survey over 1,000 people about their reactions to two descriptions of adjustable rate rules, one technical and one conversational. Their responses were highly correlated with their attitudes toward money and their credit score. In short, the closer the fine print was to language they would use to talk to their friends, the more likely they were to find it not just helpful, but trustworthy. This was particularly true for those with lower credit scores who were more negative about financial disclosures overall.

These findings mirror a Federal Reserve Board study in 2011 that concluded, “When reading disclosure documents, consumers are best served by terms that are straightforward. Small wording changes can significantly improve consumer understanding.”

Credit Karma Head of Consumer Insights Greg Lull is passionate about making managing money as stress-free as possible for everyone. “When we communicate in everyday language, we help people take control of their financial future. That is powerful.”

Technical paragraph

Your variable rates may change when the Prime Rate changes. After the initial introductory 0% interest rate period, the variable rate is calculated by adding a percentage to the Prime Rate published in The Wall Street Journal on the 25th day of each month. Variable rates on the following segment(s) will be updated quarterly: Non-Introductory Purchase APR: Prime plus 9.74%, 14.74% or 19.74%; Non-Introductory Transfer APR: Prime plus 9.74%, 14.74% or 19.74%; Cash Advance APR: Prime plus 19.74%.

Conversational paragraph

You’ll have an introductory interest rate of 0% for the first 12 months. After that, though, you’ll have a variable interest rate – meaning your rate will change based on the Wall Street Journal’s “prime” rate (here’s more about the prime rate). We’ll calculate your interest rate for purchases and balance transfers based on your credit. We’ll let you know the percent (prime plus 9.74%, 14.74% or 19.74%) after you’re approved.

Overwhelmingly, the conversational language was seen as more positive. In addition to being seen as easier to understand, helpful and less anxiety-inducing, it was also seen as more trustworthy than the technical language.

Pay for a Delete: Do you think it is a Good Idea?

What in life is really essential to our survival? It’s a pretty short list, headlined by food, shelter and clothing, but many people nowadays would also include a mobile phone among their list of indispensable “must-have” items. But did you know that a mobile phone payment could also affect someone’s credit scores? Currently, the account can only have a negative impact if you default on your payment, a sign that you might be falling behind on your regular financial responsibilities.

For most of your other payments, including a car loan, a mortgage or credit cards, you are rewarded for paying your bills on time and penalized when you miss or are late on a payment. A mobile phone, however, affects your credit scores only if you default on your payments and it is charged off or sent to collections. One key thing to know about charged off debt, however: if your debt is charged off, you’re still obligated to pay it.

1. Your account balance changed.

Many credit scoring models include consideration of your payment history and your credit utilization ratio (your outstanding balance as it relates to your total amount of credit available). The length of credit history, your credit mix, and your amount of new credit are also factors that can be considered, but may not have as much weight as the others.

Because your payment history is a major part of many scoring calculations, it is important that you avoid defaulting on any payments whatsoever . While paying your mobile phone bill on time doesn’t affect your credit scores positively, defaulting on the account is a serious negative that could have a potentially severe effect on your credit scores.

Is it already too late for you? If you currently have a defaulted mobile phone payment on your credit report, don’t be disheartened. Defaulted debt that’s either charged off or sent to collections will stay on your credit report for seven years. However, if you pay it off and recommit to using good credit behaviors like paying your bills on time each month, it will begin to recede into the past before you know it. Making good credit a part of your everyday life is something you can always reaffirm your commitment to; good behaviors beget good scores, so know that your efforts to improve your habits won’t be in vain.