Credit Basics Part 2

Credit Basics Part 2 Experian offers some very simple but sound advice about credit scores.   This week we will be sharing some of their insights with you.  Credit Score Facts

Learn more about score factors and why lenders use credit scores. Find out how your credit score rates before approaching lenders.

Types of credit scores

There are primarily two types of scores – generic scores and custom scores. Custom scores are generated by individual lenders, who rely on credit reports and other information, such as account history, from their own portfolios.

Vantage Score

Vantage Score is the first generic credit score developed cooperatively by Experian and the other national credit reporting companies. This score uses the same exact formula across all three credit reporting agencies.

Why lenders use credit scores

Before credit scores, lenders physically looked over each applicant's  credit report to determine whether to grant credit. A lender might deny credit based on a subjective judgment that a consumer already held too much debt, or had too many recent late payments. Not only was this time consuming, but also human judgment was prone to mistakes and bias. Lenders used personal opinion to make a decision about an applicant that may have had little bearing on the applicant's ability to repay debt.

Credit scores help lenders assess risk more fairly because they are consistent and objective. Consumers also benefit from this method. No matter who you are as a person, your credit score only reflects your likelihood to repay debt responsibly, based on your past credit history and current credit status.

You can read more from the Experian website on this information at http://www.experian.com/credit-scores/basics.html

Check back tomorrow for more information on credit basics that will help you.

At HOPE we help educate clients every day on how to make wise financial decisions. If you would like to know more please call us at 704-503-3669. Our staff is waiting on your call.

Credit Basics Part 1

Credit Basics Part 1 Experian offers some very simple but sound advice about credit scores.   This week we will be sharing some of their insights with you. 

1. Improve your credit by understanding the basics

What are credit scores and how are they calculated? Credit scores are fluid numbers that change as the elements in your credit report change.

What is a credit score? A credit score is a number lenders use to help them decide: "If I give this person a loan or credit card, how likely is it I will get paid back on time?" Credit scores are also called risk scores because they help lenders predict the risk that you will not be able to repay the debt as agreed. Scores are generated by statistical models using elements from your credit report however scores are not stored as part of your credit history. Rather, scores are generated at the time a lender requests your credit report and then included with the report.

Credit scores are fluid numbers that change as the elements in your credit report change. For example, payment updates or a new account could cause scores to fluctuate. There are many different credit scores used in the financial service industry. Scores may be different from lender to lender (or from car loan to mortgage loan) depending on the type of credit scoring model that was used.

How scores are calculated

How scores are calculated. Developers of credit scoring models review a set of consumers – often over a million. The historical credit profiles of the consumers are examined to identify common variables they exhibited. The developers then build statistical models by selecting the credit variables most predictive of future behavior and assigning appropriate weights to each variable.

Models for specific types of loans, such as auto or mortgage, more closely consider consumer payment statistics related to these loans. Model builders strive to identify the best set of variables from a consumer's past credit history that most effectively predict future credit behavior.

You can read more from the Experian website on this information at http://www.experian.com/credit-scores/basics.html

Check back tomorrow for more information on credit basics that will help you.

At HOPE we help educate clients every day on how to make wise financial decisions. If you would like to know more please call us at 704-503-3669. Our staff is waiting on your call.

How To Get A Low Mortgage Interest Rate.

How to get a low mortgage interest rate.

If you hope to get a mortgage, either for a new house or to refinance, the biggest factor will be your credit score. Your credit score will determine how good of a rate you get or whether you get a loan at all.

The credit score isn't magic; it's a mathematical formula. It’s important that you know your credit score.

Different reporting agencies may use slightly different percentages, but it boils down to roughly this:

35% Paying Bills On time 30% How Much You Owe and How Much Credit You Have 15% How Long You've Had the Accounts 10% No New Accounts 10% Variety of Accounts

Here are a couple of suggestion that might help you.

***Use automated bill payment. Lots of people have the money to pay their bills; they're just too disorganized to do it. Automated bill payment is usually free, and some banks will even send out paper checks automatically to people you owe who don't take electronic bill payment.

It's especially helpful for credit cards, which are now scrounging for every fee they can get. And, most importantly, you won't get a ding on your credit report for being late.

***Pay down your credit card debt. Lenders don't want you to use more than 30% of your overall credit limit. Just because someone is willing to lend you money, doesn't mean you should take it.

They'll allow you to charge 100% or more because they can add extra fees. For a credit card company, someone who keeps a high balance and barely pays the minimum is the ideal customer; they generate the most fees. But for a mortgage lender, that person is a higher risk.

You also don't want to concentrate all your balance on one card, no matter what miles or rewards you're soaking up. Creditors look at your overall available credit and whether you are at your limit in any one account.

At HOPE we help our clients everyday make wise decisions on getting the highest crdeit score they can achieve. If you would like to know more please call us at 704-503-3669. We are waiting on your call.

Is It Okay To Co Sign A Loan?

I am often asked, "Is it okay for me to co sign a loan for a friend or family member?" My answer is always NO! There are several reasons I say no.

First of all unexpected things happen to all of us and it is easy for your friend or family member to get in a situation where they cannot make a payment. A new late on their credit report will also appear on yours and will drop your credit scores significantly. When you co sign for them, they have every intention on making every payment on time but we all know that can change quickly. As I said unexpected things happen that effects us all.

When you co sign, the debt of that loan will appear on your credit report and will be totaled into your debt to income ratio. This can effect your ability to qualify for future personal financial transactions. You become co responsible until that debt is paid in full.

We are all good hearted and want to help a friend or family member when we can, but obligating yourself for the duration of the loan is not a wise decision to make. Unexpected set backs can strain even the best of relationships.

It would be wise to make the decision that you will not co sign for anyone, ever. That way when someone comes to you and plays on your sympathy your decision is already made. You can simply say: "I made the decision a long time ago that I can not co sign for anyone, ever." They may be disappointed but they will get over it and you have protected from a difficult situation.

At HOPE we help our clients make wise decisions every day related to various credit issues they face. If you would like to know more about HOPE please call us at 704-503-3669. We will be glad to help you.

Teaching Kids About Money Part 5

Teaching Kids about Money – Part 5

by Michelle Lambright Black

Today we will be covering one final tip on how to effectively teach your children about money, helping to prepare them to be financially responsible adults.  Don’t forget, you can check out our blog archives for parts 1-4 in this series. 

Lesson #5:  Lead by Example

We believe this is the most important tip of the week, that’s why we have saved it for last.  Children, whether they be young or whether they be teenagers, are usually excellent observers.  Your child will learn more from your example than they will learn from anything else you teach them.  Therefore, if a child sees their parents making unwise financial decisions, such as racking up excessive credit card debt, buying homes and cars they cannot afford, and failing to save for the future, the child will learn to accept this kind of behavior as the norm. 

If you have been guilty of making poor financial choices in the past then now is the perfect time to change.  Beginning today, you can help to erase any bad examples in spending that you may have set for your child before.  By establishing a sound monthly budget now you can begin to teach your children how to handle money more effectively.

If you have any credit issues you may be facing or if you need assistance establishing a working monthly budget for your household please contact HOPE today.  Our specialists would love to assist you.  You can reach us at 704-499-9696 or you may email us by clicking on the following link:  http://hope4usa.com/contact-us-2/.  We can’t wait to hear from you!