FSSb2b Blog

Three More Easy Credit Tips to Boost Your FICO Score

2008-04-08T09:54:00.001-07:00

Credit Tip #5: Auto Loan and Home PurchaseHaving a healthy mix of credit includes an auto loan. But having a fleet of cars on your credit won't necessarily help. Just one is needed to complete a mix of credit. Your score will drop after the purchase (or lease) of an automobile, then pick up each month with successive on time payments. Because of this initial drop, don't purchase or lease a car 90 days before looking for a home loan or refinancing your house.Credit Tip #6: Mortgage and Auto Loans Grouped TogetherDepending on the scoring formula, all autos and mortgage inquiries made within a 14 or 45 day period are grouped together as one for scoring purposes. Many credit scoring formulas will allow for the fact that you might want to shop around for an auto or a mortgage loan and that each person or company you work with might want to pull your credit. So the way that it's now set up is if you have 8, 10, 12 or more mortgage inquiries in the past 2 weeks as well as the same or more auto inquiries, the mortgage inquiries get grouped together as will the auto inquiries. So for scoring purposes, the mortgage inquiries will count as 1 and the auto inquiries will also count as 1 against you. Therefore, a total of 2 inquiries will count against you for scoring purposes.Also the first inquiry in the group for each auto and mortgage won't count against your score for 30 days after it's pulled. So don't worry about taking that slight drop on your credit score for the next month, because you have a 30 day buffer period.Credit Tip #7: HELOCs and Credit ScoreYou would not want to max out your credit card, so do not max out your HELOC either because it could cause your FICO score to severely drop.Fair Isaac claims that when the dollar amount exceeds a certain limit, the credit scoring formula is supposed to treat the HELOC as a mortgage account and not a revolving credit account (i.e.: credit card). But quite often, HELOCs are treated as revolving credit and credit scores can suffer immensely.For example, you want to take out a $50,000 HELOC and use the $50,000. The credit scoring formula often sees this as if you have maxed out a $50,000 credit card and your score will suffer.Another option is take out more than what you need you, if have the available equity in your home. If you use the same $50,000 on a $250,000 HELOC, you only pay interest on the $50,000 that you borrowed and the scoring software will not hammer your score like in the above example. It looks at this HELOC like a $250,000 credit card that only has a 20% debt ratio, a considerable difference from 100% in the previous example. So if you decide to use a HELOC, make sure you use it in a way that best affects your FICO score.To learn more about how you can help increase your credit score, go to Financial Solution Services' website at FSSb2b.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE webinar by visiting UpcomingWebinars.

Fast and Easy Credit Tips to Boost Your FICO Score

2008-04-08T09:53:00.002-07:00

Credit Tip #1: Credit Card Debt RatioWhere should your monthly credit card debt ratio be? Let’s say that your credit card bills are at 80% of the total limits that you have. At minimum, try to get them below 50%. If you can afford to below 30%, if you can find the means, below 10% and ideally pay them off completely if your financial situation allows for it.Bringing down your debt ratio can make a huge difference to your FICO score and save you tens to hundreds of thousands of dollars over your financial lifetime.Credit Tip #2: Keep Your Card ActiveMake sure that you use your credit cards at least every 6 months. If you don’t use a credit card, the card becomes inactive with the credit bureaus. Inactive accounts do not help to lower your debt ratio and you will also loose the history of that credit card which will also lower your credit score.You want to use your credit cards to keep them reporting as an active account even if you only use them minimally. You use the card to buy gas or a lunch and pay off the balance if you want to. Just make sure that you use it every 6 months so it reports to the credit bureaus and that it remains active.Credit Tip #3: Don’t Close Your Credit CardNever close credit cards. It is one of the worst things you can do to your credit score. By closing a credit card account, you raise your debt ratio and lower the average age of your credit file. You want to make sure that your 15 year-old credit card sees if 16th, 17th and so on birthdays.Credit Tip #4: Ask for Credit Limit IncreasesYou want to ask for credit limit increases every 6 months as long as you’re not going to apply for a loan or a major purchase in the next month or so, unless your credit score is above 730. You don’t want to ask for the increase if you’re on the cusp of the score you need to get that great loan, because 9 out of 10 times when you ask for the credit limit increase, a creditor will pull an inquiry which usually dings you 5 points or less. But when you are building or rebuilding your credit, getting credit limit increases will lower your debt ratio by increasing your available credit. This will help to increase your FICO scores.To learn more about how you can help increase your credit score, go to Dr. Alan Rosenthal's website at FSSb2b.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE Webinar by visiting Upcoming Webinars.

Is Your Credit Score Costing You Thousands of Dollars on Your Investment Properties?

2008-04-08T09:53:00.001-07:00

Many investors have made tremendous returns by carefully choosing an investment property and waiting until its value appreciates. They find a property, decide to purchase and usually take out a loan. And for those investors, who buy multiple properties in any given year, may apply for several loans or other lines of credit. But what many investors, both new and old, do not know is that these loans could be costing them hundreds of thousands of dollars in unnecessary interest over the 15 or 30 years of the loan and can significantly affect the future benefits of the investment. You might be asking yourself, how could a loan damage an investment with a 6.1% rate of appreciation (the nationwide average over the last 30 years)? The answer is easy, a credit score.A credit score determines the borrowing status and credit worthiness of a consumer by calculating the likelihood that he or she will become 90 days delinquent or more on a particular loan obligation. You can have more than one credit score, but the one that is most important to investors is the one given by the Fair Isaac Corporation. This score, also known as a FICO score, is the one that mortgage brokers pull when deciding interest rates for potential borrowers. The scores range from 350 to 850. A consumer with a high FICO score (800 or more) will yield a lower interest rate than a consumer with a low score. This is because a high score indicates that the consumer’s odds of being 90 days late or more is about one in 1,300. Therefore, the consumer is rewarded with a lower interest rate. A high credit score can be a huge benefit to real estate investors. For example, if John has a credit score of 640 and wants a $350,000 30-year fixed rate mortgage loan on his investment property, his interest rate could be around 7.42%. If John were able to raise his score 100 points, he could be approved for a loan with a rate of 6.01%. Now that might not seem like a huge difference, but John would certainly feel a change when the bill comes or when he checks his savings. With a 7.42% rate, John’s monthly payments would be $2,426.91. Should he succeed in raising his score 100 points and obtain a 6.01% rate, his payments would be $2,120.76. That’s just over $300 dollars saved each month, making the total savings $110,216.20 over the life of the loan. A 1.41% drop in interest rate just saved John over $110,000. John can now use that money toward another investment property or any number of purchases that could enhance his financial future. Credit scores are especially important to real estate investors, because a decrease in credit score could prevent someone from closing escrow or obtaining the best possible loan for that property. There are several ways to make sure your credit score is not damaging your next investment. First know that there are three major credit bureaus that use the FICO scoring model: Experian, TransUnion and Equifax. They all allow consumers one free credit report a year. It’s best to ask for one report every four months. This way, investors and consumers receive three reports over the course of one year to keep tabs on their credit, to know what their FICO scores are and to see what delinquencies can and cannot be removed.FICO uses several components to determine a credit score. These include, past delinquencies (35%), revolving debt ratio (30%), mix of credit (15%), average age of file (10%) and inquiries (10%). In future articles, I will explain these factors and give a few tips on how to succeed in each of the fields.To learn more about how you can help increase your credit score, go to Financial Solution Services' website at FSSb2b.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE Credit Repair and Enhancement Workshop by visiting Upcoming Webinars.

How to Successfully Read a Credit Card Statement

2008-04-08T09:52:00.000-07:00

Step one in building good credit is to apply for a credit card that suits you, whether it is a gas, department store, rewards or cash back card. Next is to pay your bills on or before the due date. But if you do not understand the statement, then you might not be paying the bill correctly and can fall into bad credit, which may cost you tens to hundreds of thousands of dollars over your financial lifetime. Correctly understanding you credit card statements can prevent identity theft, because you are more likely to notice irregularities.Account Number and NameThe account number on a statement should be visible at the top and usually in bold. Every account has at least one name and an address attached to it. It is important to know whether or not your account name includes your middle name or initial. If you set up your account with your name as Mike M. Money, then that is the name that you should use when making purchases online or over the phone. Sometimes businesses will say your name does not match the account if you had given your name as Mike Money because the middle initial was excluded.Transaction Period, Charges and CreditThe transaction period shows the dates that the statement opened and closed. In this section, you will find all purchases and new charges made during this time. It is a good idea to save your receipts for the month and match them to the statement. That way you can make sure there are no unnecessary charges on your account or see if you were over or double charged for certain purchases. You also want to make sure if you were credited any money for returned items, and make sure any paid fees and cash advances were applied correctly.Finance ChargesEven if you pay your bills in full each month, the privilege and convenience of owning a credit card sometimes come with these charges. A credit card company will often calculate finance charges by the average balance and 1/12 of the Annual Percentage Rate (APR). However, some credit cards have different interest rates for specific charges such as cash advance, balance transfers, etc. Make sure that the charges add up and the interest rates are with the correct transactions.Minimum Payment and Due DateThe minimum payment is usually between two to three percent of the balance owed. I strongly recommend paying more than the minimum and if possible the entire balance, because interest charges will accrue and cost you more money. Therefore, pay off as much as you can and do not overspend. Send in your payments well before the due date to avoid late payments and past due notices. Usually you have 20-30 days from when the statement was made to pay. This includes the week or so it took for the company to get the bill out to you. Therefore, you should pay it as soon as possible.Credit Limit and New BalanceA credit limit or credit line is the maximum allowable money you can borrow or charge during a pay period. If you charge over this amount, you will be paying over-the-limit fees. On the statement, often times you will see the credit limit next to the new balance, which is how much has not yet been paid. If you pay the entire amount, you should not be charged any interest.Double CheckYou might want to double check for irregularities or purchases you do not remember making. If you have any questions, you can always call up your credit card company to verify purchases. Identity theft is a serious issue and you do not want to spend the hundreds of hours and thousands of dollars it costs to fix your credit. If used correctly, credit cards are a great way to build a substantial credit file and can essentially help raise your credit score if you pay your bills on time. To learn more about how you can help increase your credit score, go to Financial Solution Services' website at FSSb2b.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE webinar by visiting UpcomingWebinars.

The Many Faces of a HELOC

2008-04-08T09:51:00.000-07:00

A HELOC is a home equity line of credit, which is basically a big credit card with mortgage tax deductions where you can borrow, pay down and repeat. They are versatile and useful lines of credit, allowing borrowers to use the money for a multitude of reasons. Sometimes, when a person needs to borrow larger sums of money, a HELOC might be the best choice. HELOCs are commonly used as home improvement loans, for investment properties, vacations, debt consolidation, college tuition, car loans, business loans, etc. They offer low interest rates and allow borrowers to pay on demand – only what is used and the interest. The collateral on a HELOC is the equity in the borrower’s house. It differs from a home equity loan because the borrower does not receive all the money up front, but has access to it during a specific draw period – usually between five and ten years with a pay period of ten to 25 years. When a HELOC is above a certain monetary amount, the FICO credit scoring software is supposed to treat it as a mortgage. But often times it shows up as revolving credit and not a mortgage. Because of this, HELOCs are often seen as big credit cards and need to be treated as such. You would not want to max out your credit card, so do not max out your HELOC, either because it could cause your FICO score to severely drop. There are several strategies you can use to tackle the HELOC, one being as follows. Let’s say you need $50,000, but can attain a $200,000 HELOC because you have enough equity. Apply for the $200,000 HELOC and only use $50,000 of your balance. Then you are only at 25% debt ratio on that particular account and you do not have to pay what you do not use. If you were to take only a $50,000 HELOC and use all of it, it would be as if you had a $50,000 maxed out credit card. This would cause your credit score to suffer tremendously.HELOCs more recently have been used for emergency funds. However, lenders might charge a fee to keep that line of credit open. HELOC's generally have adjustable interest rates. Keeping a HELOC open for a long period of time as an emergency fund can be a great idea, but understand that your interest rate can fluctuate significantly.HELOCs are a great source of flexible credit for large sums. There are various strategies to use with HELOCs as mentioned above. Look into all options when searching for a HELOC, so you can find out how its many faces can benefit you.To learn more about how you can help increase your credit score, go to Financial Solution Services' website at FSSb2b.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE webinar by visiting UpcomingWebinars.

Use Business Credit Cards to Help Your Small Business

2008-04-08T09:50:00.000-07:00

Business credit cards can be an easy and effective way to help you smooth out business expenses, build credit for larger loans, access various resources and gain substantial rewards. For those of you who plan to start a small business, you should know that raising capital can be difficult especially during the startup period. Some credit card companies are offering credit card programs geared to small businesses to help with expenses while also giving business oriented consumers rewards and benefits such as cash back, air miles, or discounts at certain business-related stores. If your new business will require trips across the nation, free air miles will certainly come in handy. And since you will probably be using your card for larger purchases than you would put on a personal card, you might even save up enough miles for a family vacation. Other like benefits include discounts at stores like Staples, Office Depot and FedEx for supplies, printing and other such expenses through a business credit card. Also some credit card companies also give customers reports on expenses, online banking and transfers, and free business checks. With a business credit card, your credit limit will be significantly higher as you will have more expenses on this card than on any personal card. This high limit gives for emergency expenses as the market changes, increased inventory purchases and cash advances from ATMs. While you are charging away on that line of business credit, you can keep track of spending more easily and efficiently which can help you budget month to month and file accurate tax returns. Business credit cards are also a great way to build additional business credit because they offer higher limits which can help your debt ratio.Another huge benefit from business lines of credit is that even though almost all of us have to sign as a personal guarantor, it should not show up on your personal credit report as long as payments are made on time. The better your personal history the higher available limits you can receive.To obtain a business credit card, you will need a tax ID number and your card will have your business name on it as well as your personal name, but it should not show up on your credit report or count against your credit score even if your business card has a high debt ratio.These cards can also help with obtaining larger loans for ambitious business ventures or other investments. By creating a relationship with your credit cards, you can sustain a healthy financial future and a better credit score. To learn more about how you can help increase your credit score, go to Financial Solution Services' website at FSSb2b.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE webinar by visiting UpcomingWebinars.

How College Students Can Build Credit and Get a Free Lunch

2008-04-08T09:24:00.000-07:00

Many credit card companies will team up with restaurants, pizzerias, sandwich shops, etc. around college campuses to offer students a free lunch for signing up for their credit card. These credit card offers are advertised as no obligation cards – meaning that a student can sign up for the card but has the option to not activate it. A free lunch and no obligation? Sounds great! Well, students should know by the time they get to college that There Is No Such Thing as Free Lunch!Every time you apply for new credit, a creditor will pull an inquiry to view your borrowing status, or credit score. Believe it or not, this will negatively affect your score for one year. It is one of businesses’ Catch-22s. In order to build credit and increase your score, you need to apply. However, applying for new credit will decrease your score a few points. As is the case with many financial endeavors, sometimes you must spend a little to get a lot. Compared to the other delinquencies that can hurt your credit score, an inquiry is a very minor blow and new credit will boost your score in the long run.Some of these credit card offers can really help a student start building credit. So if you want that “free lunch” and a credit card too, then go for it. But be sure this is the type of card that you want. Ask your parents or research on what types of APRs, benefits or payment plans would be good for you.If you start building good credit now, this “free lunch” will be the first of many. A good credit score can save you thousands of dollars in interest for when you apply for car, mortgage, or any other type of loans. My intention with this article is not to scare you away from these offers, but rather for you to use them to your benefit and not to continuously apply for cards that you will not use just to save those seven dollars on a pizza. To learn more about how you can help increase your credit score, go to Financial Solution Services' website at FSSb2b.com where you can find more great information on credit improvement. And, you are cordially invited to sign up for a FREE webinar by visiting UpcomingWebinars.