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Posts Tagged ‘FICO’

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Historically Low Mortgage Rates Are A Golden Opportunity

March 26th, 2009 by Matthew C. Keegan | 2 Comments | Filed in Home Buying, Home Financing

You hate to tell someone that this could be a “once in a lifetime opportunity” but in the case of mortgage rates that statement may very well hold true.

mortgage chimneyHome buyers and current owners who want to refinance their homes should take note of a critical line that was recently crossed – the interest rate on thirty-year fixed mortgages has dropped below five percent for people who have very good credit. Coupled with an $8000 first time home buyers credit from the federal government, things are suddenly looking a lot better during this spring home buying season.

Rates Have Been Dropping Since November

Interest rates began their gradual decline last November when the Federal Reserve decided to push down mortgage rates. Moreover, last week the Federal Reserve promised to spend as much as $1.25 trillion to buy mortgage securities this year. The Fed is also purchasing long-term Treasury bonds in a bid to push down rates on those securities, whose valuation affects mortgage rates.

For the person who has a fixed rate home loan of 6% and an outstanding balance of $200,000, refinancing at 4.7% could see their monthly mortgage payment drop from $1199.10/month to $1037.28, a savings of just over $160/month or about $1940 a year.

Closing Costs and Your Loan

Keep in mind that if you choose to refinance, closing costs may apply. When rates were higher, some lenders absorbed or reduced these costs but the trend today is for homeowners to shoulder at least a part of those costs. This means that it could take a year or two for you to realize savings with your new mortgage, but that shouldn’t be a problem for the person who plans to stay put for the long term.

No one is quite certain for how long mortgages will stay at historically low rates, though some predict that they should last through the summer. Most likely by next spring rates will begin to climb as the full force of the federal governments multi-trillion dollar spending spree kicks in. When that happens mostly everyone agrees that inflation will return, sending interest rates higher perhaps for many years.

So if you’re planning to buy a home or refinance your current mortgage, you’ll want to act as soon as possible. Oh, by the way, make sure that you check your FICO score first to see if you’ll qualify for the best loan available.


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Your FICO Score Gets A Makeover

January 30th, 2009 by Matthew C. Keegan | 5 Comments | Filed in Consumer Tips, Credit Reports, Home Improvement

In life, there are two things you can be certain about: death and taxes. While you only die once, you’ll be paying taxes over and over and over again. Sometimes death can seem more appealing than the two!

Your Credit Score, Courtesy of Fair Isaac

Mortgage ApplicationAnother certainty in this life, at least to for the American consumer, is their credit score – what is known as a FICO score. The Fair Isaac Corporation score is used by the three major credit reporting bureaus which are: TransUnion, Equifax, and Experian. That score will help lenders determine whether you will receive credit and, if so, at what terms. The higher your score, the better the chance you’ll be approved for a loan and at a favorable rate.

This week, Fair Isaac rolled out a modified version of their credit score, this one dubbed FICO 08. TransUnion is the first of the credit reporting bureaus who will use the new FICO method for calculating credit scores followed by Equifax in the second quarter. Experian is currently in litigation with Fair Isaac over another matter, so we don’t know when they’ll include with the new methodology.

More Accurate Predictor of Problem Borrowers

Supposedly, the new score will be an improvement over the way that the old one was calculated, as it will help creditors do a better job of predicting borrower defaults. In addition, it will be more forgiving of one time slip ups, but it will come down harder on repeat offenders. Scores will still range from 300 to 850 and Fair Isaac is expecting an improvement in lending decisions by as much as 15%.

Consumers may not notice much of a change for awhile, especially as many lenders use the score as only part of their methodology for determining whom they will lend to and for what terms. Some analysts believe that many mortgage lenders will not use the new calculation method until all three credit reporting bureaus are using it. Oftentimes, lenders will obtain credit scores from all three to determine one median score.

Get Your Free Credit Reports

For consumers, now is a good time to pull your credit reports to see if they are accurate and correctly reflect your personal information. Mistakes can impact your credit score, but they generally will only be fixed if you catch them. Thanks to an act of Congress, you can get free copies of all three credit reports at www.annualcreditreport.com. If you want you credit score you’ll pay a nominal fee for that service, something you can do when you order your reports.

Resources

Check Your Credit

Federal Trade Commission

Financing Tips


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Fair Isaac and Your Credit Score

January 2nd, 2009 by Matthew C. Keegan | 5 Comments | Filed in Consumer Financing, Consumer Tips, Credit Reports

A new year means you should keep tabs on your credit history (reports and scores).

As the new year unfolds, they’ll be many things on your mind. Will the economy worsen? Will President Obama offer a huge stimulus package? How bad is the job market likely to be in 2009?

credit reportThose questions cannot be answered in advance, it’ll take the better part of the year to find out what direction our country is headed. Other forces such as a regional war, natural calamity, terrorist attack or some unforeseen problem may also loom large, events which can shake the world to its very core. Clearly, gloominess is pervasive and there isn’t a whole lot we can do about it.

On a personal level, one area where you have at least some control is your credit. Specifically, your credit reports and your credit score. If you don’t already do it, you can obtain free copies of your credit reports from Equifax, Experian, and TransUnion once annually. A government mandated website has been set up where you can gain access to these reports at www.annualcreditreport.com. Get your copies, review your reports and correct whatever errors you find.

Your credit score, which is separate (and will cost you a fee ranging from $5 to $8) is derived from your credit reports so if you’re planning to apply for credit at some point during 2009, you’ll want to make sure your reports are in order. Remember: the higher your credit score, the more likely you’ll receive a loan and obtain a favorable interest rate and other loan terms.

What Goes Into Your Credit Score

Knowing what goes into building your credit score goes a long way to helping you understand how your credit score is calculated. Quite simply, there are five components to your score weighted as follows:

Payment History (35%) — Lenders who report their information to at least one of the three credit reporting agencies let them know whether you pay on time or not. Late payments can work against you, weighing in as a significant chunk of your credit score.

Credit Limits (30%) – Large balances on credit lines (credit cards, equity loans, etc.) can reduce your score. The higher the balance, the lower the score.

Credit History (15%) — The longer you have had credit, the better for you. Specifically, if you have loans and lines of credit dating back for many years, that information is beneficial to creditors when they decide whether to lend to you, for how long, and at what interest rate.

New Credit (10%) — Recently opened accounts can actually work against you. If you apply and receive several new credit cards in a short period of time, then your score will be lower.

Types of Credit (10%) — What kinds of outstanding loans do you have? That mixture which could include credit cards, cash advances, students loans, an auto loan, a home mortgage, etc. can also impact your credit score.

The total number for your credit score is known as your FICO (Fair Isaac Corporation) score and it’ll range between 300 and 850. Though your social security number is one of the most important numbers you have, your FICO score is too as it can impact your lifestyle as you seek to buy a new car, pay for college, buy a home, etc.

As mentioned, you cannot control the big picture (national and global events) but by getting copies of your credit reports and obtaining your credit score, you can take care of personal business – an excellent resolution for the new year!


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You Can Raise Your FICO Credit Score!

September 9th, 2008 by Matthew C. Keegan | 1 Comment | Filed in Consumer Financing, Consumer Tips, Credit Cards, Credit Reports

FICO, which stands for Fair Isaac Corporation, is a term which describes your personal credit score. That score is used by lenders who will determine if you qualify for a loan and the interest rate you’ll credit cards
charged as well as the length of your loan. The higher your score, the more likely you’ll be approved for a consumer loan and receive favorable terms.

In these pressing economic times, not everyone has a good FICO credit score, which can be especially problematic if you need to apply for a consumer loan. Whether seeking a mortgage, a home equity loan/line of credit, car loan, credit card, or some other type of loan, you need to get the highest score possible.

Raise Your FICO Credit Score Step By Step

Fortunately, you can raise your score and see significant results within 2-3 months time. If you plan on applying for a loan some time over the next few months, the following steps can help you improve your FICO credit score:

Shrink those balances: You don’t have to pay off your credit cards, but running big balances is a red flag to creditors. Work on reducing your debt, a step which will gradually raise your credit score.

Don’t apply for too many loans: You may have unwittingly caused your credit score to drop by applying for too many loans in a short period of time. This can happen if you are planning to shop for a new car and are arranging your own financing. By applying to several different lending institutions for the sake of finding the best deal, you’ll be shooting up another warning flag to creditors. Find out the rate first, then apply.

Remedy credit problems: If you’ve been late making payments in the past, then your score will take a hit. Make payments on time and pay more than the minimum amount due each month. Get free copies of your credit reports and check them for errors; notify the credit reporting agencies if you find mistakes. They are required by law to fix mistakes within thirty days or that information must be automatically removed from your credit report.

Keep consumer accounts open: Odd as it may sound, closing a credit card or other consumer account will negatively impact your credit score. Simply tuck your unused credit cards away in a safe place and don’t use them again. You can gradually close them after you secure new credit, especially if you have no plans to borrow again in the near future.

More accounts means a reduced score: Opening more accounts will work against you. Only open up enough consumer accounts as needed.

Consider NOT moving your money around: Consumers have gotten into the habit of shifting outstanding balances from one account to another, but that move can actually reduce your credit score. Consolidating your balances to one account may cause your credit score to drop.

Building a good credit history is an achievable and laudable goal for any consumer. Take care of your credit score and your credit score will take care of  you in the form of favorable lending terms for your next consumer lending opportunity.


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