What is a FICO score?
August 19, 2008
FICO comes from the Fair Isaac Company, which came up with the process of condensing all of your credit information into one three-digit number.
Three major credit bureaus hold your FICO score; Equifax, TransUnion, and Experian, and each calculate it a little different than the others. Should you wish to dispute a mark on your credit report from one of the three bureaus you can write to them like I have done previously (see below for address information).
Equifax Information Services
P O BOX 740256
Atlanta, GA 30374
800-997-2493
TransUnion
Customer Disclosure Center
Trans Union Consumer Relations
PO Box 2000
Chester, PA 19022-2000
800-888-4213
Experian
NCAC
PO Box 9556
Allen TX 75013
888-397-3742
Your FICO score is used in determining your interest rate, and is even used as a barometer for getting a job. FICO scores range between 300 and 850. Ratings are as follows:
Excellent: Over 750
Very Good: 720 or more
Acceptable: 660 to 720
Uncertain: 620 to 660
Risky: less than 620
The formula used to calculate your FICO score includes information based on several factors:
~ 35% on your payment history
~ 30% on the amount you currently owe lenders
~ 15% on the length of your credit history
~ 10% on the number of new credit accounts you’ve opened or applied for (fewer is better)
~ 10% on the mix of credit accounts you have (mortgages, credit cards, installment loans, etc.)
Now that you know what your FICO score is and how it is calculated you’ll want to work on getting it as high as possible. I’ll be offering some tips in the coming weeks!
For more information about credit or to apply for a credit card (click here).
Private Loan Consolidation
August 14, 2008
Consolidation is a great debt management tool. It allows you more time to repay your loan(s). You can generally extend your loan terms out to 25 or 30 years from the initial 10-year marker, which means you can dramatically lower your monthly payment.
Another good thing these days are the lower interest rates. When the economy is slumping interest rates tend to get cut. As a byproduct of these rate cuts (lower interest rates) you the consumer benefit, which is why it’s a great time to consolidate your private student loans.
With one convenient low payment, no prepayment penalties, and lower interest rates it is the perfect time to consolidate.
If you are seeking private loan consolidation (click here).
The Adjustable Rate Mortgage
August 13, 2008
If you have entered into the mortgage process then you now realize that it is much more involved than you might have thought. You have the decision of whether you would like an adjustable rate mortgage or a fixed rate mortgage. The decision of choosing one of these is up to you, so make sure that you choose wisely. The following is a bit about an adjustable rate mortgage and how it could work out for you. Be familiar with every aspect possible in order to make that informed decision. You are only cheating yourself if you do not take your time and learn what you can do in this process.
What are the Details?
When you choose an adjustable rate mortgage (ARM) then you are opting for an interest rate that will not remain steady. With a fixed rate you get one interest rate that remains the same for the entire mortgage. When you choose an ARM, you are choosing to take the national interest rate. This means that you can have a low interest rate one month, but then can see a rise the next month. If you want to risk it a bit and try to save more money, then an ARM is not bad, just know that you could end up paying much more over the course of your mortgage. This is the main thing that you must know about when choosing the style of interest.
The Indexes Used
When you choose an adjustable rate mortgage you will link your interest rate to one of the following three indexes. The London Interbank Offered Rate (LIBOR) is the standard index that international banks will use when charging. The Weekly Constant Maturity Yield on One-Year Treasury Bill is tracked by the Federal Reserve Board and are based on yield debt securities paid by the U.S. Treasury. The 11th District Cost of Funds Index is based on interest that the financial institution in the West U. S. are paying on their held deposits.
Different Opportunities
Many people decide to choose an adjustable rate mortgage because they have the ability to choose many different ways to carry out their process. Sometimes you could even find that you could convert your ARM to a fixed rate for a fee if needed. You could try different types of interest only loans, and see if that will work out for you. You must make sure your read through what is expected of you though because most people find that their adjustable rate mortgage is more difficult to understand then a fixed rate would be.
Additional Resources:
No TagsWhich Mortgage Loan Suits You Best?
August 11, 2008
When you make the decision to tap into your home equity, there are many options available to do this. Home equity and its value are thought of as illiquid, meaning you can’t move them from one place to another as you can say with cash. If you want to utilize your home’s value, tapping into your home equity is essential. The most common ways people utilize their home equity are through traditional home equity loans or home equity lines of credit. Each loan type has its own pros and cons and it is up to you to determine which one fits your needs.
Traditional Home Equity Loan
The traditional home equity loan is often called a fixed-rate home equity loan because the APR is set and will remain the same throughout the life of the loan. This type of loan generally provides the borrower with a set amount of cash to be used for a variety of purposes. While the APR will be higher than the original mortgage rate, borrowers typically find it useful for paying off credit cards because the interest rate is usually lower. You can borrow up to 100,000 dollars with this type of loan.
Home Equity Line of Credit
This type of loan is often referred to as a HELOC. This loan operates more like a credit card and can be good for consumers who may need multiple infusions of cash over a period of time. Sometimes they actually come with credit cards. Consumers often use this for paying biannual tuition fees, annual trips, and the like. The interest rate on this type of loan is variable and will go up and down just like a credit card. The major difference is that a HELOC has a fixed term and the loan must be paid in full by the end of the term. Some consumers find this to be the most difficult part and are unprepared for the huge amount due at the end of the HELOC term.
Choose What is Right for You
Try to create a financial plan for yourself and your home equity loan. Envision what you need and want to get out of your loan. After you examine all the aspects of your financial needs and future, decide on which type of home equity loan will be right for you. Remember, home equity lines of credit are useful if you are going to need multiple infusions of cash over time. This would be a cheaper option than taking out multiple fixed rate loans. However if you have a one time expense, such as paying off credit cards or a home improvement project, the fixed-rate loan may be the best option for you. Make sure you think of all the expenses that you may need to cover so you make the right decision and take out enough money to cover everything that you plan to pay for with the loan.
Additional Resources
No TagsUnderstanding the Closing Process
April 23, 2008
After you’ve gone through the grueling mortgage process, you’ll eventually reach that day everyone involved has been waiting for - the day you close. The closing process basically involves all of the parties signing the final documents and officially transferring ownership of the property to you. Closing fees are typically collected here and the transaction is essentially complete. Here’s an idea of what you’ll need on the day of closing and what to expect.
What You Should Bring
- Contract
- Home appraisal and inspection reports
- Good faith estimate
- Flood certification
- Homeowner’s insurance and mortgage insurance if required
Main Purpose of Closing
Sign legal documents: There are several important documents you’ll have to sign here, such as the transfer of ownership of the property and your mortgage terms from you lender. Read all of the documents carefully and make sure they are in line with what you had previously agreed upon. Remember that you can delay closing if necessary.
Pay closing costs and escrow: Now will be the time to pay the fees associated with closing your mortgage. The fees may already be included in your mortgage, you might have a separate loan for them, or they could be paid out of pocket.
Who’ll be there?
- You, and your spouse if they’re involved with the transaction
- Your attorney (not always necessary, but can help you through the process)
- The lender
- The title company’s representative
- Real estate agent, if one was used
- Closing agent
After you’ve completed the closing process, you’ll officially have ownership of the home and the mortgage process will be complete!
Related:
Mortgage, mortgage basics, mortgage closing, mortgage closing process, mortgage questions, mortgages, understanding the closing processLoan Calculator
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