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Archive for the ‘Credit Tips’ Category

Yeah, its that time of year again. Where we sit back after Christmas and relax to enjoy the time off work and watch the kids play with the new toys.

Then a few days pass by and the mail comes once again… hmm.

“We spent how much?” Holy Cow!

That’s when it hits you… you are getting over your head and the bills are flooding in!

This is where the professionals of the Carolina Mortgage Connection can help. We can take the time to see if a Debt Consolidation loan would benefit you. In many cases, you coud use the equity in your home to eliminate the sea of debt and give yourself breathing room again.

But please, once you get this done, let’s also start a savings plan for next year so we don’t end up in such debt again! We want to be your lender for life, but not because of this type of cycle!

Apply now for a Debt Consolidation Loan and see if we can help you lower your monthly payments and get your head back above water!

In 2008, Fair Isaac Corp has announced that it will be changing the FICO credit scoring model. The new model, dubbed FICO 08, will make it easier on some and harder on others. Here are a few changes to expect:

• Bye Bye Authorized Users - In response to those that have charged up to $1,000 to add someone on their account to improve credit scores, authorized user accounts will no longer help boost credit scores. In fact, they could actually lower your score. No official word on this, but my expectation is that if MAJORITY of your credit is someone else’s credit, your score WILL reflect that. Also, if you are an authorized user on an account that is being sold for improving scores, expect to get hit hard! (again, no official word on that, but I expect this will be the case.)
• Occasional Slips Forgiven - So you have gone on forever making all your payments on time and then you have this one time late payment. Maybe it really got ”lost in the mail”, but the occasional random late may not hurt you quite as bad as it has recently. The word is that Fair Isaac is really trying to find out WHO is most likely to stop paying… the occasional late payment happens to most of us. But if most of your accounts are paid as agreed, the occasional late may not be such a big deal.
• Frequent Late Pays Hit Hardest - If you are late frequently, expect your score to be even worse that it was before. When this mew scoring model roles out, you will be penalized for constantly being late. The cure? Start making your payments EARLY and not waiting till the last minute.
• Variety is the Spice of Life (and now credit) - Those with a more diverse profile may see improvements. For example, someone with only 2 credit cards may not see the same gains as someone with a credit card, a loan, a car payment and a mortgage. I would still recommend credit cards for rebuilding as they do have a more instant impact on credit, however you will want to show more consitency across the board. One rule to remember… avoid Finance Companies if at all possible. They can still tend to hurt your score!

The bottom line is that lenders are more sensitive to risks right now and Fair Isaac is trying to help correct that. With other credit score models coming out, Fair Isaac wants to keep the FICO model on top of the market place. This new model will further seperate the good from the bad with little room in the middle.

If you do not understand how credit works, see a credit counselor immediately so that you can get yourself on top of things. Or, if you live in the Charlotte area, you can call me and I will try to help. If you are thinking about buying a home in Charlotte in the near future, start now by checking your credit profile and speak to a mortgage professional. You can never start that process too early!

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So you have saved at least a month’s worth of income. You are ready in case some quick emergency comes up. That is awesome! Now it’s time to attack!

It’s time to say goodbye to that debt!

While creating your savings, you found extra money somewhere. Its time to use that extra money to pay off the debt. But first you have to devise a plan of attack. Most “experts” agree that you should go after the highest rate card first. Again, I disagree with that. Don’t worry about the rate right now. I want you to focus on the amounts you owe.

Grab up all your bills. Sort them out…. let’s start with the revolving ones first. You know them best as credit cards. Today, we plan our attack on them. Right now I want you to list out the names and balances on a sheet of paper. Once you have done that, I want you to rank them in order starting with the SMALLEST BALANCE. That one will be #1. If you have 2 cards with the same amount, then focus on the one with the largest payment. That one would go before the other one.

Once you have numbered your order of attack, take the extra money you have been using to create your savings (not your savings itself!) and apply that money on top of your normal payment to work at paying off this first card. Once you have paid off that card, add the payment you had been making to that card and apply to card #2. Repeat until all are gone.

This is the best approach because it does 2 things. With every card you pay off, you feel a sense of accomplishment and hope that you will make it out. And, if something does come up that pauses your efforts, you will have less payments to make in a shorter period of time so you still feel like you are getting somewhere, even when you have to focus on savings again.

One note. When you pay off these cards, do not close the accounts. We will talk about what is next, but you will need them open. If you must put them up so you are not tempted to use them, that is fine. You can even cut the physical card, but do not call them to close any open accounts. You will see why soon.

I am excited for you in your plan of attack. Be patient. You did not get here overnight, and it will take time to dig out. But with a good plan of atack, you will get there faster than you think!

This is for the majority of us that live paycheck to paycheck, have little or no real savings and are in debt.

If you have a large IRA and major investments, you already know how to manage this thing we call money. If missing 2 weeks of work might cause your power bill to go out, you are not managing money well, even if you always make your payments. You are hanging on.

Many “experts” tell you to hurry up and pay down your debt now! I disagree. If you do not have a savings set up, paying off your debt first will become something that will defeat you long term. Consider this… You have $5000 on a credit card and bust your tail to pay if down. You finally get the balance paid down to only $2,500 and feeling great! Then the car needs repairs and since you have no savings, you need to use the credit card. Right back to $5000 and you feel defeated! All that work and you are right back to where you started!

If you had saved $5000 first, when the repairs were needed you would have had the cash to pay for them. Sure you may have had to put the debt reduction on hold until you rebuilt your savings, but knowing you only owe $2500 on that card still offers a mental reward. Add to that the fact that your minimum monthly payment on that credit card is half of what it once was, you can boost the saving up quicker and the go back to attcking your debt!