It’s a new decade, and you have the gigantic goal to purchase your first home by the end of the year. But you worry about your credit score. What if you can’t get a reasonable interest rate for a home loan? Is it really possible to purchase a new home this year?
Well, put those fears to rest, because with some dedication, a clear plan of action, and maybe a little help from a credit repair company, you definitely could be handed the keys to your first home in 2020.
Keep reading to see how you can make your homeowner dream come true!
A Good Credit Score Is Important When Buying a Home
The essential first step in purchasing a home is making sure that your credit score is as healthy as possible. Your credit score is the foundational piece of information that determines the interest rate you’ll pay on a mortgage. It provides essential information to your lenders about how responsible you are with your money.
A high credit score shows that you’re more accountable and that you have a consistent history of paying your bills and debts on time. A lower credit score, however, is a red flag for most lenders and is considered a red flag.
If you have a lower credit score, and you are approved for a home loan, you’ll probably have a higher interest rate because lenders see you as a liability.
The baseline credit score for obtaining a mortgage will vary from lender to lender. Generally speaking, any score that is in the 700s or higher is considered excellent.
Why does this matter?
High scores get the lowest interest rate available in the market. When it comes to determining how risky you are as a borrower, however, the minimum score differs from. Some lenders have a baseline of 660, while others have 640 or 620.
Your credit score is lower than 700, that doesn’t mean homeownership is out of your reach.
There are still a variety of other mortgage programs through the Federal Housing Association (FHA) and Veteran Affairs (VA), which provide more flexible requirements to help you purchase a home. These programs are for borrowers with scores as low as 580 in some cases.
How to Buy a House with Bad Credit
If your credit isn’t good, your dreams of homeownership aren’t completely gone. Here are a few steps you can take to regain control of your credit and reach your goals.
Get Your Credit Report
Before you can work on repairing and raising your credit score, you need to understand your current state and what’s affecting it. You are entitled to a free credit report from all three major credit bureaus every year so that you can take a look at what your current status is.
This report includes your personal information, payment history to all your creditors and debts, and whether or not you’ve ever filed for bankruptcy. Review your report, and if you find any errors, you should work to fix them immediately.
A credit repair firm may be a good investment in this case. They are professionals at helping consumers remove and correct inaccuracies quickly and correctly.
Start Saving for a Down Payment
No matter which lender you go with, you’ll more than likely need to put a downpayment when you get a mortgage. Saving for a down payment is one of the best ways to show lenders that you’re serious about purchasing a home, and also that you’re responsible enough with money to save a significant amount.
This is especially important if you have bad credit. If your credit is less than stellar, consider setting aside a larger down payment. Putting a more substantial chunk of change down can help you get a better mortgage rate, too, since you’re borrowing less.
There are a variety of mortgages that will accept down payments for as low as 3.5%, but you should still aim for higher if you can.
Apply for FHA or Low-Credit Loans
If your credit is below the threshold that most private lenders will accept, consider looking into an FHA loan.
The Federal Housing Administration provides a few different options for prospective homeowners that may have challenging financial histories to obtain a private mortgage. Many borrowers can qualify for a mortgage through these programs with a credit score of 580 plus a 3.5% down payment.
There are a few things you should know about going through an FHA program to get a mortgage:
All FHA loans require you to pay mortgage insurance, which is a premium that’s added to your home loan, throughout the lifetime of the loan. Mortgage insurance provides peace-of-mind for the lender because it protects them if you stop making your mortgage payments. Currently, the mortgage insurance premium on an FHA loan is 1.75% upfront and then 0.7% to 0.85% annually.
You’re a veteran, you should also consider looking into VA loans. The VA doesn’t set a minimum credit score, but they do prefer to have borrowers with at least a 620.
Both the VA and FHA mortgage programs provide borrowers with challenging credit scores a path to homeownership.
Rebuild Your Credit
If you do find yourself unable to qualify for a loan, you’ll need to concentrate on taking steps to become more creditworthy to prospective lenders. Take a detailed look at your credit report again and try to identify what is impacting your score.
For example, if you have a very high debt-to-income ratio, you can improve that by paying off high-interest debts first. However, if you’re stuck and don’t know how even to attempt to repair your credit, the best thing you can do is to hire a credit repair company.
Their job is to help you by creating a detailed, personalized plan to help you get your credit back on track. With their expertise, you’ll know precisely what you need to do to get your credit back up to par, and realize your dreams of homeownership in no time!
The path to financial freedom and homeownership isn’t out of your reach, no matter what your current credit situation is. Awareness is the first step in making any changes, and knowing where you stand now gives you the ability to create a pathway to the future.
And if you want a detailed, expert plan to change your credit situation, hiring a credit repair company is one of the best things you can do.
Don’t wait until it’s too late and make your dreams of homeownership come true!
With a new year and a new decade just right around the corner, have you started thinking about your finances? While you’re setting your new years’ resolutions, it’s essential to take into consideration your financial goals too.
Building a financial foundation is crucial, and affects everything we do from buying a car or a home to signing a new apartment lease, plus the peace of mind knowing that you can cover unexpected expenses.
If you’ve thought about improving your financial standing for the future, 2020 is the year to start! Here are some tips to help you develop goals and put you on track to financial freedom!
Where Do I Begin?
The first step in developing a plan for financial freedom is to look at where you are today. How can you know where you need to go if you don’t know where your finances stand currently?
You need to know what your spending habits are, and how you can improve upon them or change them to meet your new goals. Start by reviewing your spending throughout 2019 by looking over your credit card and bank statements.
When you’re evaluating your spending, ask yourself the following questions:
How much did I spend on necessities?
How much did I spend on extras?
Where is it obvious that I’m overspending?
What do my savings look like compared to my spending?
Did I make purchases I don’t even remember buying?
By reflecting on your spending over the past year, you’ll start to see where you may have been overspending and what things you can cut out to direct that money towards your goals.
If you spent a considerable amount of money on eating out, think about ways you can curtail that spending by meal prepping for the week ahead.
Steps to Prepare for Financial Freedom in 2020
Now that you have a picture of your current spending habits, and where your money is going, you can start looking at how you can change your practices to move towards your goals. Financial freedom isn’t a pipedream.
Still, it will take some budgeting, planning, and actively pursuing resources that can help you along the way.
Refine Your Budget
Creating a budget and sticking to it, is the first step in getting your finances under your control. Start by finding out your fixed and variable expenses.
Fixed expenses are things like rent or mortgage payments, your cellphone bill, monthly subscription services like Netflix or a gym membership. Variable costs fluctuate from month to month and can include things like your groceries and toiletries.
It’s important to get actual amounts for this exercise, not estimates.
You’ll also want to develop a savings goal at this point, that is in line with your financial goals. Think about setting up an emergency fund because it’s always a good idea to have money in case something comes up unexpectedly.
Take your monthly income and subtract your fixed expenses and varied expenses, as well as what you’ve decided to put towards your savings goal and emergency fund. What’s leftover is what you have left for “fun things” like entertainment, going out to eat, or purchasing things you don’t need, but just want.
Congratulations! You now have a budget!
Now make sure that you keep it easily accessible so that you can refer to it and track your expenses against what you’ve budgeted. A simple spreadsheet works for this.
There are a ton of apps out there that allow you to do this as well, and if that’s easier for you, you can check one of those out.
Check Your Credit
When you’re building financial goals, usually there is a reason behind them like a large purchase. Whether you want to buy a house or a car, or even start your own business, you’ll need to make sure that your credit history is up to par.
Your credit score tells a prospective lender whether or not you are responsible with your money, and is a requirement when applying for a mortgage or car loan.
To find out where your credit stands, request a free credit report online, and review it carefully. Check your history for any errors, and if you find them, address them immediately. The longer they stay on your report, the harder it is to get them off.
You’ll also want to check your credit score as well, as this is the first thing a lender will see when they pull your report. Credit scores can range anywhere from 300 to 850. You’ll want to get your score as close to 700 or above as you can. The better your score, the more likely a lender will offer you a line of credit, and you’ll get better interest rates.
Hire A Credit Repair Company
If dealing with your credit report errors and getting your score up seems overwhelming to you, it’s a good idea to look into hiring a credit repair company. A credit repair company can improve your credit and deal with inaccuracies and errors in your report for you.
You have outstanding debts that you need to address, a credit repair company can work with you and your budget to come up with a detailed plan to get your credit score back on track. They have the resources and expertise to handle these issues for you, and they can get it done quickly.
Should your credit history needs a facelift, a credit repair company can definitely help you get there and is an investment towards achieving financial freedom!
Practice Mindful Spending
If you have significant financial goals set for yourself, you’ll need to start being mindful of how you spend your money. This means that you need to identify the differences between your needs and wants.
Your needs are necessary for your survival, like food and shelter. Wants, on the other hand, are “nice-to-haves” and include things like a nice car, a vacation, or that pair of killer stilettos that you don’t have many places to wear them to, but want them anyway.
For many of us, the line between wants and needs often blurs.
For example, if you’re going to a wedding, you may think you need to buy a new dress or suit, even though you have a closet full of outfits that you can wear. By practicing critical thinking about our needs and wants, and evaluating necessity versus nice-to-haves, you’ll find ways where you can save money.
Outside of your needs and wants, also practice mindfulness when it comes to buying things for other people. There’s no need to go overboard with holiday spending.
Most of your family and friends just want to enjoy your company, and while it’s nice and feels good to give gifts during the holiday season, it truly is the thought – not the price tag – that counts!
Ditch Your Debt
No matter how you slice it, getting rid of your debt is always a good thing to do. The quicker you can pay off your debt, the faster you can start putting that money towards achieving your financial future.
To give you an idea of how much money you can free up by paying off your debts, take a look at how much you pay each month for credit card bills, student loans, and other outstanding debts like car loans.
If you can free up that money and put it towards securing your financial foundation, you’ll be well on your way to achieving your goals.
Attack your debt by prioritizing those with the highest interest rate. You’ll end up saving more money by paying less interest on your outstanding debts. Sometimes, it takes longer to see the results of doing this, but don’t get discouraged.
Adding just an extra $100 towards your highest interest debt each month brings you $12,000 closer to paying it off at the end of the year!
Save For A Rainy Day
One thing that every personal finance expert includes in their suggestions to those aspiring toward financial freedom is to build up your savings. This helps you build a stable emergency fund if the unexpected occurs.
If you’re not a natural saver, this can be tricky to navigate. Fortunately, there are apps that allow you to round up each purchase you make on your debit card to the nearest dollar. It can automatically deposit that amount into a savings account or invest it for you.
It happens behind the scenes, and you don’t even have to think about it automatically putting money into your savings. You’ll be surprised how quickly spare change can add up!
There is always room for improvement on the road to financial freedom, and 2020 can be the year that you achieve that. These tips are meant as a starting point for you to get an idea of what it will look like to get yourself on-track and on-budget.
If you would like expert advice and a clearly defined plan that’s personalized for you and your specific goals, consider contacting a credit repair company. They have the know-how to help you identify critical areas that you should concentrate on, come up with a budget, and provide you with a detailed plan on how to move forward.
Put your best foot forward, and invest in your financial freedom for this new decade ahead!
Have you ever seen that episode of Black Mirror where the number of followers you have on social media determined whether you could purchase a car or be accepted into a prestigious apartment complex? This is essentially how credit scores work.
A credit score can help you get a loan, buy a car, or rent a condo. If you have poor credit, this could close a lot of doors for you and affect your financial freedom.
Maintaining good financial standing is no easy feat. The slightest dip can affect you in unforeseen ways. What’s worse, you might be scratching your head in confusion over why your score dropped and what you can do to boost it back up.
Let’s go through some factors as to why your credit score has dropped and what you can do to repair your score. Don’t fret, while the idea of a poor credit score may seem scary, you are in control of it and this article will help you understand why and how.
What are the Reasons Why Your Credit Score Dropped?
You Missed a Payment/Are Late on a Payment
Life gets in the way. While you are pretty consistent when it comes to making your payments on time, there are some months where you either forget because you’re so busy or other financial obligations require you to skip a payment. This can cause a dip in your credit score as late payments make up a large portion of your credit score.
Your Credit Card Limit Was Lowered
Credit card companies reserve the right to lower your credit line, especially if you’ve made a habit of being late on payments. Something like this can explain the drop in your credit score as it will increase your debt-to-credit ratio.
It’s recommended to keep this to 30% of your credit limit and under.
You’ve Closed a Credit Card Recently
While you may have cut up a card and said that you were done with your addiction to shopping, closing an account doesn’t always work in your favor. It’s an incorrect state of mind to think that closing a credit card will benefit you.
This may sound crazy, but the best thing to do is to pay off your credit card entirely and keep the account open. Put your card in a drawer or use it very sparingly.
Did You Apply for New Credit?
If you’ve applied for a new credit card, a home loan, or any sort of loan, this can cause your credit score to drop. It’s unfortunate, but it happens.
When a card issuer assesses your credit report, this is known as a “hard pull.” Unfortunately, this can lead to a slight drop in your credit score, whether you are approved or not for the credit card.
Made a Large Purchase
While you are given a maximum amount on your credit line, it’s never good to max out your credit card or come close to it. Especially if you’ve made a single large purchase.
This shows that you are not utilizing your card properly and can sometimes communicate to credit bureaus that you have no intention of paying your credit card off or it could be difficult to pay off in a timely manner.
Identify Theft Can Hurt Your Score
While you may think to yourself ‘I didn’t make these purchases, someone else did’, you could still end up paying for these fraudulent charges. Identity theft drops your credit score. Regularly check your account regularly to ensure all of the purchases on your card was actually made by you.
Did You Pay Off a Loan?
I know what you’re thinking. You just paid off a loan early. You accomplished a longtime goal. Job well done! You no longer have to worry about holding the weight of that burden on your shoulders. Something like this can cause your credit score to drop.
Credit Report Errors
In the end, people and technology are flawed. Mistakes happen. If an error occurs, even when it’s ultimately not your doing, your credit score can be negatively impacted. It’s frustrating, especially when you have been doing so well in maintaining a good credit standing.
Paying an installment loan off early won’t necessarily improve your credit score, and keeping it open for the life of the loan may be a better strategy.
How Can You Raise Your Credit?
So, your credit score is not where you envisioned it would be. As we said before, there is no reason to panic. Do not reserve yourself to thinking that you will always be at this score for the rest of your life.
No brand new car. No nice house in the suburbs. You can raise your credit score, and in this section, we will be going over how to do just that because it is possible.
Make On-Time Payments
This point is a little bit of ‘hitting the nail on the head,’ but if it wasn’t obvious already, you should try your best to make your payments on time everytime. Even if you pay $5 more than the minimum and go at a steady pace for a while, it is better to make your payments on time instead of letting your payments build up.
Don’t Use Your Credit Card Too Much
The idea of a credit card is tempting. You don’t have enough money in your bank account for those new pair of shoes, but you have room on your credit card.
So, you get the shoes. Then you get a jacket. Then you pay for a fancy meal out with friends.
Overusing your card on a very consistent basis is not good, so make sure you are aware of how often you swipe that card.
Don’t Close Your Credit Cards
As mentioned before, it may seem like a good idea to close a credit card and not tempt yourself. You are doing more harm than good this way. Keep your credit card open and be mindful of when you should and when you shouldn’t use it.
Raise Red Flags on Credit Report Errors
If you see something on your credit report that doesn’t look right, don’t let it just sit there and fester. Dispute this error before it can affect your credit score too badly.
Don’t Apply for a Loan
While you are trying to raise your credit score, do not apply for a loan. This may seem like a viable solution for helping you escape your credit card debt, but you will drop your score by doing so. While you are looking to boost your score and pay off debts, hold off on any loans.
Request A Credit Line Increase
As mentioned earlier, maxing out your credit card is no bueno. You may feel like requesting a credit line increase is tempting, but you may want to take advantage of the opportunity. By doing so, your credit card balance will be further away from the maximum and not threatening to drop your score.
Bring in a Credit Repair Company
When you feel like you are unsure of how to go about raising your credit score, then it’s time to bring in a credit repair company. These are the experts who do this for a living.
While you may feel like you are out of options and your wheels are just spinning in place, a credit repair company will devise a customized solution to fit your exact needs and help you move forward. These experts will get you back on track and you can take a big sigh of relief.
When it comes to improving your credit score, remember that it is not a sprint, but a marathon. It will take some time to see results, which could be discouraging, but should actually be promising.
You should know that while you may not see changes right away, you are taking the right steps that will pay off in the end. With the help of the tips listed above, along with a credit repair company, you will be on your way to a fixed credit score and leaving bad credit behind.
Almost everyone needs a car in our daily lives whether to take you to work or to drive your kids to school. In most cities, it is essential to getting from point A to point B. If you don’t have one yet, you might be wondering whether it’s better to lease or buy one outright.
However, before making any large purchases like a vehicle, it’s helpful to know your credit score so you can find out what kind of loan you can get approved for and what kind of interest rate you will be dealing with.
In this article, we look at the credit scores you need to lease or purchase a vehicle so you can better plan to get your dream car.
What Credit Score You Need To Lease A Car
Stated by a credit repair Dallas expert, the advantages of leasing a car versus buying one outright are that you generally get lower monthly payments. Some experts say you can get anywhere from 30% to 60% lower payments versus buying a car. Another big advantage is that you have warranty protection for the entire time you drive the car.
Leasing a vehicle is like buying because you still need a decent credit score. According toNerdwallet, “the average score for customers staring a new lease was 722. If your score is 680 or above, you’ll likely have attractive offers.”
Credit scores above 740 are considered excellent by lenders, and those with scores 740 and over get the best rates and deals regardless of whether they purchase or lease.
But, what if your score isn’t so hot?
Well, according toLeaseGuide.com, if you have a score between 620-679, you’re still in the ballpark for getting a lease. However, while you’re more than likely to be approved with those numbers, you may get a higher interest rate.
Now, if your score is below 619, it’s considered ‘sub-prime’ or fair credit. If you have a score in this range, you may or may not get accepted to lease. And if you do, you’ll likely pay a high-interest rate.
If you have a sub-prime score, you’re better off taking a few months to improve that number before you go shopping for a new vehicle, if you can. Keep in mind that lease requirements always change and vary among auto manufacturers. It’s important to note that market conditions play a factor in whether or not you get approved depending on your score.
Credit Score For Buying A Car
Buying a car has its own advantages over leasing. While you do pay higher monthly payments, you have the benefit of owning a vehicle when you’ve paid it off, and can sell the vehicle when you choose to get another one.
Also, you have the advantage of being able to modify the vehicle if you want without the fear of breaking a contract.
But buying a car is similar to leasing because you still need to have a decent credit score to get a loan. Again, according to Nerdwallet.com, “the average credit score to buy a new car is 713; it’s 656 for a used-car loan.”
If your score is in the low 700s or below, expect to have a difficult time getting a loan. You’ll probably have to answer questions about negative entries in your credit report and have to jump through hoops to prove your income and verify payment history.
While it’s possible to get an auto loan with bad credit, which is defined as a score below 600, it’s unlikely. And if you do get approved, you’ll pay very high-interest rates.
As with leasing, if your credit score is bad, you’re better off spending six months to a year rebuilding your credit score back up if you can afford to wait.
How To Improve Your Credit Score
As you can see, having a good credit score is essential to getting good terms on a lease or car purchase. But if you have less than perfect credit, all hope isn’t lost. There are steps you can take to beef up your score and it doesn’t take as long as you may think.
To know what your credit score means, it’s helpful to know how that number is calculated. Credit scores are three-digit numbers that help lenders know how credit-worthy you are. There’s no uniform algorithm that’s used by everyone, which is why you may have different scores from different reporting agencies.
Credit reporting agencies look at a variety of factors to come up with that number, including your payment history, your credit usage, whether your accounts are delinquent, etc.
First and foremost:
The number one thing you can do to improve your score right away is to make your payments on time from now on. Your payment history is the biggest factor that goes into your credit score.
Even if you’ve been late before, start making every payment on time even if it’s the minimum.
The next thing you can do to improve your credit score is to pay off your debts and credit cards. The debt to credit ratio or credit utilization ratio is the second biggest factor that goes into your credit score. Do everything you can to bring down those credit card and loan balances quickly to send your score in the right direction.
Another way to better your score is to not take on any more debt if you can afford it. It seems counterintuitive since you’re trying to take on a car loan, but when you apply for new credit, your score takes a hit. That’s why it’s best to get your score as high as you can before taking on a car loan or lease payment.
The bottom line to take away from this article is that your credit score is very important whether you want to get an auto loan, home loan, or any other type of credit. If you’re in the market for a new vehicle, your best bet is to examine your credit to see where you stand.
Then, if you think you need to make improvements, do so first before you attempt to get a loan. Getting a loan with a high credit score gives you more favorable terms and makes it more likely you’ll be approved.