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Looking for a credit card? If so, you’ll need to shop around. Do some research to compare costs, features and drawbacks before settling on a single card.
Annual fee: Some cards charge an annual fee – anywhere between $15 and $50 – while others may not. Check to see which ones do and if their annual fee still makes smart financial sense to you.
Grace period: Most credit cards offer a 25-day time period for you to pay off your total balance without paying a finance charge. The grace period runs from the date printed on the bill, not the date you receive it or the date you make a purchase.
APR/interest rate: The APR or interest rate is the percentage of interest you’re charged on the balance you carry on the card and cash advances. It can either be fixed or variable. A fixed rate APR is usually higher, but you’ll know what to expect for the year. A variable rate is typically lower, based on an interest rate that swings up and down.
Introductory rate: Some cards offer a super-low introductory rate that will later switch to a higher fixed or variable rate. Make sure you know how long the introductory rate lasts and what the new rate will be. The introductory rate is often terminated if you send a late payment.
Finance charge: This is the actual dollar amount you’ll pay when you carry a balance. It includes interest costs and any other transaction fees. It’s helpful to know how this number is calculated. The average daily balance method is the most common. It adds the amount of debt on your account for each day during the billing period and averages it
Other fees: These include fees for paying late, charging over your limit, and getting a cash advance. Make sure you read the cardholder agreement, which discloses these charges.
Other Rewards and Benefits: Many cards now offer added benefits, like rebates, discounts and/or frequent flyer miles. With these cards, find out how many dollars equal a free ticket, etc and if you will actually use these types of rebates.
Payback Time: If you plan to pay your credit card bill in full each month, look for a card with no annual fee & a generous grace period. If you think you’ll carry a balance, then the important thing is a card with a low interest rate.
Be a smart consumer and shop before you buy.
If you are like most you started the year off with a list of “Resolutions”. You probably started the year by saying to yourself “This will be the year I finally erase all my debt.” But now that spring is already here, how have you done with sticking with your financial resolutions? With almost 88% of all New Year’s Resolutions failing, sticking to your budget may be harder than you think. The reason? Our brain is wired to do the same thing year in, and year out, therefore making it very hard to actually change the behaviors that got you into debt.
Here are some Tips to help you understand your debt behaviors, as well as tools to help you combat the temptations of spending.
We all tend to overestimate our own willpower and self-control when we set resolutions. We REALLY believe that for whatever reason THIS YEAR will be the year “I stick to it”. Planning to be virtuous is easy and it feels achievable. Actually avoiding temptations is much more difficult.
- Be realistic with your reaction to temptations.
- Give yourself room to re-adjust the budget if the original plan isnt feasable.
Our brains discount future consequences for ourselves when we want instant gratification. How many times have you eaten a calorie laden meal right before you started your big diet? That is because our brain is saying “go ahead, eat the cake…those calories are for that person starting a diet tomorrow”, it almost makes you feel like that is a different person, therefore not recognizing the consequences for yourself right then and there.
- Take the decision-making out of your own hands.
- Set up your paycheck so a portion automatically goes into savings without you ever seeing it and being tempted to spend it instead of save it.
- Keep credit cards at home—this completely eliminates those impulse buys
Credit card spending doesn’t feel as “REAL” as spending cash. When we pay with cash, we feel the pain of losing the money immediately, but paying with a credit card delays the sense of pain until the bill comes. And because we pay our credit card bills electronically, there is a further sense of unreality to the amount of money you owe. The further you get away from cash transactions, whether that is in the initial point of purchase or in the bill paying, the less likely you are to feel the pain and urgency of your debt.
- Start paying with cash instead of credit
- Disperse your monthly “allowance” into envelopes of cash. As long as you have money in the “shoe envelope” you can buy shoes. If it’s empty, you got to wait until next month—even if they are on sale!
These strategies will help you change your behavior habits, by giving yourself time to actually think about your spending habits. By understanding WHY you spend, you can begin to develop the discipline necessary to pay off your debt.
April 15th is just over a month away, and many of us that have yet to file taxes are spending the next few weeks thinking about the various deductions we qualify for before we file. For tax year 2013, the standard deduction is $6,100 for single Americans and $12,200 for those married and filing jointly. That means unless you can claim more than those amounts, there’s usually no reason to itemize.
One of the most common ways to get over the threshold, however, is to own a house and unlock the many deductions that come with homeownership.
But it’s not as simply as simply mailing a mortgage bill to the IRS and reaping the rewards. There are a bunch of very specific deductions that require specific paperwork.
Here are 5 important tax tips to look for if you’re a homeowner:
Claiming mortgage interest is the biggie, and one of the most common deductions among taxpayers. Currently the cap on mortgage debt we can deduct for tax purposes is 1.1 million. This includes multiple loans, so those with a primary residence in Tennessee, but own a vacation home in Florida, they can claim interest on both, as long as the total is under the cap.
Be careful of claiming a mortgage interest deduction on home equity loans that haven’t been used to improve the property. If you refinanced your loan and decided, ‘Hey, why don’t we take another $50,000 out in equity,’ but then you don’t use that money to, say, build a pool, that’s not fully deductible. You must use the money to improve the house, or you aren’t allowed a deduction.
Mortgage Insurance and Taxes
In addition to mortgage interest, private mortgage insurance is also deductible.
Don’t mistake private mortgage insurance, or PMI, for homeowner’s insurance that protects against a fire or other loss. PMI comes into play with lower-income homeowners who often can’t afford a big down payment, and instead pay a small monthly fee as insurance against default.
If you make a private mortgage insurance payment, in most cases this is deductible.
Also worth noting is that local and state property taxes can also be itemized on federal tax returns. Particularly for lower-income Americans, there may be special property tax benefits available based on your community.
Unless Congress extends existing tax credits for residential energy efficiency, 2013 is your last chance to claim up to $500 in green energy credits.
You can still get credit for, Insulation, energy efficient windows and doors, high efficiency air conditioner and heaters. Still, the cap is small at just $500, and it’s not applicable if you claimed it previously since the credit was passed in 2011.
A separate and more substantial credit is available for solar energy installations, so long as they are on your primary residence and not a rental property.
The credit is for 30% of the cost, including installation, wiring, and set up.
Selling Your Home Unlocks Tax Breaks
Of course, for homeowners who have taken advantage of a resurgent housing market by selling their homes altogether, there are also tax implications.
If you sold a home in the past year, costs including title insurance, advertising and real estate broker fees can also be claimed on your return.
You can also claim certain repairs to reduce your capital gains on the sale, presuming they were made within 90 days of the sale and clearly for the intent of marketing the property.
And after the sale? If you had to find a new home because of a new job that is located more than 50 miles away from your old home, you may be able to deduct your reasonable moving expenses, too.
Especially given the very harsh winter weather we’ve seen recently, it’s important to note that when disaster strikes you are able to claim a tax break for any significant losses.
You have to have a loss more than 10% of your income. If you make $50,000, you have to pay $5,000 out-of-pocket before you are eligible for any deduction. And for the record, that’s an out-of-pocket loss. You won’t get a deduction for losses that were covered by your insurer and that you were compensated for.
You’ve gone to your lender and been approved for a home mortgage. You’ve found the home of your dreams. But just when you are about to close, the lender says you are no longer approved. What happened?
Since the infamous “mortgage meltdown” a few years back, lenders as well as industry regulations have gotten much stricter. The latest tightening of the screws comes from Fannie Mae. The mortgage titan’s Loan Quality Initiative, which went into effect June 1, requires lenders to track “changes in borrower circumstances” between application and closing. While these rules aren’t new, Fannie is enforcing them more vigorously.
The new rules simply want to ensure the new home loans are deemed “low risk” for default or buyback. Basically, lenders want to be assured that this is the type of borrower that has the ability to repay this loan in full. With the increase in regulation and scrutiny over any changes, even seemingly small changes can implode your pending mortgage.
Following are three things borrowers can do to mess up their next mortgage closing.
Get a new credit card or auto loan
Get a new credit card or auto loan, and you could find yourself no longer approved for that mortgage loan.
Lenders have long admonished mortgage applicants to avoid getting new credit cards and auto loans while home loans are in underwriting. Fannie’s Loan Quality Initiative adds urgency to this request.
For example, picture a borrower who gets a car loan a week before closing on the mortgage. The mortgage lender doesn’t know about it. Later, the borrower misses a couple of mortgage payments.
Fannie Mae can look back, discover the undisclosed auto loan and make the lender buy back the bad mortgage. That’s a money loser for the lender.
So at the eleventh hour, most lenders check credit for new accounts.
Even merely opening an account — without charging anything to it — can be a mistake.
Charge up credit cards
Charging up credit cards with thousands of dollars’ worth of appliances, tools and yard equipment is another surefire way to muck up a closing. It’s best to leave those cards alone.
Don’t increase your credit card balances at all. Mortgage approval is based partly on debt-to-income ratio. The lender looks at the borrower’s minimum monthly debt payments and compares them to income. If the ratio of debt payments to income is too high, the borrower could be turned down for a mortgage.
Fannie encourages mortgage lenders to recalculate debt-to-income ratios just before closing. If a spending spree sends the debt-to-income ratio too high, the mortgage could be doomed. For this reason, borrowers should wait until after closing the mortgage before buying furniture, a refrigerator or a lawn mower on credit.
Changing jobs is another good way to derail a mortgage before closing. Other potential deal-breakers include staying with a current employer, but switching from a salaried position to one where primary income comes from commissions or bonuses.
Any slight change in income could cause you to not qualify.
The main thing to remember is, keep everything exactly the same as the day you got approved. No new car. Don’t apply for a credit card so you can get brand new furniture. And definitely don’t change your job.
Today, February 14th is the most romantic day of the year. In fact over 2.2 million people will get married today and millions more will become engaged. Getting married is a wonderful moment in life, but it can affect many things, including your credit. So in the spirit of the holiday that love built, we’ve decided to debunk some credit myths associated with marriage, and its effect on credit.
Our Credit Reports MERGE TOGETHER When We Get Married
Many people mistakenly believe that getting married means that your credit also gets hitched. That’s not true because you never share, inherit, or merge credit histories. Marriage has no affect on your credit score even if you take your spouse’s last name or live in a community property state. Everyone has their own credit report and credit scores.
If you have joint account—such as a credit card, car loan, or mortgage—with a spouse (or anyone else) the account history appears on both of your credit reports. But if you have a credit account in your name only, it never appears on your spouse’s credit file.
If My Spouse Has BAD Credit So Do I
Marrying someone with bad credit doesn’t affect your credit (unless your name is added as a co-owner on a delinquent credit account), but it can hinder your ability to get credit as a couple.
For instance, if you apply for a mortgage or car loan that requires both of your incomes to qualify, the lender will review both of your credit histories. Having a spouse with poor credit could cause your joint application to be declined or require you to pay a relatively high interest rate on a loan.
My Credit History Is ERASED When I Change My Last Name
If you change your name after you are married and report this change to your creditors, you will see some updates to your existing credit reports. Along with your old name, your new name will be listed as an alias. You will not have to start from scratch with a new credit history. There may be a few inaccuracies on your report as this transition takes place, so it’s important to check your credit report frequently during this period.
I Will AUTOMATICALLY Become A Joint User On My Spouse’s Accounts
Marriage doesn’t automatically make you an authorized user or co-signer on your spouse’s accounts. If you wish to be added to your spouse’s credit cards, you will need to call the creditors with this request. Please note that being added as an authorized user will not result in the account being factored into your credit score. As for loan accounts, becoming a co-signer for a loan usually requires refinancing.
Before getting married, make sure there is complete financial transparency. Understand your partner’s debt situation and credit history so you address any negative issues and increase your chances of living happily ever after.
Establishing a good credit history has never been as important as it is today. It’s not just that you’ll need good credit to get decent rates when you’re ready to buy a home or a car. Your credit history can determine whether you get a good job, a decent apartment or reasonable rates on insurance. One seemingly minor misstep — a late payment, maxing out your credit cards, applying for too much credit at once — can haunt you for years. If you’re just starting out, you have a once-in-a-lifetime opportunity to build a credit history the right way. Here’s what to do, and what to avoid.
Check your credit report
You’ll first want to see what, if anything, lenders are saying about you. That kind of information is contained in your credit report at each of the three major bureaus: Equifax, Experian and Trans Union. Credit reports are used to create your credit score, the three-digit number lenders typically use to gauge your creditworthiness. Lenders also may look at the report itself, as may the landlords, employers and insurance companies who use credit to evaluate applicants.
Establish checking and savings accounts
Lenders see these accounts as signs of stability. Opening checking and savings account is also one of the few things you can do as a minor to start building a financial history. While you can’t get a credit card in your own name until you’re 18 and can be legally held to a contract, many banks have no problem letting you open an account. Many, but not all. If your bank balks, you need to either look around for another bank or consider opening a joint account with an adult.
Understand the basics of credit scoring
You need to know that the two most important factors in your score are:
- Whether you pay your bills on time.
- How much of your available credit you actually use.
It’s essential that you pay all your bills on time, all the time. Set up automatic payments or reminder systems so that you’re never, ever late. All it takes is a single missed payment to trash your credit score — and it can take seven years for the effects to completely disappear. You also don’t want to max out any of your credit cards, or even get close. Keeping your credit use to less than 30% of your credit limits will help you get the best possible credit score. Finally, you don’t need to carry a balance on a credit card to have a good credit score. Paying your bill off in full is the best way to keep your finances in shape and build your credit at the same time.
Apply for credit while you’re a college student
It turns out that there’s no easier time to get a card than while you’re a college student, but you must proceed with caution. Look for a card with a low or nonexistent annual fee and low interest rates. For now, just get one: Opening a slew of credit accounts in a short period of time can make you look like a risky customer.
Apply for a secured credit card
If you can’t get a regular credit card, apply for the secured version. These require you to deposit money with a lender; your credit limit is usually equal to the deposit. You’ll want to screen your card issuer carefully. Some charge outrageous application or annual fees and punitively high interest rates. Your credit union, if you have one, is a good place to start looking for a secured card.
Ideally, the card you pick would:
- Have no application fee and a low annual fee
- Convert to a regular, unsecured credit card after 12 to 18 months of on-time payments
- Be reported to all three credit bureaus – If it doesn’t, the card won’t help build your credit history.
Get a finance company card
Gas companies and department stores that issue charge cards typically use finance companies, rather than major banks, to handle the transactions. These cards don’t do as much for your credit score as a bank card (Visa, MasterCard, Discover, etc.), but they’re usually easier to get.
Get an installment loan
To get the best credit score, you need a mix of different credit types including revolving accounts (credit cards, lines of credit) and installment accounts (auto loans, personal loans, mortgages). Once you’ve had and used plastic responsibly for a year or so, consider applying for a small installment loan from your credit union or bank. Keeping the duration short — no more than a year or two — will help you build credit while limiting the amount of interest you pay.
Use revolving accounts lightly but regularly
For a credit score to be generated, you have to have had credit for at least six months, with at least one of your accounts updated in the past six months. Using your cards regularly should ensure that your report is updated regularly. It also will keep the lender interested in you as a customer. If you get a credit card and never use it, the issuer could cancel the account.
Just remember the credit tips mentioned earlier:
- Don’t charge more than 30% of the card’s limit.
- Don’t charge more than you can pay off in a month. As mentioned earlier, you don’t have to pay interest on a credit card to get a good credit score, and it’s a smart financial habit to pay off your credit cards in full each month.
- Make sure you pay the bill, and all your other bills, on time.
By Lesley Fair
Today is Data Privacy Day. You’ve educated your staff about limiting access to sensitive information, locking up confidential paperwork, and securing the network. But Latanya Sweeney, the FTC’s new Chief Technologist, just clued us in about a potential security vulnerability you, your HR team, and your web master can do something right now to correct.
It can happen on any site, but it’s common for universities, research institutions, non-profit organizations, and even tech companies to include links to the CVs of professors, scientists, executives, and other staff. For the most part, those resumes list scholarly publications and academic interests. But scroll through all that high-minded content and you may get to the down-and-dirty stuff identity thieves live for: dates of birth, home addresses, and even Social Security numbers.
On this topic – and a whole lot of others – when Latanya Sweeney talks, we listen. And here’s why. Yes, Latanya is an Ivy League Big Brain Academic. (And we mean that in the nice way, of course.) But she also has the tech credentials to speak geek with the very best of ‘em. And if that weren’t enough, for years she’s been a leading thinker about how privacy and technology policy affects consumers.
Here are some steps you can take immediately to help plug the potential gap Latanya is warning about:
HR professionals: Survey the faculty or management pages of your site and have your web master take down any CVs or resumes that include the kind of personal information ID thieves could exploit. Explain to your colleagues why it’s a risk they shouldn’t be taking. As new staff members are hired, implement a policy not to upload documents that include sensitive data. Executives and staff will appreciate that you’re looking out for them – and for the reputation of your institution or business.
Academics and professionals: If the CV or resume posted on your employer’s site or your personal homepage includes your Social Security number, date of birth, or other personal information, take the page down. If it’s a link to a .pdf, revise the document to get rid of the data crooks could exploit. Pass the word to your colleagues, mention it in your next staff meeting, or print this page and post it where they’ll see it.
Job applicants, graduate students, and others with an interest in promoting their credentials online: Be savvy about what you include on your CV, resume, or webpage. There’s just no reason for posting your Social Security number or date of birth where it’s accessible to some random web surfer. And your home address? These days, isn’t it more likely legitimate employers would contact you via email?
Those steps can reduce your risk from here on in, but what can you do if your personal information is already out there? Go to annualcreditreport.com and exercise your right to one free copy of your credit report from each of the three major national credit reporting companies. Stagger your requests and monitor your report once every four months.
The H.A.R.P. (Home Affordable Refinance Program) program which enables struggling homeowners to refinance their mortgage, whose home value has declined, has extended its application deadline to December 31st 2015.
H.A.R.P. is a federal-government program designed to help homeowners refinance at today’s low mortgage rates even if they owe as much or more on their mortgage than their home is worth. The goal is to allow borrowers to refinance into a more affordable or stable mortgage. Most homeowners eligible for a HARP refinance are able to reduce their monthly payment by lowering the interest rate on their mortgage. Other homeowners can use HARP to convert their adjustable mortgage into a more predictable, fixed-loan program. You also have the option to do a HARP refinance for a shorter-term loan, which will help you build equity in your home at a faster pace.
To be eligible for a HARP refinance homeowners must meet the following criteria:
- The loan must be owned or guaranteed by Fannie Mae or Freddie Mac.
- The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
- The current loan-to-value (LTV) ratio must be greater than 80 percent.
- The borrower must be current on their mortgage payments with no late payments in the last six months and no more than one late payment in the last 12 months.
Borrowers should contact their existing lender or any other mortgage lender offering HARP refinances. For more information, please go to http://harpprogram.org/
The new CFPB New Mortgage Rules recently took effect on January 10th 2014.
You’ve probably heard several things about how this is effecting banking and lending institutions, but you may still not be sure what this means to the consumer.
First let’s take a brief look back in the not so distant past…In 2008, the rise in home foreclosures was viewed by many as the result of sub-standard mortgage lending practices. Subsequently, Congress passed the Dodd-Frank Act in 2010, which created the CFPB and set forth a number of financial industry regulations aimed at protecting consumers, including some pertaining to mortgage lending. In January 2013, the CFPB issued mortgage rules that implement the mortgage provisions set forth by Congress under the act.
The new rules which took effect on January 10th broaden coverage of existing ability-to-repay rules, which require a lender to make a reasonable, good faith determination that a consumer has the ability to repay a loan. The rules extend coverage of the ability-to-repay rules to the majority of closed-end transactions secured by a dwelling (with certain exceptions). In addition, the rules set forth specific procedures a lender must follow when determining a borrower’s ability to repay a loan, including the consideration and verification of certain consumer information (e.g., income, employment status) and the calculation of the borrower’s monthly mortgage payment.
The rules also center on what are referred to as Qualified Mortgages. According to the Dodd-Frank Act, lenders that issue Qualified Mortgages will receive a presumption of compliance with ability-to-repay rules, thereby reducing their risk of challenge from a borrower for failing to satisfy ability-to-repay requirements.
The rules specify various requirements that a loan must meet in order for it to be considered a Qualified Mortgage, including:
- Limits on risky loan features (e.g., negative amortization or interest-only loans)
- Cap on a lender’s points and fees (3% of the loan amount)
- Certain underwriting requirements (e.g., 43% monthly debt-to-income ratio loan limit)
- The new mortgage rules were mainly put into place as a way to end irresponsible mortgage lending and ensure that borrowers will only be able to obtain a mortgage loan that they can afford to pay back.
Proponents view the rules as welcome industry safeguards that simply mirror responsible mortgage lending practices that are already in place. However, some mortgage-industry experts fear that the new rules may end up making obtaining a mortgage loan more difficult than it has been in the past–especially for borrowers who have a high debt-to-income ratio. Borrowers may also find themselves burdened with the task of providing lenders with additional documentation that they may not have had to in the past.
But what does all this mean to you? The new mortgage rules mean you will have more information and more protection when you’re shopping for a loan, and while you own your home.
In the run-up to the housing crisis, some lenders made loans without checking a borrower’s income, assets, or debts. That turned out to be a pretty bad idea. And, when many borrowers couldn’t repay their loans, the economy took a devastating hit.
The CFPB new mortgage rules help protect consumers by requiring lenders to make a “good-faith, reasonable effort” to determine that you are likely to be able to repay your loan. That means the lender will check and verify your income, assets, debts, credit history, and other important financial information. And no more qualifying consumers based only on those initial “teaser” rates that trapped many new homebuyers.
Lenders who meet certain requirements called Qualified Mortgages–or QMs– are presumed to have made that good-faith, reasonable effort to check the applicant’s ability to repay. QMs have several characteristics that protect consumers.
First, QMs can’t have risky features like negative amortization or no-interest periods. Second, QMs are available with some exceptions to borrowers who have a monthly debt-to-income ratio of 43 percent or less, meaning that the total of their monthly mortgage payment, plus other fixed debts like car loans, is not more than 43 percent of their monthly gross income.
Most people taking out a mortgage now have a debt-to-income ratio of around 38%
Consumers will also have less to worry about when hiring someone to find a mortgage. Loan officers and mortgage brokers have to follow rules to protect consumers from certain conflicts of interest. That means anyone you pay to help you find a mortgage generally can’t also be paid by someone else. And the loan officer or mortgage broker can’t get paid more to put you into a loan that has a higher interest rate.
The new rules empower all consumers to get important more information about their mortgage. Consumers will now get a new periodic mortgage statement or coupon book that gives important information about monthly payments. If you have questions about your mortgage or you believe your servicer has made a mistake, the servicer is required to respond to your inquiries quickly.
If your financial situation changes and you are having trouble making your mortgage payments, servicers now have to reach-out under certain circumstances and send written information describing how you can apply for the options available to avoid foreclosure. During the housing crisis, mortgage servicers were often ill-prepared to help borrowers in trouble. Important paperwork was often lost and borrowers were frustrated by services who couldn’t give them accurate information about their options for avoiding foreclosure. Now your servicer has to ensure that employees assigned to help you will be able to answer your questions and important documentation won’t go missing.
You can think of all these changes as a “back to basics” moment for the mortgage market: no debt traps, surprises, or runarounds. And a market where if you run into trouble paying your mortgage, you will have a fair shot at all the options available to help you avoid foreclosure.