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New Credit Advice: Dont Pay off Those Credit Cards!
Credit needed for real estate mortgage financing differs from credit needed for consumer loans. If you need help getting a home mortgage, these credit tips will help you. Contrary to what many credit advisors say, paying off credit cards each month is not always the best action to take. When making credit card payments, don't pay the balance in full each month -- let a little roll over. Carry a balance on your credit card every other month --as little as a dollar. Paying balances in full does not increase your credit score; paying balances in full may in fact lower your credit score. Accounts with zero balances do not compute significantly in your total score. For instance, a credit card with a perfect payment history and no balance will not raise your credit score as much as a credit card with a low balance. Any balance keeps the card active so it computes in your credit score. You most likely have been advised to cut up your credit cards and close your accounts. Following this advice degrades many credit scores. Canceling Credit Cards Canceling credit cards can lower your credit score. Keep your longest-term credit card account open to show long-term credit history. If this account has prior late notations, negotiate with the creditor to drop negative reporting on your credit history file. Slowly close out newer accounts after they are paid off. Keep your best accounts open -- those paid on time or reporting "pays as agreed" and with the longest history. Credit card companies may raise your rate if you cancel a card before it is paid off; it is best to keep accounts with outstanding balances open until you pay them off. Perfect Balance of Credit 1. Mortgage over one year old with all payments on time 2. Visa Card or Master Card with less than 10% of available credit as balance due 3. Discover or American Express Card with less than 10% of available credit as balance due 4. Auto loan either paid off or paid down with low payments compared to monthly income. Debt-to-Income Ratio Credit scores do not reflect income -- credit bureaus do not have income reported to them. However, real estate lenders look at the consumer debt-to-income ratio -- the amount of monthly debts in relation to the amount of earnings. Consumer debt is more highly regarded/scores higher if total debt is under 20% of net income, or total monthly payments on all debts is less than 35% of monthly gross income. Qualifying Ratios Lenders want the total debt ratio (the percentage of total monthly payments, including the new mortgage, to income) to be less than 33% for a typical conventional mortgage. This means the new mortgage payment, credit card payments, and all other monthly debt payments should not equal more than about one-third of the monthly income. Lenders want the mortgage debt ratio (the percentage of the new mortgage payment to income) to be less than 28%. Non-prime loans have lower standards; some lenders allow debt-to-income ratios as high as 55%. Borrowers with less than perfect credit qualify more easily for a non-prime loan compared to an "A-paper" loan. Once you total your monthly expenses and determine your debt ratio, you can estimate how much you can afford for a house payment. For example, if your income is around $3,000 per month, you can afford a home with payments around $1,000 per month (including taxes and insurance) with a conventional loan, if your other debt does not total more than 5% of your income. For investors, these equations change. Lenders expect 10%-25% down on investment property and allow about 75% of the rental income to offset the debt ratio. Understanding your credit helps you manage your credit so you can obtain real estate financing, either for the house of your dreams or for your financial future. (c) Copyright 2005 Jeanette J. Fisher. All rights reserved. Professor Jeanette Fisher is the author of "Credit Help! Get the Credit You Need to Buy Real Estate," "Doghouse to Dollhouse for Dollars: Using Design Psychology to Increase Real Estate Profits," and other books. Jeanette and her husband chose real estate investing to be able to care for their daughter with special needs. While buying and selling millions of dollars worth of real estate, the Fishers were forced into becoming credit experts. Forget what you've been told about credit. Get the credit you need to buy real estate. Visit Real Estate Credit Help Center: http://recredithelp.com/ MORE RESOURCES:
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GOOGLE SEARCH Learning the Disturbing Facts about Credit Card Debt When I received my first credit card in the mail at age 18 I was ecstatic, I said to myself, wow now I'm getting somewhere in life. This credit card company thinks I'm worthy of 500 dollars in credit. Compare Credit Card Offers and Reward Yourself Here's a simple system on how to pay zero interest and get tons of free stuff. Almost everyone uses credit cards. Free Credit Report - A Website Typo Could Be Costly In 2003, Congress passed the Fair and Accurate Credit Transactions act (FACT), which made it possible for consumers to obtain a copy of their credit report for free. In fact, the legislation makes it possible for consumers to obtain one free report from each of the three main credit bureaus - Experian, Trans Union, and Equifax, per year. Credit cards If gold medals were awarded for marketing consistency, the credit card industry would be the Sarah Hughes of the business world. Major players Visa and MasterCard, who have maintained their steady rates of spending and commitment to their positioning platforms for years, will stick to their established routines this year. Credit Report Secrets: Do You Know What They Reveal? If you've ever applied for a credit card or loan, you've probably hadyour credit report reviewed by the lender. Your credit report has a huge impact on your financial future, so it's well worth your time to be sure that you understand what your credit report says about you. Choosing The Credit Card That Is Right For You Credit cards represent an important part of our financial lives. Having the right credit cards is essential and will make a big difference to your finances. Five Credit Card Billing Problems and How to Fix Them It goes without saying that your first and best defense against paying fraudulent or unfair charges on your credit card is knowing what your bill says! When you receive your credit card statement each month, sit down with it and check each item to make sure that you actually DID purchase it. If you do run into inaccuracies or problems, there are procedures to follow to report and deal with the charges. How to Order the Right Credit Reports to Repair Your Own Credit In this week's article, I am going to offer some tips and insight regarding how to order the right credit reports needed to repair your credit.Believe it or not, a majority of the credit reports offered on the internet don't have the required information (File Number, Confirmation number, or Report number) needed to repair your own credit. Credit Score - Reporting Your Financial Health Credit score is one of the most basic, determining factor while loan borrowing. Credit score is the criterion for the creditor to ascertain whether to give you credit or not. Why Should You Use Credit Cards Believe it or not, the way society, especially the commercial side, is set up these days, the only alternative to using credit is to pay cash for everything. But it's actually quite hard to do that. Credit Repair, How To Credit repair, is in a word, vital to reestablishing your credit. Unless you plan to never use your credit again, then you have to find a way to fix it. Building Good Business Credit After Bad Credit Can you establish good business credit if you have bad personal credit? The answer is yes.. Getting Your Credit Report and Understanding Whats On It If you intend to apply for a loan, you need to obtain your credit score. Understanding what this score means will allow you to make the loan process easier and quicker. Ways to Look Good without Selling Your Soul to the Credit Card Sharks 1. Buy clothes at thrift stores. Credit Traps Snag Consumers Nearly 20 years ago I worked for a small consumer advocacy organization in Washington, DC. Each week we received sacks full of mail from consumers across the country requesting our list of credit cards with low interest rates and no annual fees. Know Your Credit Card Rights When you apply for a credit card, the application that you sign is also a legally binding contract laying out all the termsbetween you and the bank, such as the interest rate and how its calculated, the grace period, whether there's an annual fee, etc.While you have to agree to the terms and sign if you want the credit card and while the lender will certainly hold you to the terms, the lender doesn't feel similarly committed. Trying to Land a Job? Poor Credit Scores May Hurt Your Chances Many employers are now looking at an applicant's credit report for hiring purposes. During an interview process a potential employer may request your written consent to access your credit report. How to Repair a Bad Credit Rating If you have a bad credit rating, then you might find that your ability to get financing, loans, and even some jobs is greatly diminished.Once you have a bad credit rating, it might seem like there's nothing that you can do about it? but you don't have to believe that. Credit Repair Scams "Erase Bad Debt !""Remove Negative Items From Your Credit Report"You've probably seen these headlines and others just like it promising to clean up or "fix" bad credit. For someone who suffers from a bad or poor credit rating, these headlines are certainly an appealing offer. Good Credit Is a Necessity for Everyday Living Most of us want a good credit report to obtain vehicle financing, credit cards for emergencies and luxuries, and to finance a home mortgage. However, beyond these consumer loans, a great credit report makes your life easier. |
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