Your Personal Finance Pro http://yourpfpro.com Personal Finance for Young Professionals Sat, 13 Oct 2018 00:14:03 +0000 en-US hourly 1 31591919 3 Reasons Why Your Credit Score is More Important Than You Think http://yourpfpro.com/3-reasons-why-your-credit-score-is-more-important-than-you-think/ http://yourpfpro.com/3-reasons-why-your-credit-score-is-more-important-than-you-think/#comments Wed, 19 Aug 2015 13:30:10 +0000 http://yourPFpro.com/?p=6285 When I first graduated college, I was so proud of myself. I didn’t have a credit card, which meant I didn’t get into debt like some of my friends did. I had no other debt than my student loans. I assumed I had been very responsible with my money, building a small savings and submitting […]

The post 3 Reasons Why Your Credit Score is More Important Than You Think appeared first on Your Personal Finance Pro.

]]>
When I first graduated college, I was so proud of myself. I didn’t have a credit card, which meant I didn’t get into debt like some of my friends did. I had no other debt than my student loans. I assumed I had been very responsible with my money, building a small savings and submitting my tax returns on time.

Over time, I realized that not having a credit profile was almost as bad as having a bad credit profile. While it’s great to be debt-free and avoid credit at all costs, in the US, our credit scores are very important. Unless you live completely off-the-grid, which is virtually impossible now, there is a credit history of you out there somewhere. Here are three reasons why your credit score is more important than you think, and what you can do to gain control of it.

You may think you know all about your credit score and how to improve it, but did you know these three additional reasons why having a good credit score is important?

Your Credit Score and Your Job

While it may not be fair, your credit score and history could impact your ability to get a job. In many management-level jobs, running a credit check of potential hires is a routine part of the background check process. Management, law enforcement, and many public sector jobs now require a financial history check be part of the background check process.

To put this into perspective, a friend of mine from school applied to work in the national security field after graduation. He hadn’t been the most responsible with his money when he was younger, but by age 26, he had cleaned up his bad habits and regularly paid bills on time. For the most part, he avoided credit cards entirely and paid for everything in cash.

Unfortunately, his delinquent history (even though he had paid back all he owed, plus interest) still showed up on his credit report. This bad mark on his report led to him being denied the job he originally applied for. While national security is, for obvious reasons, a tightly controlled environment where people typically cannot have bad results from their background checks, you won’t know what is considered “that bad” until you’re denied a job opportunity.

You do have the right to request a copy of your background check report, which can show you where you may have been flagged. If your report is incorrect, you must contact the reporting agency, have them fix it, and then send the corrected report back to your potential employer.  However, best case scenario is avoiding this entirely by having an average or good credit score.

Your Credit Score and Utilities

As I mentioned, I graduated college proud of myself for not having amassed any credit card debt and being responsible with credit, or so I thought. What I didn’t know is that credit history is used for more than just getting approved for a credit card: your credit history is also used when you apply for utilities.

After graduation, two friends and I decided to move into an apartment together. Two of us carried no debt other than student loans, and the other friend had a small amount of credit card, car loan, and student debt. My not-much-debt-carrying friend and I thought we were the credit-worthy ones.

However, when it came time to apply for utilities, I applied first. I was denied but told I could pay a $250 deposit because of my poor credit history. When my other student-loan-only-debt roommate applied for the utilities, she was also denied and told to pay a $250 deposit. We finally applied in much-more-in-debt roommate’s name and, surprise, not only was she approved, she also didn’t have to pay a deposit!

It turned out that because she had a more robust credit history than we did, and a few years of repayment in her history, she was seen as a better credit risk to the utilities. While this is entirely legal, it’s not great to have to pay a $250 deposit, especially if you’re just starting out after college.  The only way to avoid this is to have a good credit history, pay the deposit, or obtain a letter of guarantee from someone stating they will pay your utility bill if you cannot.

Your Credit Score and a Home Loan

Finally, your credit score and history can have a tremendous impact on how much you pay over time on your home. Many of us don’t have the resources to buy a home in cash, which means we need to take out a home loan.

A poor credit history can mean the difference of paying a few thousand dollars to tens of thousands of dollars over the course of a 30 year loan. You can check out the MyFICO website here, where you’ll see the lower your credit score, the higher interest rate you’ll pay over time.

On a $100,000 house, the difference between a 760+ credit score and a score of 620-639 adds up to a $33,000 difference over time. Just having a better credit score gets you access to a better interest rate, meaning your overall repayment on your house is less than someone with a lower score.

If you have no or poor credit, there are ways to rebuild your credit score. Harry has a great post on how to rebuild your credit score here, and being sure to pay bills completely and consistently will help you establish a positive credit history. While you never want to take on debt you cannot repay, having a credit card you use occasionally and pay off immediately could be one way to help establish a good credit history.

What did you not know about your credit history that you wish you had known? Do you have any advice for someone trying to build their credit history?

The post 3 Reasons Why Your Credit Score is More Important Than You Think appeared first on Your Personal Finance Pro.

]]>
http://yourpfpro.com/3-reasons-why-your-credit-score-is-more-important-than-you-think/feed/ 3 6285
5 Financial Tune Ups To Do in January http://yourpfpro.com/financial-tune-ups/ http://yourpfpro.com/financial-tune-ups/#comments Wed, 07 Jan 2015 21:30:25 +0000 http://yourPFpro.com/?p=5781 I’ve never been a big fan of New Year’s resolutions but I do believe in taking some solid steps to secure your financial life at the beginning of each year.  Today, PF Pro contributor, Melissa Hoffman, takes a look at 5 financial tune-ups that you should complete ASAP. It’s the start of the new year, which […]

The post 5 Financial Tune Ups To Do in January appeared first on Your Personal Finance Pro.

]]>
I’ve never been a big fan of New Year’s resolutions but I do believe in taking some solid steps to secure your financial life at the beginning of each year.  Today, PF Pro contributor, Melissa Hoffman, takes a look at 5 financial tune-ups that you should complete ASAP.

It’s the start of the new year, which means new resolutions! However, before we jump into 2015 too quickly, it’s important to make some financial tune-ups. Here are the top 5 financial tune-ups to make in January to set yourself up for financial success in 2015.

Financial Tune-Up 1: Check your annual credit report

If you haven’t checked your credit report recently, visit annualcreditreport.com and grab at least one of your credit reports. You can get a report from Experian, TransUnion, or Equifax.

You may as well grab all three at once, especially if you’re apt to forget to check your score later in the year. The three reporting agencies all differ in little ways, so it’s a good idea to get them all and evaluate your credit score overall.

Around 25% of people find an inconsistency on their reports, and that can negatively affect how you are viewed for credit cards, home and auto loans, and more. By checking your credit score early on in the year, while your motivation is still high, you can tackle any issues on your report and go into 2015 knowing if you need to improve or simply maintain the score you currently have.

Financial Tune-Up 2: Shop around for new insurance

If you’re within a few months of renewing your current auto or homeowner’s insurance policies, now is a good time to shop around and see if you can’t do better elsewhere.

If you’ve stuck with the same insurer, over time your loyalty could end up costing you money. Nerdwallet did some research on auto insurance and found that US drivers overpay on auto insurance by an average of $368 each year. US drivers who shopped around saved an average of 32% on their auto insurance.

Shopping around for insurance can be a pain, which is why the majority of consumers stick with their insurers for a while. However, there are some ways you can price shop efficiently, without spending hours on the phone or filling out multiple forms.

Some credit unions offer services to help you find cheaper rates on home and auto insurance. Call or visit your credit union (either physically or online) for more information. The catch is you have to be affiliated with a credit union, and you’ll need to go through the process annually if you want to shop around next year for cheaper prices.

If you don’t use a credit union, you can search online for cheaper auto and home insurance rates. Use this tool from NerdWallet.com to search for auto insurance quotes. If you find an auto insurance quote cheaper than your current plan, call the provider and ask if they provide discounts for bundling home and auto insurance (if you own your home).

Financial Tune-Up 3: Increase your contributions

In 2015, set up or increase your Flexible Savings Account (FSA) or Health Savings Account (HSA) contributions. If your employer offers these accounts, consider signing up with either an FSA or HSA to take advantage of tax deductions and save yourself some money on health care.

If you’re already signed up, the IRS increased contribution limits from 2014 to 2015, so take advantage of those new limits by increasing the amount you deduct from your paycheck each month, or how much you contribute on your own if not done through your employer.

Haven’t yet signed up for an FSA or HSA account, and not sure if you should? Harry has made the case for why you should get an HSA here, here, and here. If you’re a younger, healthy adult who rarely goes to the doctor, and you want a triple tax advantage, consider signing up!

Financial Tune-Up 4: Check your IRS withholdings

Before tax season even starts, check your IRS withholdings and make adjustments as necessary. If you’ve had any major life changes, such as a marriage or birth of a baby, it’s definitely time to check how much you’re having withheld and if you’re paying enough in taxes.

The IRS has a handy tool to see if you’re withholding enough. While it’s nice to get a big windfall in April or May, don’t forget that the refund you received was your money all along. You were simply giving the government an interest-free loan instead of being able to use, save, or invest that money.

Financial Tune-Up 5: Rebalance your investment portfolio

It’s easy to forget about your retirement or investment portfolio if you don’t check on it regularly, but it’s important to rebalance your portfolio. The beginning of 2015 is a great time to check on your portfolio and rebalance as necessary.

How you rebalance is up to you and your priorities right now: someone who isn’t planning on retiring for 40 years will likely have a riskier portfolio than someone who’s looking to purchase a house in 5 years. In either scenario, you will rebalance according to your initial set up. If you originally allocated 60% of your portfolio to stocks and 40% to bonds, but you currently have 52% and 48% respectively, you’ll want to sell off some of your bonds and purchase stocks in order to get your asset allocation back to its original 60/40.

Take this new year to reflect on your finances and make changes where applicable. In January, you may find yourself with some free time and the willpower necessary to sit down and take a couple minutes for these financial tune-ups. By carving out a little time now, you’ll save yourself money and enter the new year confident you have done your annual tune-up.

The post 5 Financial Tune Ups To Do in January appeared first on Your Personal Finance Pro.

]]>
http://yourpfpro.com/financial-tune-ups/feed/ 10 5781
Planning for My First Credit Card App O Rama http://yourpfpro.com/planning-first-credit-card-app-o-rama/ http://yourpfpro.com/planning-first-credit-card-app-o-rama/#comments Tue, 17 Sep 2013 02:20:09 +0000 http://yourPFpro.com/?p=2874 Part 1: Planning for My First Credit Card App O Rama Part 2: Which Cards to Apply For In My First Credit Card App O Rama Part 3: Applying for Credit Cards and My Spending Plan For My First App O Rama This is the first part of a three part series on My First […]

The post Planning for My First Credit Card App O Rama appeared first on Your Personal Finance Pro.

]]>
Part 1: Planning for My First Credit Card App O Rama

Part 2: Which Cards to Apply For In My First Credit Card App O Rama

Part 3: Applying for Credit Cards and My Spending Plan For My First App O Rama

Planning for My First Credit Card App O Rama

This is the first part of a three part series on My First Credit Card App O Rama.  5 cards to apply for, $13,000 to spend and the potential to receive 250,000 points, $200 in statement credit and 8 airport lounge passes!

Anyone who reads my blog or knows me personally knows that I love free stuff.  In fact, the less I have to work and the more I can get, the better.  For the past couple years, I’ve been using Slickdeals to keep my eye out for the best credit card sign-up bonuses and there have been some great ones that came along.  I rarely applied for more than one card every few months but my credit score was doing well and I was getting approved for every single card I applied for.  Most of these cards came with $400-$500 sign up bonuses in cash or gift cards and best of all they were all tax free.

I was pretty content with the little operation I was running, I was averaging a couple thousand dollars a year in extra income for about an hours worth of work(per year).  I never bit off more than I could chew and since I tend to spend about $1,000 a month on my credit card, it was pretty easy to meet all of the spend requirements.  That all changed one day though, when I discovered FlyerTalk.  Flyertalk is the largest travel community on the web and you can get advice on everything from travel help to credit card sign up offers to information on loyalty programs.  I was literally in heaven since I discovered a whole world of like minded people who made what I’d been doing look like child’s play

Basics of a Credit Card App O Rama

On Flyertalk, I learned about the term App O Rama(or AOR), a strategy of applying for multiple credit cards in one day in order to maximize the likelihood of getting approved for all of your applications.  Since it often takes some time for an inquiry to be reported to the credit bureaus, by doing all your applications in one day you increase your chances for getting approved since each credit card company won’t see the other inquiries until you’ve already been approved.

I’d never done a true credit card AOR until a few months ago but I can say that it was definitely pretty exhilarating.  Most people will wait 90 days in-between AOR’s since that’s when inquiries tend to fall off your report but I suggest spacing them out a little further to start.

Preparing Your Credit Score

I don’t think people believe me when I tell them I have 21 credit cards, a 763 credit score(Credit Karma) and I’ve never been declined for a card, but it’s true.  Just like with any good thing in life, the key with credit card applications is to apply in moderation.  I only apply for the best and most rewarding offers and I always do my research.  I make sure that my credit score and report are in the best possible shape before I apply.

Contrary to popular belief, opening a large number of credit cards is not that bad for your score.  Initially, you’ll see a small drop(2-8pts) per card for the hard credit inquiry and the lowering of your average age of accounts(AAOA) but it’s only temporary.  Hard inquiries will be removed from your credit report after 2 years(or less) and since there are three credit bureaus(Experian, Equifax and TransUnion), not every credit card company will pull from all three bureaus when you apply.  So for example, if Citi only pulls Experian reports and Amex only pulls Equifax reports then when you apply for a new card they would not see the other company’s inquiries.

When you open a new card, that obviously lowers the AAOA, but over time, as the card gets older, your AAOA will go back up.  That’s why using the Authorized User trick can be a huge advantage to your score.  Remember, you always want to keep your oldest cards open as long as possible.  That way, when you open a new card, your AAOA won’t be affected as much.

Free Scores and Free Reports

I use Credit Karma and Credit Sesame to check my credit score.  Although they don’t give you the exact credit score that the credit card companies will pull, it’s a very good approximation and should give you a good idea of where your credit stands.  A 700+ score is required for many of the top offers but there are still quite a few cards that you can apply for and be approved for with a 600+ score.

I like to stagger my three free credit reports from annualcreditreport.com so that I get one every four months.  Since that’s about when I do my AOR’s, it works out perfectly.  I’ll take a look and see how many inquiries I have and determine which cards I’ll have the best chance at being approved for.  Certain companies are much more strict than others when it comes to inquiries so you need to plan accordingly(another great resource is the forum at creditboards.com).

In part 2 of the series on My First Credit Card App O Rama, I’ll discuss which cards I decided to apply for and why.  I’ll take a look at things like which cards I already have, the annual fees and of course the sign-up bonuses offered by each card.  Stay tuned!

-Harry @ PF Pro

The post Planning for My First Credit Card App O Rama appeared first on Your Personal Finance Pro.

]]>
http://yourpfpro.com/planning-first-credit-card-app-o-rama/feed/ 15 2874
Amex Backdating Still Alive But Authorized User Results May Vary http://yourpfpro.com/amex-backdating-still-alive-but-authorized-user-results-may-vary/ http://yourpfpro.com/amex-backdating-still-alive-but-authorized-user-results-may-vary/#comments Sun, 08 Sep 2013 16:53:08 +0000 http://yourPFpro.com/?p=2776 A lot of the questions I get from readers of this blog have to do with building credit.  Everyone wants to know things like what type of monitoring services they should use or how they can increase their score in the shortest amount of time.  Unfortunately though, building credit isn’t always a quick and painless process. […]

The post Amex Backdating Still Alive But Authorized User Results May Vary appeared first on Your Personal Finance Pro.

]]>
Amex Backdating Still Alive But Authorized User Results May VaryA lot of the questions I get from readers of this blog have to do with building credit.  Everyone wants to know things like what type of monitoring services they should use or how they can increase their score in the shortest amount of time.  Unfortunately though, building credit isn’t always a quick and painless process.  It could take years to build up a solid score with a long enough history to get you the best interest rates when applying for lines of credit.  In fact, when I bought my first property at the age of 23, I had a 780 credit score but since the average age of my accounts was so low, I couldn’t get the best available rates.

Since then, I’ve opened multiple lines of credit, lowered my utilization and made sure to keep my oldest accounts active in order to raise my score as high as possible.  I have over 20 22 credit cards now and through a combination of careful planning and some tricks and tips I’ve picked up along the way my credit score is still very healthy(fluctuates from 725-775) and I’ve never been denied for a line of credit.  

Understanding what comprises your score and what affects your score is key in building a solid credit profile.  What good is a great credit score if you never use it?  I won’t ever have a score in the top 5%, but I’ll still get the best rates on loans and I can take advantage of all the great sign-up bonuses out there as long as I maintain my good credit.

What Makes Up a Credit Score?

A credit score is compiled from five main data points: the number of open accounts, the average age of those accounts, the credit utilization rate(balance/limits), number of inquiries and payment history.  For newbie credit profiles, there’s not a whole lot you can do about the number of accounts you have.  If you’ve never had an account before, that part of your score will be weak.  But at the same time, since you’ve never had an account you won’t have any inquiries either which should help your score.

AU Boost

Getting added as an authorized user is one way to jumpstart your credit profile since you gain a new account and there’s no inquiry.  In my last article about adding an authorized user, I actually did a test case where I added my girlfriend(now fiancee) as an AU on my Amex Gold card and her score went up by 7 points.  It didn’t make a huge difference but it was a quick and effective way to boost her credit score.  Each case is different but generally the worse your score and the higher the limit is on the card you’re added to, the higher your increase will be.

AMEX Backdating

When you’re added on as an authorized user, the age of your account is supposed to reflect the date that you were added on and not the date the original cardholder opened the account.  But there’s some ambiguity with Amex since it looks like prior to November of 2011 they would allow Authorized Users to reflect the original cardholder’s opening date ‘if you asked nicely’.  Obviously you could see how valuable that would be since if I had my dad(Amex cardholder since 1980) add me as an authorized user, my average age of accounts would shoot way up.  I wasn’t even born until 1987 but my credit report would show that I opened that AU account in 1980.  And in fact, there are reports of people who did just that!

Never Give Up

Amex’s official policy is that they will no longer backdate an AU’s card to the original date opened of the cardholder but there are still reports of success on this Creditboards forum.  The key seems to be persistence.  In one case, there was a user who actually called 67 times before a rep finally agreed to change his AU’s date to his opening date.  When you call make sure you don’t mention the word backdate.  Instead, ask if they can change the member since date on your AU’s card to reflect the same date that’s on the original cardholder’s card.




My opening date is 2010 on my Amex Gold but my fiancee’s opening date was 2012 so I went ahead and called Amex’s customer service line.  The first rep I talked to told me that their policy was not to change the opening date of an AU’s card to match the original cardholder’s member since date.  Instead of trying again though, I signed onto my online account and used the chat feature to speak with another CS rep.

No luck there either.  Next, I decided to turn to social media and see if they could help me out.  They told me the same thing the phone rep told me so I finally gave up.  It wasn’t really worth my time since I might not be keeping my Amex Gold past this year(if they don’t waive the fee for me again).

Backdating Your Oldest Amex Card Works

Long story short, I wasn’t able to get my fiancee’s member since date changed to match mine but I did discover something interesting along the way.  Since I have a Hilton Amex that was opened in 1999, Amex allowed me to match my Amex Gold(opened in 2010) to the Hilton card opened in 1999.  So on my next credit report, I’ll be eager to check and see what the opening date says for my Amex Gold(It worked!  I just checked my Experian report and all of my Amex accounts show opened in 1999).




This can be very valuable since you can actually match all your cards to the opening date of your earliest card.  I have four different Amex cards so I plan on getting them all changed to an opening date of 1999 and really boosting my average age.

Readers, have you ever heard about this Amex backdating trick or had success with it?  Can you think of any other ways to quickly boost your credit score?

-Harry @ PF Pro

The post Amex Backdating Still Alive But Authorized User Results May Vary appeared first on Your Personal Finance Pro.

]]>
http://yourpfpro.com/amex-backdating-still-alive-but-authorized-user-results-may-vary/feed/ 5 2776
Pros and Cons of Refinancing Your Home Mortgage Loan http://yourpfpro.com/pros-and-cons-of-refinancing-your-home-mortgage-loan/ http://yourpfpro.com/pros-and-cons-of-refinancing-your-home-mortgage-loan/#comments Mon, 10 Jun 2013 00:33:49 +0000 http://yourPFpro.com/?p=2314 Gary Dek is a former investment banker and private equity analyst. Don’t hate him – he had nothing to do with the mortgage crisis and the recession. He writes at Gajizmo.com – check out his site sometime. There are excellent reasons for refinancing a home, but before deciding to do so, homeowners should be aware […]

The post Pros and Cons of Refinancing Your Home Mortgage Loan appeared first on Your Personal Finance Pro.

]]>
Refinancing Your Home Mortgage LoanGary Dek is a former investment banker and private equity analyst. Don’t hate him – he had nothing to do with the mortgage crisis and the recession. He writes at Gajizmo.com – check out his site sometime.

There are excellent reasons for refinancing a home, but before deciding to do so, homeowners should be aware of both the advantages and disadvantages that refinancing entails. Whether you want to get a lower interest rate, lower monthly payments or cash out equity in your home, there are times when refinancing may not be the best option for your investment.

Lower Interest Rates

Whenever there is a significant drop in interest rates, homeowners rush to banks and mortgage companies seeking to refinance their primary residence’s mortgage as well as investment properties. Over the life of a 30 year loan, saving 1% on mortgage interest translates to tens of thousands of dollars. This can mean lower monthly payments and can make your home more affordable, particularly if you are struggling to pay your bills because you are feeling house poor. Lower interest may be a good reason to refinance your home, especially if you have a good payment history for at least two years.

Homeowners who had a fair credit rating when they obtained their current mortgage may get lower interest on refinancing if their credit score has increased to good or excellent. High credit scores usually get borrowers the lowest possible interest rates. So what is considered a good credit score? If you have 650 or above, you should be able to get one of the best rates, though 720 plus will get you the best and lowest interest rates.

Get More Favorable Mortgage Terms

Some homeowners opt for adjustable rate mortgages (ARMs) because the interest rates are lower than fixed rate mortgages for the first several years of the loan. Unlike fixed rate mortgages, the interest rates on ARMs rise over time and increase the amount of monthly payments. Some ARMs also have balloon payments that are due at intervals specified in the mortgage terms. Buyers with lower credit scores and small down payments may not qualify for a fixed rate mortgage and accept the terms of an ARM because it is the only financing available.

Refinancing to replace an adjustable rate mortgage with a fixed rate mortgage is usually a good idea since it keeps monthly payments stable and there are no balloon payments. Interest rates are so low now that anyone who hasn’t refinanced in the last 5 years should definitely research mortgage loan offerings before rates increase any further.

During the recent mortgage crisis, some homeowners lost their homes to foreclosure because they did not understand the mortgage terms and were not prepared to make balloon payments when they became due. Others were unable to pay substantially higher payments when interest rates increased. Getting better terms on your loan is a great reason to refinance.

Cashing Out Equity

There are times when cashing out the equity in your home makes sense, whether it is to meet a long term goal like sending a child to college or to make needed repairs or improvements on the home. If you have been making payments on a mortgage for more than 5 years, or if property values in your area have risen, you probably have at least some equity in your home. Your equity is the difference between the value of your property and the amount still owed on your mortgage.

The disadvantage of removing equity from your home by refinancing is that your debt is increased and it will take longer to pay off the home. Depending on the current interest rates and mortgage terms, you monthly payments may be higher on the new loan. Using the equity in your home to pay off other debt, like credit cards, can be a great use of the proceeds, but could put your home at risk of foreclosure if you default on your payments. If you default on credit cards or other debts and fall into bankruptcy, you may still be able to keep your house.

Bottom line – as long as you don’t refinance your home and use the money to buy an RV, jet skis, a sports car or some other depreciating asset, using low-interest funds to make investments or pay off higher-interest debt is a wise financial decision.

Cost of Refinancing

Applying for refinancing is a lot like applying for any mortgage. You may be unable to refinance if your credit score is poor or if your income has been reduced due to a change in employment. Most finance companies and banks require that applicants have a stable employment history and may require that the applicant have held the same job for one to two years. If your credit scores are lower now than when you originally financed the home, you could be approved at a higher interest rate than you are paying on the original mortgage, which obviously means you shouldn’t refinance.

Furthermore, there are points/fees associated with refinancing that are similar to closing costs when you purchase a house. Lenders require a new appraisal, title search and credit report and discount points may apply. There is also a loan origination fee and all of the costs are paid by the borrower. You may have to pay for mortgage insurance when refinancing. While some lenders roll these costs into your new loan, others will require that you pay the costs out of pocket when the loan is finalized.

Refinancing Upside Down Mortgages

In many areas, the average market value of homes has dropped in just a few years. If the value of your home has depreciated since you purchased it, you may owe more on your mortgage than the home is currently worth. Since most lenders require some equity for refinancing, you may not be able to get a traditional loan. There are government insured refinancing programs to help homeowners without equity find mortgages with better terms so you can lower your monthly payments and pay off your mortgage early.

While real estate values will likely rebound in the coming years, appraisers must use the selling prices of recently foreclosed homes as comparisons (comps) to determine the market value of your property. Since foreclosed homes typically sell for less than their original market value, this can drop real estate values in areas with a large number of foreclosures. If the value of your home is less than the principal on your mortgage, it may be smart to wait to refinance until housing values recover or you have more equity in the property.

Homeowners who need to refinance to avoid foreclosure or to lower their interest rates or monthly payments may be eligible for the Home Affordable Refinance Program (HARP) sponsored by the U.S. Treasury Department and HUD. The program is designed to help homeowners keep their houses and may provide refinancing solutions for those who have no equity or negative equity in their homes. Although the program originally only addressed mortgages guaranteed by Fannie Mae or Freddie Mac, it has been expanded to include some private mortgages.

Refinancing can be a good financial decision, especially when it helps families get better interest rates and save money each month. For some, refinancing may be a way to avoid foreclosure and stay in their home. It is important to consider the pros and cons before deciding to refinance your mortgage and to shop around for the best terms and interest rates.

Check out more of Gary’s work at www.Gajizmo.com.

The post Pros and Cons of Refinancing Your Home Mortgage Loan appeared first on Your Personal Finance Pro.

]]>
http://yourpfpro.com/pros-and-cons-of-refinancing-your-home-mortgage-loan/feed/ 3 2314
Should College Students Start Using Credit? http://yourpfpro.com/should-college-students-start-using-credit/ http://yourpfpro.com/should-college-students-start-using-credit/#comments Mon, 30 Jul 2012 05:35:03 +0000 http://yourPFpro.com/?p=928 When I bought my first real estate property in 2010, I had excellent credit.  My score was over 760, but my mortgage broker told me they couldn’t give me the best rate because my credit history was too short.  At the time, I was 23, and the only credit card I owned was one that […]

The post Should College Students Start Using Credit? appeared first on Your Personal Finance Pro.

]]>
college_credit_cardWhen I bought my first real estate property in 2010, I had excellent credit.  My score was over 760, but my mortgage broker told me they couldn’t give me the best rate because my credit history was too short.  At the time, I was 23, and the only credit card I owned was one that my mom co-signed for me so I could buy the essentials during college.  I was only allowed to use the card for gas, groceries and bars that sounded like grocery stores 😉  Since then, I’ve amassed an impressive collection of credit cards and my credit history is getting longer.

I think it’s a vital step to financial independence for college students to get their own credit card.  If I’m an 18 year old kid and I have my parent co-sign for a credit card, they are on the hook for the balance if I can’t pay, not me.  In fact, a co-signed card will do nothing to help build the applicant’s credit.  Instead, students should opt for a student credit card to help build their credit.  In my real estate situation, if I would have established a line of credit when I turned 18 or 19, I would have had a credit history of 5 years when I first applied for a loan and probably gotten the best rate.  Not only will establishing credit at an early age save you money but it also teaches students life long lessons of financial responsibility.

Don’t Baby Adults 

In the eyes of the law, when children turn 18 they become adults.  Often, they go off to college where they can vote, smoke and drink(illegally, but yes under-age drinking is prevalent in college).  Why shouldn’t they be allowed to open a credit card and start spending?  There are plenty of adults who rack up loads of credit card debt and treat their cards like a piggy bank.  I still can’t fathom why anyone would ever spend more money on their card than they have in their bank account, but obviously some people don’t see the connection.

There are tons of stupid people in this world, and I don’t feel the need to baby them and tell them what they can and can’t do.  Student cards generally come with a $500 or $1,000 limit.  The second you get a full-time job, credit card companies are chomping at the bit to offer you 10-20k lines of credit.  I don’t think much harm can come out of a credit card with a $500 limit, but you can do some real irreparable damage with a $20,000 limit.

Don’t Trust Credit Card Companies

Although I think adults should be able to make their own financial decisions, credit card companies are not helping the situation.  These companies often send representatives to college campuses to search for unsuspecting victims.  There’s no mention of what the interest rate will be if you don’t pay, what a credit inquiry is, etc.  I think that first time credit card holders should have to take a simple two hour course that would explain everything about your credit and how credit works.  If you have to pass a test to drive a car, why not to get a credit card?

The government has made some minor changes to help consumers, but there is still nothing for first time users.  Although student loan debt may be a bigger problem at this point, I hope the government imposes some restrictions in the future on first time credit card use.  Until then, parents need to do their best to educate themselves and their children.

Credit cards can be a great tool if used wisely.  I have been using credit cards and reaping the rewards for over 5 years now and I have never paid one cent in interest.  Because of my solid credit history, I’m able to constantly take advantage of awesome credit card sign-up bonuses and still maintain my high credit score.  Students should not be shielded from credit because it will be important to them for the rest of their lives.  I don’t ever expect the credit card companies to educate their consumers because it’s not in their best interest.  Until government agencies intervene, it’s up to credit card holders and their families to educate them about the proper uses of credit.

It is more challenging than most people realize for those who have just completed grad school, such as an online mat program, to avoid significant debt.  Do you think students should be allowed to use a credit card?  When did you get your first credit card?

-Harry @ PF Pro

The post Should College Students Start Using Credit? appeared first on Your Personal Finance Pro.

]]>
http://yourpfpro.com/should-college-students-start-using-credit/feed/ 8 928
Credit Karma iPhone App Review http://yourpfpro.com/credit-karma-iphone-app-review/ http://yourpfpro.com/credit-karma-iphone-app-review/#respond Fri, 20 Jul 2012 05:26:35 +0000 http://yourPFpro.com/?p=847 As many of you know, I’m a big proponent of do it yourself credit monitoring and score checking.  I don’t think you should ever have to pay for something that is yours.  Credit Karma is one of the only companies around that allows you to check your credit score absolutely free.  I’ve been a member […]

The post Credit Karma iPhone App Review appeared first on Your Personal Finance Pro.

]]>
credit_karma_iphone_appAs many of you know, I’m a big proponent of do it yourself credit monitoring and score checking.  I don’t think you should ever have to pay for something that is yours.  Credit Karma is one of the only companies around that allows you to check your credit score absolutely free.  I’ve been a member for over a year now, and they are constantly improving and updating their site.  They’ve added a ton of new features since I’ve joined and the app is just another one of them.

Their new mobile app makes it even easier to stay up to date with your score.  Although it’s only on the iPhone platform, according to their website, it will be coming to the Android platform very soon.

I’ve graded the app below on some important factors

Usability: A

The app has a nice and simple interface that automatically updates your credit score every time you log in.  I like this feature because when you use the website, you have to manually update your score.  Obviously if I’m on the site or using the app, I want to know what my latest score is!

Navigation: A+

I like how they made navigation from page to page very simple.  The home page takes you to a dashboard that gives you your updated credit score and a notifications section below.  From there, you can look at your credit report card or take a look at your accounts.  I actually prefer using the app over the website  because of these simple features.  Aesthetically, the site is very pleasing and the navigation pages make a lot of sense.

From the homepage, you can go to your credit report that breaks down and grades you on the factors that affect your score: utilization, on-time payments, average age, total accounts, hard inquiries and derogatory marks.  You can also navigate to the my accounts section, which is clearly divided into home loans, credit cards and other types of loans.

Security: B-

This might be the only fault I see with the app.  If you were to lose your phone, someone could potentially access your credit score and credit report.  Personally this doesn’t bother me, in fact I’ve already shared my credit score 😉 so I’m not too worried about some criminal knowing my score.  But I could see how this might be a little troubling to some.

Cost: A

The app’s free so the cost must be an A right?  Well, not necessarily.  The trade-off here is the same as on the website.  In exchange for your score and report, Credit Karma shows relevant ads on the bottom of the screen.  I think this is a fair trade-off and the first ad I saw was for the Chase Freedom Card, which I think is a great starter card btw(no annual fee, and $100-$300 sign up bonus).

Overall, I highly recommend the app.  Ever since Credit Karma added their credit monitoring service, the site has become an extremely valuable part of my do it yourself identity theft protection plan.  I check my score about twice a month, but the credit notifications is their best feature.  The app has a nice notifications area too that will push notifications to your phone when there’s been a change to your credit history.

So are you ready to sign up with Credit Karma(aff link)?  If you’re already a member, you can download the app here.

Completely Free Credit Score
-Harry @ PF Pro

The post Credit Karma iPhone App Review appeared first on Your Personal Finance Pro.

]]>
http://yourpfpro.com/credit-karma-iphone-app-review/feed/ 0 847
Knowing Your Credit Score and Building It Up http://yourpfpro.com/knowing-your-credit-score-and-building-it-up/ http://yourpfpro.com/knowing-your-credit-score-and-building-it-up/#comments Mon, 30 Jan 2012 01:30:10 +0000 http://yourPFpro.com/?p=36 We have all seen, and laughed at, the litany of free credit score commercials on television now a days.  Whether it’s a funny rock band song that you can never get out of your head, or the overweight, balding credit score man seen on your left; we are constantly bombarded with ads for paid services to […]

The post Knowing Your Credit Score and Building It Up appeared first on Your Personal Finance Pro.

]]>

credit: freecreditscore.com

We have all seen, and laughed at, the litany of free credit score commercials on television now a days.  Whether it’s a funny rock band song that you can never get out of your head, or the overweight, balding credit score man seen on your left; we are constantly bombarded with ads for paid services to check our credit score.  So it must be important right?

This is where the magic of advertisement shows it’s power!  We are duped into running to our computer and signing up for a free trial just to make sure we don’t have a fat ugly bald guy in there.  The truth is, there are a couple great alternative sites that are completely free.  The service I use is called, Credit Karma.  It is a simple sign-up process and it will immediately give you one of your three credit scores.  They now provide credit monitoring at no charge too, so you can keep track of all your current lines of open credit.

Now that you know your credit score, what does it mean?  There are three main credit bureaus in the United States: Equifax, Experian and TransUnion.  All three take information from your credit history, such as number of lines of credit currently open, number of inquiries for credit in the past two years, etc and come up with a credit score based on all this information.  All three companies use similar, but slightly different statistical methods to come up with your score, hence the three different scores.  Credit bureau scores are often called “FICO Scores” because they were all developed on the principles used by the Fair Isaac Corporation.

Being a young professional, the one disadvantage you have when it comes to your credit score is time.  The average age of your lines of credit will be low due to the fact that you are young.  You want to have one or two “no annual fee” cards that will always be in your wallet to help raise the average age of all your accounts.  A quick example:  If you have a card with 10 years of history, and you open two new credit cards, this will only reduce your average age to 3.33 years.  Without this 10 year old card, your score could be adversely affected by opening one or two new cards in a short period of time.

Often overlooked, a hard inquiry can negatively affect your credit score for up to two years.  Every time you apply for a credit card, home loan, or even open a bank account, this causes a hard inquiry to show up on your account.  Whether you are accepted or rejected for the offer, each inquiry made counts against your credit score.  However, one important note is that rate-shopping for a mortgage, auto or student loan is actually encouraged.  All inquiries made within a 14 day period, for a mortgage loan for instance, are lumped into one credit inquiry.  Use this to your advantage when applying for these types of loans as rates can vary greatly depending on the type of institution you choose.

You can see a detailed breakdown of what’s in your credit score here.  Let me know what you think about my first post!  Love it? Hate it?  Disagree?  Do you think there is anything else a young professional can do to raise his/her credit score?  How many lines of credit do you have open?


Completely Free Credit Score

-yourPFpro

 

The post Knowing Your Credit Score and Building It Up appeared first on Your Personal Finance Pro.

]]>
http://yourpfpro.com/knowing-your-credit-score-and-building-it-up/feed/ 6 36