There has been much discussion on this blog about credit cards and what you need to look for in your terms and conditions because changes can happen so quickly. This blog post is going to give you a few different suggestions you can do to gain rewards back and not have to watch your credit card companies to such a high degree.
Look at this article for more about credit cards: http://finance.yahoo.com/banking-budgeting/article/107012/Credit-Cards-You'll-Love. What is truly interesting is that the article will give you different cards you can use which give you rewards back. If you are using a certain credit card every month, you should focus on either a very low rate (if you have a balance) or rewards (if paid off every month). Some cards will have both but you should get rewarded. When a credit card is swiped for a $100 grocery bill, the merchant usually receives about $96 or $97 out of the $100 authorization. That $3 or $4 is split between Visa or Mastercard and the card issuer (your bank or WalMart, etc.). Banks want more people to use their cards because it is an easy source of revenue so that is why rewards are so attractive. Think about what rewards would be beneficial to you. For some people, airline miles will be attractive while some store charge cards can give you a certain percentage off of certain days. Here are different rewards credit cards that you can look into: http://www.creditcards.com/reward.php.
One pundit who was quoted in this article said that these times are “extraordinary” and it calls for evaluating all your finances. That is a truly accurate statement because you have to run your finances just like a business would. You want to keep as much of the incoming revenue in your pocket as possible. Checking out your credit cards and how much interest you pay or how you can increase your rewards only benefits you in the end. You are the one who will determine how much gross revenue (your income) hits the bottom line (your savings account).
The manufacturing index did increase this month from the previous month’s number of 36.3 to 40.1. Any reading below 50 is considered a contraction but the higher number shows that things may be coming back. New orders are coming in but many are being fulfilled by inventory on the shelf. This goes back to the previous blog post about how inventories are shrinking. This will help aid the economy because with less inventory on hand, companies will have to ramp up production to meet orders and this will have a beneficial effect for the economy. Here is the full article: http://finance.yahoo.com/news/Manufacturing-declines-at-apf-15102468.html?sec=topStories&pos=5&asset=&ccode=. When companies see that the economy is on more stable ground, that likely will lead to more capital investment and higher factory orders.
Prices for a barrel of oil have increased today. This may be an indication that some people may see that a recovery could start at some point. The price of oil fell so rapidly last summer because of the recession. There was far less demand for oil since economies were in such dire straits. Higher prices will come once economies start to grow. The question is when economies will grow?
This can also be seen simply by looking at the stock market. The market had its best month in many years. This may be a case where people are placing stock in the fact that the economy is starting to come back but it is has not really turned the corner yet, a point made in the previous blog post: http://www.cnbc.com/id/30498787/?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo. Are sentiments ruling the fundamentals of the situation at this point as the author of that article so clearly stated?
The economy did contract and by a large amount. It contracted at the rate of 6.1% on an annualized basis which was significantly higher than analyst’s views of an annualized basis of 5%. What drove this number to be so high was that fewer goods were produced. Many companies have stopped producing goods at this time so that they can deal with inventories that were continuing to increase. Inventories are continuing to decrease so that production will start up again for many of these companies.
Consumer spending also rebounded. This article talks specifically about that: http://finance.yahoo.com/news/Consumers-give-spark-of-hope-apf-15078136.html?sec=topStories&pos=4&asset=&ccode=. There was an increase in spending on durable goods, which would include items such as washer and dryers, cars, etc. The recession may still be going on but cars may last only so long. People may enter the marketplace to buy goods, especially with prices continuing to remain so low.
One of the interesting notes that one pundit pointed out today is that much of the stimulus bill has not been felt yet. This could lend general optimism that the economy could post positive growth in a quarter this year. At this point, the recession has lasted longer than many of the most recent recessions.
When looking at that, the large government stimulus bill combined with a continued increase in consumer spending could lead to an improving economy. It is still early in the game but it could be seen that we are rounding the corner ever so slightly.
There has been much talk and hype about doing a loan modification. This can be a win-win for both parties: lenders may not have to deal with another foreclosure while you are able to remain within your home. While this seems to be good, many lenders are reluctant to let this happen. Take a look at the following article and some real-life examples of people struggling to make this happen: http://finance.yahoo.com/real-estate/article/106472/Tough-Workouts.
Take a look at this article: http://ezinearticles.com/?Do-it-Yourself-Loan-Modification—The-Best-Way-to-Get-Started-and-Succeed&id=1948329. It gives you some tips about how you can be successful in a loan modification system. Your success will be contingent upon a few primary factors and the first would be education. You have to educate yourself on the process because you will likely be the one driving the process. The article talks specifically more to this but the only way that you can truly succeed is if you push the envelope and understand the steps that must be taken to see through a loan modification to the end.
When you are talking with your mortgage company or bank about a loan modification, one of the biggest keys is to be persistent. It will take many phone calls and attempts to get the end result accomplished. Many people will become frustrated and give up in the end. This loan modification could be very important if you are making a payment you cannot afford or if you have a house worth less than you borrowed. This is a significant step in your financial future and you owe yourself at least the dedication to trying as hard as possible.
Obama’s plans for mortgage changes are slowly taking effect. You can call on your bank to see if they have been unveiled although many banks are working on the rollout still.
There has been quite a bit of confusion among many individuals about their credit scores, especially in relation to credit cards. This is primarily because of the decrease in many people’s credit lines, which can affect total balances to available credit limits. This may happen to anyone but most often occurs with customers who are not using their credit cards on a regular basis or who keep very low balances. Here is the article: http://www.bankrate.com/finance/credit-cards/are-credit-scores-dropping.aspx. Remember that you have to be in control of your finances and part of this is to keep track of your credit cards. You can easily get online to check on any credit card once a week. This takes only two minutes and could easily be done on an early Sunday afternoon.
One potential positive is that President Obama has said that he wants to make some changes within this field. This could be highly beneficial to credit cardholders because they often have few alternatives to what the credit card companies decide to do with their accounts. He wants to prohibit unjustified rate increases or penalties along with clearer guidelines that everyone can understand. A bill was passed in March which did make changes to credit card laws and this article talks about that and more about President Obama’s goals with credit cards: http://www.bankrate.com/finance/credit-cards/are-credit-scores-dropping.aspx.
This may be a good time to check through your credit cards. Your credit card company does not need to inform you of a change to your credit card account. That is why it may be good to check through your accounts. The average American has four credit cards. It may be hard to keep up with all four or if you have even more. Focus on your junk mail as many changes could be sent through your standard mail. This affects your daily routine by less than two minutes.
Everyone lives in their life in a different way so there are different ways to save money. Think through your cable bill. You may be able to see whether any competitors in your area are offering a great one year deal. If you are paying $50 a month and the competitor offers to charge you $30, why not save $20 a month? That equals out to savings of $240 very quickly.
In the end, small changes in your living habits can produce big savings at the end of the year. Think through where you spend money on a regular basis. Finding less costly alternatives allows you to keep more money in your pocket and not relying on raises to save more money.
This can add up very easily when you think over the years. Look at the following
One of the best practices that you can have is to make these adjustments on a periodic basis. This usually can be done about every six months or a year. This can ensure that you are not making bad spending decisions for an extended period of time. Look at the following article so that you can get more tips about that: http://www.bankrate.com/finance/personal-finance/spring-clean-your-finances-1.aspx/ It is generally estimated that most individuals spend more time planning a vacation than planning their finances. Which side of the line do you want to be on? Those who focus on the finances tend to be more in control of their lives and feel much more balanced.
The third part of this series will look at the credit report. The credit report is your report card on how well you are doing with your finances and payments. If you do not have a good credit report, you will have a higher interest rate than others. The interest rate is critical because this can add tens of thousands up to a hundred thousand dollars or more in extra interest over the life of a mortgage loan if you have bad credit. When you have a good credit report, it shows others that you are less of a credit risk and this lower risk is rewarded with a lower interest rate.
When you are looking at your credit report, you want to first check to see what your overall score is. If you got a free credit report, you can usually pay a small fee (under $10) to get your credit score. The score can change depending upon the credit bureau so use their index to tell where you stand as far as being a credit risk. Once you know your score, look to see whether you have any public information filed against you. This would be things such as judgments, bankruptcies, or collections. If you have any collections, it is usually best to pay them off. Some mortgage companies may not choose to lend to you until you have all non-medical collections paid off. This has a severely negative impact on your credit score.
From there, you want to review each credit account on there carefully. Look to see that you still have an open account if you have one. Check to see that payment history is correct. Your payment history will reflect if you have any 30 day late payments, 60 day late payments, 90 day late payments, etc. It will also show the high limit or original amount (depending upon if a line of credit or a loan). Your most recent twelve months’ worth of payments will hold the most weight on your credit score.
The broker will look to see how you use your available credit. The figure for this to be in good standing and not affect your credit score is to use no more than 35% of your available credit limit. This can be figured out by adding up all outstanding balances on credit cards and other available lines of credit and divide it by your credit limits.
This breaks down the key factors and what brokers look for. If you find that your credit score is not to your liking, take steps to improve it.
Yesterday you learned about the first piece of the puzzle, loan to value ratio. Today you will learn about debt to income ratio.
The debt to income ratio is so important simply because the mortgage brokers want to make sure that you have enough room within your monthly budget to pay your mortgage and bills comfortably. The company holding your mortgage wants to make loans and simply collect the payment. That is why the mortgage broker will be so diligent to look at your monthly income and that you can make your payments.
You should first get a copy of your credit report. This is going to be important for two reasons: your credit history is on it and your debt to income is calculated using the payment amount on each creditor loan or line each month. To order a copy of your credit report, visit http://www.annualcredit report.com. You can get one free copy of your credit report from each of the three major credit bureaus once a year. These are TransUnion, Experian, and Equifax.
What you will do when you have ordered a copy of a credit report is to look on there first to ensure accuracy. There are many people who have found incorrect information on their credit report. You can challenge this information if you find that it is not correct. The creditor whose account it is then has to prove why it should remain on your credit report.
Then take your minimum payments defined by the credit report. These usually will be on the first line of the account summary. It should be not too far from the creditor name. Add these altogether and then add in your proposed new monthly mortgage payment. If you do not know how to find what your monthly mortgage payment will be, use this link for a handy calculator: http://www.bankrate.com/calculators/mortgages/mortgage-calculator.aspx. You then want to take that number and add your estimated escrow amount (yearly taxes +insurance/12). This will equal your total debt every month and divide this by your income. You want this number to be below 40%. If you are above that percent, you will want to find ways to lower your monthly debt or to increase your monthly income. You may need to sell the motorcycle you financed or the extra car you do not really need.
With your debt to income in line, we can start looking more at the credit report and what it signifies.
If you want to refinance, now is one of the best possible times simply because rates have come down. When looking at your refinancing, there are steps you can take ahead of time to ensure that you are a good candidate or how you can improve to be a good candidate.
The first thing to look into is what your home may be worth in these times. With the declining home values, you may be unaware of what your house is worth. This had been a source of frustration for many because they may have felt that their house was worth X based on an appraisal from two years but that is not valid simply because of the dramatic shifts within the marketplace. Some banks will only accept appraisals completed within the past three months because of such dramatic price swings. A good website to simply check is: http://www.zillow.com. This should give you a rough approximation.
Let’s now calculate loan to value so that you can see how everything stacks up. You have the value of your property from going to the website. You now need to know how much you owe in loans. Take a look at your most recent mortgage statement to see what the balance is on your first mortgage and your second mortgage (if you have one). Add these together and then divide this against your house value. This will give you a loan to value ratio. If you find that your value is above 80%, you may need to speak to several different mortgage brokers to see if you can refinance. Any loan to value ratio under 80% should give you ample room so that you can qualify for a mortgage. That is step one of the process. The next article will talk about your debt to income.
If you are looking into refinancing, this article will truly apply if you have a home equity loan or line of credit. With the declining home markets, some banks are requiring that your home equity loan or line be paid off when you go to do a mortgage refinance. Here is a quick scenario: you buy your house and have a first and second mortgage. Your first mortgage is at a high rate and you want to refinance. When you refinance your first mortgage, your previous second mortgage will move into first position on a lien. To do a refinance, any mortgage company will most likely require it be the first lien holder of the property. When your first mortgage is paid off through the refinance, the old second mortgage would move into first lien holder position unless it was subordinated. The subordination will mean that the old second mortgage will return to its original position again with the refinance going into the position as the first lien holder. Things have changed in that some banks will refuse to subordinate their home equity loans or lines of credit (which are in the second lien holder position) so that you have to pay off that loan or line simply to do a mortgage refinance: http://www.bankrate.com/finance/home-equity/home-equity-lenders-may-block-refinance-1.aspx.
If you are thinking about refinancing, you may want to check with your bank ahead of time about this. If you do not, this could end up costing you time and money in the form of extra fees that you may not have been expecting. Getting a lower mortgage payment is good but you don’t want to do it at the cost of high early closing fees. Many home equity lines of credit cost you little upfront with an early close fee if you close it off within the first three or four years from origination. Some banks are also charging a fee to subordinate their loan if a new mortgage will be created as well.
