credit utilization Archives - Page 20 of 68

Apache is functioning normally

May 11, 2023 by Brett Tams

Alternatives to a debt consolidation loan

Home equity

One popular way people pay off debt is to use the equity in their homes. Home equity loans and home equity lines of credit (HELOCs) let borrowers use their homes as collateral in exchange for financing. Just be sure to factor in the risks if you’re considering this option. The lender can seize your home if you can’t make the payments.

Who this is best for: Borrowers who have built up equity in their homes.

Who this is not good for: Those unsure of their ability to maintain the monthly payments.

Home equity loan versus debt consolidation loan: Home equity loans and HELOCs may offer lower rates than debt consolidation loans, though they come with more risks, since your home is used as collateral.

Debt relief services

Debt relief services, including debt settlement companies, offer another way to deal with your debt if you can’t qualify for a consolidation loan. These companies reach out to creditors and debt collectors on your behalf and try to settle the debt for a lesser amount.

If you decide to pursue debt relief services (perhaps as an alternative to bankruptcy), be aware that the fees these companies charge can be steep. Take your time to fully research fees, reviews and other details before applying. It’s also wise to compare multiple debt relief companies before you commit.

Who this is best for: Borrowers who are experiencing financial hardship and cannot pay their debt.

Who this is not good for: Those with a thin credit history or less-than-stellar credit score.

Debt relief services versus debt consolidation loan: Unlike debt consolidation loans, debt relief services aim to eliminate some of your debt without you having to pay it. With that said, pursuing debt relief is a risky move, and it can damage your credit score.

Credit counseling

Another option that can help you get debt under control is credit counseling. Credit counseling companies are often (though not always) nonprofit organizations. In addition to debt counseling, these companies may offer a service known as a debt management plan, or DMP.

With a DMP, you make a single payment to a credit counseling company, which then divides that payment among your creditors. The company negotiates lower interest rates and fees on your behalf to lower your monthly debt obligation and help you pay the debts off faster.

DMPs are rarely free, though, even if they’re done by a nonprofit credit counseling service. You may have to pay a setup fee of $30 to $50, plus a monthly fee (often $20 to $75) to the credit counseling company for managing your DMP over a three- to five-year term.

Who this is best for: Borrowers who need help structuring their debt payments.

Who this is not good for: Those with little wiggle room in the budget.

Credit counseling versus debt consolidation loan: With a debt consolidation loan, you’re in control of your payoff plan, and you can often apply with few fees. With credit counseling, a third party manages your payments while charging setup fees.

Balance transfer credit card

With a balance transfer card, you shift your credit card debt to a new credit card with a 0 percent introductory rate. The goal with a balance transfer card is to pay off the balance before the introductory rate expires so that you save money on interest. When you calculate potential savings, make sure you factor in balance transfer fees.

Keep in mind that paying off existing credit card debt with a balance transfer to another credit card isn’t likely to lower your credit utilization ratio like a debt consolidation loan would.

A debt consolidation loan is also going to offer higher borrowing limits, enabling you to pay off more debt, as well as fixed monthly payments, which make it easier to budget and stay disciplined with paying off debt.

Who this is best for: Borrowers who can pay off existing debt quickly.

Who this is not good for: People with a young credit history or a less-than-average score.

Balance transfer credit card versus debt consolidation loan: Balance transfer cards are often the best choice for borrowers who have the means to pay off their debt within 18 months, which is a standard 0 percent APR period. If you need longer to pay off your debt, or if you have a lot of debt, a debt consolidation loan is a better choice.

Source: thesimpledollar.com

Apache is functioning normally

May 10, 2023 by Brett Tams

Save more, spend smarter, and make your money go further

It’s a question that many people have on their minds as they begin to seriously consider their finances: how do I raise my credit score, or how do I fix my credit? Though credit scores may seem shrouded in mystery – how they’re calculated, which ones are used – consumer credit scores tend to follow a few common principles.

In this post, we’re explaining some simple tricks to raise your credit score.

Raising your credit score can take time. After all, credit scores are a measure of how trustworthy of a borrower you’ve been over the years. The good news? You can get started on these credit tips today.

Let’s start with the basics of how to improve your credit score.

How to raise your credit score

Raising your credit score is important, but you might not have a solid idea of what exactly your credit score is. Don’t worry; it’s not as complicated as you might think.

Your credit score is basically a measure of how reliably you pay back money that you’ve borrowed.

There are two main models that credit reporting bureaus use to measure your credit:

FICO
VantageScore

The three bureaus that do the reporting are:

Experian
Equifax
Transunion

Each of these bureaus receives information from various financial institutions you’re involved with, and that information is what determines your credit score.

You’ll generally have a better score if you’ve:

Consistently paid off loans.
Kept your credit usage low.
Stayed on top of all your financial responsibilities.

Both metrics range from 300 to 850, with most scores above 700 considered good to great. If your score is below that — or significantly below that — it can be difficult obtaining a loan at a good rate, or even obtain a loan at all.

Here’s what you can do to boost your score if you do find yourself with a lower rating than you’d like.

1. Ask for (and receive) a credit limit increase

If you’ve been regularly making required payments on your credit card, you may want to try asking the credit card company for a credit limit increase.

What to consider before moving forward:

You wouldn’t necessarily want to do this to finance a purchase you otherwise wouldn’t have been able to make.
But if your monthly balance is relatively steady, you could decrease your utilization rate (a good thing) by increasing your credit limit.

For those who may not know, the credit utilization rate is the amount of credit available to you that you’re actually using. It’s basically your balance divided by your credit limit. So, if you increase your credit limit and keep the balance the same, the utilization rate will be lower. And that can translate into how to improve your credit score.

2. Pay your bills on time

One simple way to get started building solid credit is to start paying bills on time. Among the many different sources of data that major credit reporting bureaus use to assess your creditworthiness, whether you pay for regular expenses on time is pretty important.

It’s not hard to see why: if you have a good track record regularly making rent payments, that probably means it’s more likely that you’ll be able to make regular payments on a loan.

The trick, however, is that you may need to connect your bank account to one of the credit reporting agencies’ services. If you’re curious, call or visit the website for Experian, Transunion, or Equifax to see whether you can have your regular bill payments factored into each of these bureau’s tabulation of your score.

*Pro-tip: if you have a hard time managing your bills:

Make a central list where you itemize each bill you have — rent, water, gas, electric, internet — and what day each one is meant to be paid.
Or, even easier, just download the Mint app, which can remind you about upcoming bills and keep track of the money you spend on bills each month.

3. Show you can handle different kinds of debt

It’s probably not a good idea to run out and take on additional debt for the sake of it, but if you’re in need of a type of loan you haven’t used before (say, an auto loan for a new car, or a personal loan to consolidate credit card debt) consider taking it on and make regular payments on it; you may see a bump in your score.

Lenders want to see you can handle different types of debt, so adding another type of loan and paying it down could have a positive effect on your score.

Here’s an example. If you’ve been paying down student loans (generally, these fall into the “installment loan” category) but don’t yet have a credit card (generally, these fall into the “revolving credit” category), you could see a score increase just by opening that credit card account and paying off your balance regularly.

4. Open a new account and make on-time payments

If you need additional credit, opening a new account and handling it responsibly (making on-time payments on it, not borrowing more than you can afford) can have the effect of increasing your score.

Remember, though, that opening a new account you can’t handle (where you miss payments and/or take on more debt than you can afford) will likely have the opposite effect: a score decrease. So, it’s a good idea to proceed responsibly.

How to keep your credit score high

Once you’ve got your credit score near where you want it, it’s important to do your best to keep it in good standing. By keeping up the habits listed above, you can ensure that your credit stays relatively stable. However, it’s good to note that, in some cases, credit can fluctuate.

Don’t be surprised if you see your credit score dip, then raise up again from time to time.

For example, maybe one month, you use a higher amount of your credit utilization due to a few unforeseen expenses. This isn’t the end of the world, and with continued responsible debt management and credit usage, your score should recover.

In general, however, here’s what you can do to maintain a high credit score once you’ve got it.

1. Close accounts with care and caution

“I have too many credit cards” is something you may have heard someone say or even thought to yourself. And for many, that may be the truth. But having several credit cards, in and of itself, won’t necessarily lower your score.

Though closing credit card accounts or doing a balance transfer may seem like it would boost your credit score because it’s simplifying your life or making things more organized, it can sometimes have the opposite effect. That’s because when you close an account, two things happen:

You lose the entire line of credit you had, which may decrease your utilization rate (see the 1st tip above).
You’ll stop having that account continue factoring into the average age of your accounts.

Typically, scores want to see you’ve held several accounts open and in good standing for a long period of time.

Here’s a big caveat, though: there are still plenty of good reasons to close accounts, credit cards or otherwise:

Maybe you can’t afford the annual fee or the rewards just don’t make it worth it anymore.
Or maybe you’re struggling with credit card debt and want to consolidate it into a personal loan.

The important thing to remember is this: if there’s no good reason to close an account, it’s sometimes wiser to keep it open.

If you do want to close an account, however, don’t worry; the ding to your credit will likely be minor, and it’s likely to recover with time after continued responsible use of the other lines of credit you do still have open.

If you’re considering moving your balance, shop balance transfer credit card deals and personal loan offers from our partners.

2. Stay on top of your personal finances with Mint

Your credit score is just one metric that helps you measure your personal finances.

You should also keep tabs on other important aspects of your financial well-being, including:

Healthy credit
Well-kept budget.
Solid debt-to-income ratio
Steadily growing savings

Mint allows you to do that. By aggregating your financial information — including everything from investments to upcoming bills — into one convenient dashboard, you can have a bird’s-eye view of your financial health.

Knowing when rent, bill payments, credit card payments, and loan payments are due each month can help you raise your credit score and stay on top of it while also knowing how much you have leftover to budget for other areas.

Remember, there’s no one magic bullet to build your credit score fast. The above credit tips are just some of the ways you might raise your credit score over time and keep it high. However, lasting, meaningful score increases come from showing consistently strong credit habits.

In other words, don’t forget the fundamentals: pay your bills on time, don’t take on more debt than you can afford and be careful about applying for too many accounts over a short period of time.

Save more, spend smarter, and make your money go further

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Apache is functioning normally

May 10, 2023 by Brett Tams

If you have an 810 credit score, congratulations. The score is considered excellent and could help you qualify for loans with more favorable terms or premium rewards credit cards.

Let’s take a closer look at what an 810 credit score means and some different strategies that could help boost your credit score.

What Is a Credit Score?

A credit score is a three-digit number that reflects a consumer’s creditworthiness, or ability to pay back loans in a timely manner. Scores range from 300 to 850. Generally speaking, the higher the credit score, the better you tend to appear to a potential lender.

The two most popular credit scoring models are FICO and VantageScore. To calculate your score, both use credit history information provided by the three major credit bureaus: Experian, TransUnion, and Equifax.

Check your score with SoFi Insights

Track your credit score for free. Sign up and get $10.*

Reasons to Care About Credit Scores

There are several reasons why a good credit score is essential to your financial health. Here are three to keep in mind.

It can increase your chances of being approved for a loan

The higher your credit score, the more likely lenders will approve loan or credit card applications. Whether it’s to purchase a house, buy a car or private student loans, having access to loans can help you achieve some big financial goals. Note that some banks may also run credit checks before issuing you an account.

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You may have access to better loan rates and terms

Lenders are more likely to offer consumers with better credit scores lower interest rates and more favorable terms because they’ve proven they pay back their loans on time. A higher credit score may also get you access to other types of products such as premium rewards credit cards.

You could save money

When you move into a new home, the utility company or your landlord may check your credit score to determine how much of a security deposit you’ll need to put down. Typically, the lower your score, the higher your deposit. Though the money is often refundable, it’s usually held in a third-party account that you won’t have access to. Potential employers may also run a credit check before you’re offered a job.

Recommended: Everything About Tri-Merge Credit Reports and How They Work

Is an 810 Credit Score Considered Good or Bad?

An 810 credit score is considered very good. In fact, just 21% of consumers in the U.S. have a credit score of 800 or higher. By comparison, the national average credit score is 714, according to Experian.

What Does an 810 Credit Score Mean?

Having an 810 credit score means you’ve proven through your credit behavior that you are likely to pay back loans on time. As mentioned above, a score of 800 or above places you in the top tier of consumers.

You are also considered to be in the “exceptional” range for your FICO score and “superprime” for your VantageScore. This means lenders are more likely to approve you for loans and offer you access to products such as loans with lower interest rates and premium credit cards. Landlords and utility companies may also ask for a lower security deposit amount (if at all).

How to Build Credit

Looking to build your credit? You have several avenues to explore. Below are a few to consider. Note that there’s no one-size-fits-all solution, so it’s a good idea to research all the options available to you.

Use a Credit Card

Even if you’re just starting out in your career or only have fair credit, you may still be able to be approved for a credit card. For instance, you can open a credit card that’s specifically for college students. Or you may want to consider a secured credit card, where you pay a refundable security deposit that acts as your credit line.

Whatever purchases and payments you make on the card are reported to the three major credit bureaus. This in turn helps to establish your credit history.

Become an Authorized User

An authorized user means that your name will be put on someone else’s credit card account. You can use the credit card much like the primary cardholder can, though this person is ultimately responsible for ensuring the minimum payments are paid on time.

If the primary cardholder has a good credit score, then their positive credit history may be added to yours.

Add Monthly Bills to Your Credit Report

Some free credit monitoring services will report your utility and rent payments to your credit report. Doing so can help build your credit history. Even if there is a small fee involved, it may be worth using for a few months, depending on your financial situation.

Recommended: How to Read and Understand Your Credit Report

Take Out a Credit Builder Loan

Credit builder loans are designed to help borrowers who are looking to build their credit. They’re similar to a personal loan, except you don’t initially receive the loan proceeds. Instead, the money will be held in a separate savings account until you pay off the loan. Meanwhile, your payment activity will be reported to the credit bureaus.

How Long Does It Take to Build Credit?

It can take several months for you to establish and build credit. This is because credit scoring models need enough information from your credit history in order to assess your creditworthiness.

As you work on building your credit, do your best to practice good financial habits, such as making on-time payments.

Credit Score Tips

Even if you have an excellent credit score, it’s a good idea to keep up good credit behavior. This includes:

• Consistently making on-time payments

• Keeping your credit utilization, or the percentage of the available limit you’re using on revolving credit accounts, as low as possible

• Avoiding applying for too many new loan or credit accounts at once

• Keeping your longest credit card or loan account open

• Regularly monitoring your credit score

• Checking your credit history and immediately disputing any errors you find

How to Check Your Credit Score

Wondering how to find out your credit score for free? You have several options. The first is your credit card statement. Many credit card issuers provide customers with a complimentary look at their score. To find it, you may need to log into your account or check your monthly credit card statement.

Another option is to use credit score monitoring tools; some are free, others require a payment. Before opening an account, compare each tool to see which one best serves your needs.

The Takeaway

It’s good news if you have an 810 credit score and a sign that you have a track record of paying back your loans. A good score may help improve your access to loans with better terms or premium or luxury credit cards. If you want to improve your score — or just maintain it — you can try practicing good financial habits, like consistently making on-time payments, keeping tabs on your credit score, and disputing any errors.

If you need help managing your spending and saving, consider using a money tracker app. The SoFi Insights app connects all of your accounts in one convenient dashboard. From there, you can see all of your balances, spending breakdowns, and credit score monitoring, plus you can get other valuable financial insights.

Stay up to date on your finances by seeing exactly how your money comes and goes.

FAQ

What is a decent credit score for a 23-year-old?

Chances are, at 23 you’re probably still building your credit. According to Experian data, the average credit score for people aged 18 to 25 is 679. If yours is higher, then it’s considered above average.

What is the highest credit score possible in 2023?

The highest credit score you can achieve is 850 for both FICO and VantageScore scoring models.

Is a credit score of 800 good at age 23?

Whether you’re 23 or not, an 800 credit score is considered excellent.

Photo credit: iStock/Makhbubakhon Ismatova

SoFi’s Insights tool offers users the ability to connect both in-house accounts and external accounts using Plaid, Inc’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score provided to you is a Vantage Score® based on TransUnion™ (the “Processing Agent”) data.
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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
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Apache is functioning normally

May 10, 2023 by Brett Tams

Save more, spend smarter, and make your money go further

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Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom Mint.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear).

Each year as you await your tax refund, you face the same question – what to do with that money once it arrives? For some, the money immediately goes to cover basic needs, but for others, the money goes to far less-essential items.

According to a 2020 survey by Self Financial, 44% of respondents said not getting a tax refund this year would completely derail their budget for the rest of the year.

So how do you use your tax refund to plan ahead, build your wealth, financial health, and ultimately, your credit?

Here are 5 ways to put your tax refund to work to build your credit.

But first…

Why use your tax refund for credit-building?

Maybe you’re itching to spend your tax refund to treat yourself. While there’s nothing wrong with using a bit of that money for fun, tax refunds are a great opportunity to get ahead with your finances too.

But why, of all things, focus on your credit?

First, bad credit could cost you thousands of dollars more over your lifetime, since you often get charged higher interest rates (if you can get approved at all). Your credit can also impact your ability to rent an apartment, qualify for certain jobs, or even get a cell phone.

Good credit, however, creates a financial safety net to fall back on if you need it. If you have good credit, you may have an easier time qualifying for personal loans, credit cards, or other credit products if you need to borrow money, often at a lower rate.

If you don’t have an emergency savings fund, credit may be your only other option to lean on if you face job loss, an unexpected medical emergency, etc.

You have to build credit before you need it though. Otherwise, you might not be able to access it when you actually do need it.

5 ways to build credit using your tax refund

Once you have your tax refund in hand, here are some ways you can put it to work to help your financial health.

1. Pay down debt

While paying down your mortgage or other personal loans may help your credit score, it may be a good idea to focus on higher-interest, more expensive consumer debt (like credit card debt) first.

Not only could paying down this higher-interest debt save you the most money in the long run, but it could also have a bigger impact on your credit score. That’s because credit usage, or how much of your available credit you use at any given time, counts for 30% of your FICO® credit score.

While installment loan usage (like personal loans, car loans, or home loans) does count somewhat towards this factor in your credit score, revolving account balances (like credit cards or HELOCs) count more, according to credit bureau expert Barry Paperno.

That doesn’t mean you have to pay your credit card debt off completely to see benefits to your credit score. Even paying your balance down 5-10% may have a positive impact.

According to credit scoring agency FICO, people with the highest credit scores tend to have credit utilization between 6-10% on their revolving credit accounts. While that’s a great goal to aim for, start with paying down what you can, no matter how small that amount may seem at first. Small wins can add up to big ones over time.

Aside from credit utilization, the only other factor that impacts your credit score more is your payment history. Which brings me to my next point…

2. Get your current accounts in good standing

If you have late payments or missed payments on your current credit accounts, make up those payments if you can. While many lenders report a late payment to the credit bureaus if it’s more than 15 days late, how late your payments are can impact your credit score in different ways. A payment that is 30 days late affects your score differently than one that is 90 days late.

For example, according to one FICO score simulation, if you have a 793 credit score and miss a payment by 30 days, your score could drop 60-80 points. In that same situation, if you missed a payment by 90 days, your score could drop 100 points or more.

So the sooner you catch up on a late payment, the better. Besides, making those payments could keep more late fees from adding up.

While catching up on payments may not undo the damage of a late or missed payment on your credit (it can take years for just one late payment to fall off your credit report), it could prevent any more damage from being done.

If the late payments were on property, or loans that were secured by property, like a home loan or car loan, catching up on payments could also prevent you from losing your home or car.

3. Open a Credit Builder Account

This next one is for people who either have no credit history, a limited credit history, or need to rebuild credit after financial hardship such as bankruptcy, foreclosure, or identity theft, to name a few examples.

Unlike a traditional personal loan, credit builder loans don’t give you the money upfront.

Instead, the lender holds the loan amount in a bank account. Each month, you pay into this account and the lender reports your payment history to the credit bureaus, which helps you build credit history.

Once you pay off the loan amount, the money inside the account comes back to you, minus the interest charged on the loan. In other words, these loans give you the opportunity to put some money away for savings while you build your credit.

If you have trouble gaining access to other credit products or want to build credit while you build some savings, a Credit Builder Account could be the right option for you.

4. Use it as a deposit on a secured card

For many, a secured credit card may be a good entry point for accessing credit cards. A secured card works just like a regular credit card, except you put down a security deposit that is usually equal to your credit limit.

For example, you may have a secured card with a $100 credit limit and a $100 security deposit. Like a deposit for utilities, a secured card deposit is used to cover your bill if you don’t pay back what you owe.

Some companies (like Self Financial) provide an option for you to build your way slowly towards a secured card through a Credit Builder Account, no extra deposit or hard inquiry needed. Bonus: Self doesn’t deny you if you have a history of bankruptcy or foreclosure, unlike some other credit card issuers.

There are many different secured credit cards to choose from, so shop around to decide which one is right for you.

5. Work with a credit counselor

Not sure where to start when it comes to your credit? Or what product might work best for you? You may want to use some of your tax refund to hire a qualified professional to help you come up with a credit action plan.

Here are a few reputable places to start searching for a credit or financial counselor:

National Foundation for Credit Counseling (NFCC). This nonprofit provides financial counseling services through their member organizations across the US. Visit their website to connect with free or low-cost help in your area.
Association for Financial Counseling and Planning Education (AFCPE). AFCPE has over 3,200 certified financial counselors, planners, educators, and researchers around the world. You can find local or virtual financial counseling through their online tool.
Operation Hope. Operation Hope is a national nonprofit that provides financial coaches to help people “develop customized action plans around building their own businesses, raising their credit scores, buying homes, or simply making better decisions with the money they have.” Their website also has tons of free resources about financial basics.

These organizations provide access to qualified financial counselors who can help you create plans that align with your financial goals, whether that means building your credit, paying down debt, budgeting, or working towards buying a house, to name a few examples.

Depending on your current income and situation, you may also qualify for no-cost or low-cost help, since many financial counselors offer a sliding scale based on financial need.

Be careful when browsing for professional help with your credit though, especially if you search for credit repair. While there are some good players in the space, you have to be really careful to pick the right one. The Federal Trade Commission provides some guidelines to help you find legitimate credit repair help, which you can view here.

Bonus: Build an emergency savings

Okay, so this one isn’t exactly credit-specific, but having an emergency savings fund could help reduce the amount you need to borrow if you ever did need to lean on credit during times of financial hardship.

Research from SaverLife shows that even just $100-$200 in savings could mean the difference between keeping your housing during hard times or having your utilities cut off.

According to the IRS, the average tax refund in 2020 was $2,741, which for people who make about $30,000 is roughly one month’s salary – a pretty healthy cushion if you lose your job and need time to find something new.

The good news is, there are tools that could help you build both your credit and some savings at the same time.

Bottom line

While credit may not usually be top-of-mind when you get a sudden rush of cash, it’s a key building block for your financial health, and can help open doors to your future.

So if you have a little extra money, whether it’s thanks to a tax refund, stimulus check, bonus, raise, inheritance, or even just finding $20 in an old pair of pants, put that money to work for your future self.

Save more, spend smarter, and make your money go further

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Apache is functioning normally

May 9, 2023 by Brett Tams

How to Save for a House in 8 Steps

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down payment. Find out how much you should budget using a home loan affordability calculator and figure out how to save the amount you need. After all, the best way to save for a house is to formulate a budget that helps you work towards your house saving goals step by step. Soon enough, you’ll be turning the key and stepping into a home you love.

Step 1: Calculate Your Down Payment and Timeline

When figuring out how to save for a house, you may already have a savings goal and deadline in mind. For instance, you may want to save 20 percent of your home loan cost by the end of the year. If you haven’t given this much thought, sit down and crunch the numbers. Ask yourself the following questions:

What is your ideal home cost?
What percentage would you like to contribute as a down payment?
What are your ideal monthly payments?
When would you like to purchase your home?
How long would you like your term mortgage to be?

Asking yourself these questions will reveal a realistic budget, timeline, and savings goal to work towards. For instance, say you want to buy a $250,000 house with a 20 percent down payment at a 30-year loan term length. You would need to save $50,000 as a down payment; at a 3.5 percent interest rate, your monthly payments would come out to be $898.

Step 2: Budget for the Extra Expenses

Just like a new rental, your home will have fees, taxes, and utilities that need to be budgeted for. Homeowners insurance, closing costs, and property taxes are a few examples of cash expenses. Not to mention, the cost of utilities, repairs, renovation work, and furniture. Here are a few more expenses you may have to save for:

Appraisal costs: Appraisals assess the home’s value and are usually ordered by your mortgage lender. They can cost anywhere from $312 to $405 for a single-family home.
Home inspection: A home inspection typically costs $279 to $399 for a single-family home. Prices vary depending on what you need inspected and how thorough you want the report to be. For instance, if you want an expert to look at your foundation, there will likely be an additional cost.
Realtor fees: In some states, the realtor fee is 5.45 percent of the home’s purchase price. Depending on the market, the seller might pay for your realtor fee. In other places, it might be more common to contract a lawyer to look over your purchase agreement, which is usually cheaper than a realtor.
Appraisal and closing costs: Appraisals assess the home’s value and are usually ordered by your mortgage lender. They can cost anywhere between $300 and $400 for a single-family home.

Step 3: Maximize Your Savings Contributions

Saving for a new home is easier said than done. To stay on track, first create a savings account that has a high yield if possible. Then, check in on your monthly savings goal to set up automatic contributions. By setting up automatic savings payments, you may treat this payment as a regular monthly expense.

In addition to saving more, spend less. Evaluate your budget to see what areas you could cut down or live without. For instance, creating your own workout studio at home could save you $200 a month on a gym class membership.

Step 4: Work Hard for a Raise

One of the best ways to boost your savings is to increase your earnings. If you already have a job you love, put in the extra time and effort to earn a raise. Learning new skills by attending in-person or virtual training seminars or learning a new language could increase your earning potential. Not only could you land a raise, but you could add these skills to your resume.

Sometimes, putting in the extra effort doesn’t always land you a raise, and that’s okay! When getting a raise is out of the question, consider looking at other opportunities. Figure out which industry suits you and your skillset and start applying. You may end up finding your dream job, along with your desired pay.

Step 5: Create More Streams of Income

Establishing different income streams could help your house savings budget. If one source of income unexpectedly goes dry, having other sources to cut the slack is helpful. You won’t have to worry about the sudden income change when paying your monthly mortgage.

For example, creating an online course as a passive income project may earn you only $5 this month. As traffic picks up, your monthly earnings could surpass your monthly income. To create an abundant financial portfolio, there are a few different ways to do so:

Create an online course: Write about something you’re passionate about and share your skills online. Sell your digital products on Etsy or Shopify to earn supplemental income.
Grow a YouTube channel: Start a YouTube channel and share your skills to help others within your industry of expertise. For instance, “How to start a YouTube channel” could be its own hit.
Invest in low-risk investments: From CD’s to money market funds, there are a few types of investments that could grow your cash with low risk.

Step 6: Pay Off Your Biggest Debts

Before taking on more debt like a mortgage, it’s important to free up your credit usage. Credit utilization is the percentage of available credit you have open compared to what you have used. If you have $200 in debt, but $1,000 available on your credit card, you’re only using 20 percent of your credit utilization. A higher credit utilization could potentially hinder your credit score over time. Not only can paying off debts feel satisfying, but it could also increase your credit score and prepare you for this next big purchase.

To pay off your debts, create an action plan. Write out all your debt accounts, how much you still owe, and their payment due dates. From there, start increasing your payments on your smallest debt. Once you pay off your smallest debt in full, you may feel more motivated to pay off your next debt account. Keep up with these good habits as you take on your mortgage account.

Step 7: Don’t Be Afraid to Ask For Help

Whether your touring homes or want help adjusting your budget, don’t hesitate to ask for help. If you’re trying to figure out what your budget should look like, research budgeting apps like Mint to build a successful financial plan.

If you’re curious about additional mortgage expenses, your budget, or investment opportunities, reach out to a trusted professional or utilize government resources. Not only are they able to help you prepare for your next big step, but they could also help you and your finances in the long term.

Step 8: Store Your Savings in a High Yield Saving Account

While you may have a perfect budget and a home savings goal, it’s time to make every dollar count. Before you add to your account, research different savings accounts and their monthly yields. The higher the yield, the more your savings could grow as long as your account is open.

In September of 2020, the national average interest rate on savings accounts was capped at 0.8 percent. If you were to deposit only $100 into a high yield savings account with an APY of 0.8 percent, you could earn $80 off your investment over the year. This helps you save extra money by just putting your money into a savings account.

In Summary

First, set a savings goal to match your estimated down payment and mortgage monthly payments. Then add your contributions to a high yield savings account to grow your money overtime.
Don’t forget to budget for extra mortgage expenses like appraisal costs, home inspections, realtor fees, or closing costs. Keep in mind, your monthly utilities and fees may also be more expensive than your current living situation.
Prepare for the additional costs by increasing your earning potential and optimizing additional income stream opportunities.
Free up your credit utilization by paying off as much debt as possible before buying a house. Keep up these good habits throughout the length of your mortgage term.

When you purchase a home, you’re building a piggy bank for your future. Every month you pay your mortgage, you pay part of it to yourself because you own the home. Instead of paying rent to someone else, you reap your own investment when you sell. Most importantly, though, you’ll have a place that’s truly your own.

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Apache is functioning normally

May 6, 2023 by Brett Tams

The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. See Lexington Law’s editorial disclosure for more information.

FICO® scores are numbers measuring creditworthiness using a specific scoring system created by the Fair Isaac Corporation (FICO®). Your credit score, on the other hand, can use any scoring model to generate a number measuring your creditworthiness.

Your credit score is a personally assigned number generated by any credit scoring model that measures your creditworthiness. Lenders and creditors use this score to determine whether they can approve you for loans and credit, and if so, at what interest rates. A higher score means you’re seen as a more reliable borrower, and you’ll likely get better offers from lenders.

People often use the terms “credit score” and “FICO score” interchangeably. In reality, a FICO score is only one kind of credit score. Keep reading for a complete rundown of the differences between a FICO^® score and a credit score.

What is a FICO score?

A FICO score is a type of credit score generated by the credit scoring system developed by the Fair Isaac Corporation (FICO). The FICO score was created in 1989 and is one of the most commonly used credit scoring systems for lenders today. According to FICO, 90 percent of all top lenders use FICO scores.

FICO scores can range anywhere from 300 to 850. There are multiple versions of FICO scores, but the newest is the FICO Score 10 model. FICO releases new credit scoring models every few years to adapt to changes in the marketplace. For example, one of the main updates seen in the FICO 10 model is that debt from the most recent 24 months is more heavily weighted than other debt.

Your credit score is critical as it can dictate what types of financial products you’re approved for (mortgages, credit cards, personal loans, car loans) and the terms and interest rates on these products. In fact, your credit score can even reach beyond your finances, as it can be collected by employers and landlords reviewing applicants.

Industry-specific FICO scores

In addition to the standard FICO models, there are industry-specific FICO scores, such as the FICO Auto Score and the FICO Bankcard Score. These industry-specific scores are made for select types of credit such as cars, mortgages, and credit cards. While standard FICO scores range from 300 to 850, industry-specific scores range from 250 to 900.

Overall, FICO industry-specific scores aren’t used as frequently as the standard model.

How is a FICO score calculated?

Your FICO score is made up of the following five factors, all of which are weighted differently:

35 percent: Payment history
30 percent: Amounts owed
15 percent: Length of credit history
10 percent: New credit
10 percent: Credit mix

FICO receives this consumer information from the three major credit bureaus (Equifax, Experian and TransUnion). And those credit bureaus receive consumer data directly from lenders and creditors, which tend to report the information monthly.

What is a good FICO score?

Generally speaking, anything above 670 is seen as a good credit score. However, this will vary from lender to lender.

The FICO model groups people’s scores into these categories:

Exceptional: 800+
Very good: 740 – 799
Good: 670 – 739
Fair: 580 – 669
Poor: 579 and below

An exceptional score means you’ll likely get quickly approved for everything (or almost everything) you apply for, you’ll receive the best terms and you’ll secure the lowest interest rates. In comparison, a poor score will usually lead to application denials, and when you are approved, it’ll be with high interest rates and poor loan terms.

How to get your FICO score

You can get your FICO score directly from FICO or from one of its partners.

Check the FICO Open Access Program: FICO has partnered with a number of institutions to provide your FICO score number for free under its open access program. Check to see if your bank or credit and financial counseling program is listed.
Purchase access from FICO: You can purchase your score and other services from FICO.
Purchase from an authorized FICO retailer: FICO authorized retailers are Experian and Equifax.

When you receive your score from any provider online, make sure to confirm which scoring model was used. Most lenders do use FICO scores when making lending decisions, but it’s still helpful to understand the other scoring models—like VantageScore.

FICO score vs. VantageScore^®

The two dominant credit scoring models are the FICO score and VantageScore. VantageScore was created in 2006 by the three major credit bureaus. While VantageScore is less popular overall, it’s gaining more market share every year.

The VantageScore and FICO score models are very similar—they both range from 300 to 850 and release new versions of their scoring model every few years. Still, there are some critical differences between the two models. For example, FICO requires a consumer to have an account open for at least six months before a score can be given, while VantageScore assigns a score as soon as an account appears on your credit report.

Additionally, how VantageScore values various aspects of your credit data differs from FICO. VantageScore assigns the highest weight to credit usage, credit mix and payment history and the lowest weight to new accounts and credit history age.

As a result of these differences, your VantageScore and FICO score can differ. Unfortunately, even if you score higher with one model, you won’t usually be able to use this knowledge to your advantage. You often won’t know if a lender will pull a FICO score or a VantageScore.

Other kinds of credit scores

There are many other credit scores generated and used by other lenders and companies. Common ones are educational credit scores and business credit scores.

An educational credit score is based on a private lender or credit bureau’s ranking of your financial information.

For example, the PLUS score was designed by Experian to provide you with a basic idea of your risk level and creditworthiness. Although they’re designed to measure credit risk, educational credit scores aren’t used by lenders.

Models like the PLUS score are meant for consumer use only, which means they’re not considered when lenders review your loan application.

Business credit scores predict your company’s financial stability and how reliable you are in terms of managing company finances.

For example, Dun & Bradstreet’s D-U-N-S Number is used to identify your business and is the key to finance-related information about your company, like your business credit report, your D&B Delinquency Predictor Score and more.

All your credit scores will likely differ since numerous scoring models are used and these models weigh information differently. They may also pull information from one, two, or all three of the credit bureaus.

Instead of focusing on the specific criteria for each score, you should instead focus on responsibly managing your credit with FICO’s criteria as a guideline, since that score is most commonly used.

How to improve your FICO score

The good news is that if you’re unsatisfied with your FICO score, you can take steps to improve it. By understanding the five factors that make up your credit score, you can also determine what you can potentially do to increase your score. You can usually improve your FICO score by:

Paying down your debts
Paying your bills on time
Keeping your credit utilization low
Only opening new accounts when necessary
Avoiding too many hard inquiries
Keeping your oldest accounts open

It’s also important to check your credit reports frequently. Your credit reports can give you a better understanding of what’s dragging your score down, and you’ll want to make sure that your credit reports don’t contain any inaccurate or false information that’s unfairly affecting your score. If that’s the case, Lexington Law Firm can help you address the errors to get the accurate credit report you deserve.

Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.

Reviewed By

Paola Bergauer

Associate Attorney

Paola Bergauer was born in San Jose, California then moved with her family to Hawaii and later Arizona.

In 2012 she earned a Bachelor’s degree in both Psychology and Political Science. In 2014 she graduated from Arizona Summit Law School earning her Juris Doctor. During law school, she had the opportunity to participate in externships where she was able to assist in the representation of clients who were pleading asylum in front of Immigration Court. Paola was also a senior staff editor in her law school’s Law Review. Prior to joining Lexington Law, Paola has worked in Immigration, Criminal Defense, and Personal Injury. Paola is licensed to practice in Arizona and is an Associate Attorney in the Phoenix office.

Source: lexingtonlaw.com

Apache is functioning normally

May 5, 2023 by Brett Tams

It’s the stuff of nightmares: You’re footing the bill for an important dinner, only to be quietly told by the server that your card has been declined. That’s one possible outcome of attempting to charge above your card’s credit limit.

Credit card issuers determine your credit limit when you apply for a card, basing their decision on your personal financial information including income, other debts and payment history.

Sometimes, though, an extra-expensive month or unanticipated major purchase means you risk going over your credit limit. (Having a low credit limit to begin with also puts you at risk of exceeding it.)

But depending on the terms of your card, you may be able to charge above your credit limit — although by just how much is unclear. And even if the charge goes through, you may face other consequences.

Here’s what happens when you go over your credit card’s credit limit.

🤓Nerdy Tip

A credit limit is the amount you can charge to your credit card during any given billing cycle. With most cards, once you pay your credit card bill — even if you make a payment that’s lower than the total due — you can charge up to the credit limit again during the next billing cycle. Over time, the card issuer may adjust that limit if there are changes to your income level or spending. You may also be eligible for a credit limit increase just by requesting one.

A declined charge or over-limit fee

If you attempt to charge beyond your credit limit, it’s possible your credit card will be declined at the point of purchase, which can make for an embarrassing moment. But that’s not always the outcome.

Some credit card issuers will allow you to go over your credit limit at their discretion or if you opt in to the ability to do so. Capital One, for example, won’t charge you a fee for over-limit purchases when you opt in to this service, while Chase may let you opt in but in some cases will charge a fee. However, the amount that you’re approved to go over isn’t predictable, and this isn’t an open invitation to keep adding charges to your account. The issuer may put other limits on your account until you make a payment. (See below.)

The Credit Card Act of 2009 put some rules in place to curb over-limit fees, and these fees have become rare. In any case, card issuers can’t approve an over-the-limit purchase — and charge a fee for it — unless the cardholder opts in to allow it.

A higher minimum payment or more immediate due date

Even if an issuer allows you to exceed your credit limit, the company may increase the minimum payment due by the amount you charged above your credit limit. This means the over-limit charges must be paid at the end of that billing cycle, and you can’t carry that as part of your credit card balance.

You might also be on the hook to immediately repay the excess amount (or even the total balance due), without the ability to wait until the bill arrives as usual.

🤓Nerdy Tip

Note that charge cards work differently from traditional credit cards. A charge card has no set spending limit, so there’s generally no credit ceiling to “exceed.” However, unlike with credit cards, a charge card requires you to pay your bill in full each month. You typically can’t carry a balance.

A pause on more charges

Some issuers will stop you from putting additional charges on your card until you make a payment that puts your account back below its limit. This can also include other transactions like cash advances or balance transfers.

Changes to your card’s terms

Issuers reserve the right to change some of your card’s terms at any time, including the credit limit and interest rate. They may also close your account.

A decrease in your credit scores

One factor that’s part of calculating your credit scores is your credit utilization ratio, which is the amount of your total credit limit that you charge. In general, we recommend charging no more than 30% of your limit (and less is even better). Exceeding your credit limit or maintaining high balances can lower your credit scores over time.

An issuer opting to close your account can also affect your scores because losing an account can lower the average age of your accounts and decrease your overall credit limit, making it that much easier to max out other credit cards later.

Ways to avoid going over your credit limit

Set up alerts: Adjust your account preferences on the issuer’s website or app so you’ll receive a text or email when your card balance reaches a certain amount. You can also get alerts when your payment deadline is close or when a charge over a certain amount is made on your card.
Make small payments throughout the month: You don’t have to wait until the due date to make one big payment. Making multiple smaller payments throughout the month can help you maintain a smaller balance and lower the risk of going over the limit.
Ask for a credit limit increase: A low credit limit may not match what you need from your credit card. You can call the number on the back of your card to see whether you’d be eligible for a credit limit increase.
Open another credit card: If your current issuer declined your limit increase request, applying for an additional credit card may be the solution. It’ll raise your total credit limit and give you another card to fall back on for unexpected expenses. Just be extra careful because managing multiple credit cards can get more complicated.

Source: nerdwallet.com

Apache is functioning normally

May 1, 2023 by Brett Tams

Source: mint.intuit.com

What credit score do I need to buy a house?

What credit score do I need to get a mortgage?

Conventional loans minimum credit score: 620

Jumbo loans minimum credit score: 700

FHA loans minimum credit score: 500

VA loans minimum credit score: 620

USDA loans minimum credit score: 580

How your credit score affects mortgage rates

Credit score example

Other factors lenders consider

Can you get a mortgage with a bad credit score?

How to prepare your credit for a mortgage

1. Check your credit score and reports

2. Pay down debt

3. Avoid applying for new credit

4. Consider waiting

Think about more than just the loan terms

How to Pursue Credit Card Debt Relief

1. Do-It-Yourself

2. Consolidation

3. Credit Counseling

4. Debt Management Program

5. Debt Settlement

6. Bankruptcy

Effects of Credit Debt Relief on Your Credit

The Bottom Line

Browse Related Articles

Browse by Topic

Alternatives to a debt consolidation loan

Home equity

Debt relief services

Credit counseling

Balance transfer credit card

How to raise your credit score

1. Ask for (and receive) a credit limit increase

2. Pay your bills on time

3. Show you can handle different kinds of debt

4. Open a new account and make on-time payments

How to keep your credit score high

1. Close accounts with care and caution

2. Stay on top of your personal finances with Mint

Browse Related Articles

What Is a Credit Score?

Check your score with SoFi Insights

Track your credit score for free. Sign up and get $10.*

Reasons to Care About Credit Scores

It can increase your chances of being approved for a loan

You may have access to better loan rates and terms

You could save money

Is an 810 Credit Score Considered Good or Bad?

What Does an 810 Credit Score Mean?

How to Build Credit

Use a Credit Card

Become an Authorized User

Add Monthly Bills to Your Credit Report

Take Out a Credit Builder Loan

How Long Does It Take to Build Credit?

Credit Score Tips

How to Check Your Credit Score

The Takeaway

FAQ

What is a decent credit score for a 23-year-old?

What is the highest credit score possible in 2023?

Is a credit score of 800 good at age 23?

Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom Mint.com receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear).

Why use your tax refund for credit-building?

5 ways to build credit using your tax refund

1. Pay down debt

2. Get your current accounts in good standing

3. Open a Credit Builder Account

4. Use it as a deposit on a secured card

5. Work with a credit counselor

Bonus: Build an emergency savings

Bottom line

Browse Related Articles

Step 1: Calculate Your Down Payment and Timeline

Step 2: Budget for the Extra Expenses

Step 3: Maximize Your Savings Contributions

Step 4: Work Hard for a Raise

Step 5: Create More Streams of Income

FICO score vs. VantageScore^®