Refinancing your mortgage, or replacing your existing home loan with a new one, can lower your interest rate and monthly payments or even get you extra cash from the equity in your home.
Not all homeowners are approved for refinancing, though. With home prices and interest rates still high, lenders are careful about who they approve. The rejection rate on mortgage refinance applications increased to 15.5% in 2023 from 9.9% in 2022, according to the Federal Reserve Bank of New York.
If you’ve been turned down, you still have options for refinancing — and ways to improve your chances next time.
What we’ll cover
Compare offers to find the best mortgage
Common reasons mortgage refinancing is rejected
Lenders rely on federal underwriting guidelines from Fannie Mae and Freddie Mac when deciding whether to approve a refinancing application. Some issues are easier for borrowers to address than others.
High debt-to-income ratio
How much of your money is tied up in paying off debts isa major factor in getting approved for refinancing. Your debt-to-income (DTI) ratio is determined by dividing your total monthly debts (including your current mortgage) by your gross monthly income.
A DTI of 35% or less is ideal, according to Experian, although lenders typically will consider a ratio up to 43% for refinancing a conventional mortgage, depending on how strong the rest of their application is.
Low credit score
A credit score of at least 620 is usually needed to secure refinancing, although you may be able to get FHA cash-out refinancing with a score in the 500s.
Low home appraisal
An appraisal of your home’s fair market value ensures it hasn’t significantly depreciated, especially to the point that it’s worth less than what you owe (known as an “underwater mortgage”).
If the appraisal indicates your home is in poor condition or has renovations that are not up to code, it could also lead to being turned down.
Not enough home equity
The amount of your home that you own outright is known as home equity. If you put 5% of the cost of the property as a down payment, you’re starting with 5% home equity. That amount increases as you make mortgage payments and as the home’s value increases. You typically need to own at least 20% of your home outright to refinance your mortgage.
Employment history
According toFannie Mae’s underwriting guidelines,lenders look at an applicant’s career history and income over several years. Ideally, they want to see at least two years at your current job, but you probably won’t have to worry about a promotion or a better-paying job in the same industry. A consistent income is the key.
Taking a lesser role or lower-paying job and lengthy gaps in employment are more serious red flags, as is changing jobs in the middle of the application process. However, you can always try to explain your circumstances to your lender.
What to do if you’ve been rejected for refinancing
Find out why you were denied
Lenders are legally required to explain why you’ve been turned down. Find out the reason (or reasons) and if possible, make any necessary changes so you’ll be approved next time.
Shop for another lender
You may need a lender that is willing to accept a lower credit score. Rocket Mortgage works with applicants with scores as low as 580, rather than the 620 required by most lenders.
Rocket Mortgage Refinance
Annual Percentage Rate (APR)
Apply online for personalized rates
Types of loans
Conventional loans, FHA loans, VA Interest Rate Reduction Refinance Loan (IRRRL) and jumbo loans
Fixed-rate Terms
8 – 29 years
Adjustable-rate Terms
Not disclosed
Credit needed
580 if opting for FHA loan refinance or VA IRRRL; 620 for a conventional loan refinance
Already have a mortgage through Rocket Mortgage or looking to start one? Check out the Rocket Visa Signature Card to learn how you can earn rewards
Ally Bank offers cash-out refinances for conventional and jumbo loans, allowing homeowners to convert their home equity into cash and take out a loan that’s larger than their current mortgage. Ally doesn’t charge application, origination or processing fees and its website has a refinance calculator that provides customized rates without affecting your credit score.
Ally Home
Annual Percentage Rate (APR)
Apply online for personalized rates; fixed-rate and adjustable-rate mortgages included
Types of loans
Fixed-rate, adjustable-rate and jumbo loans available
Fixed-rate Terms
15 – 30 years
Adjustable-rate Terms
5/6 ARM, 7/6 ARM, 10/6 ARM
Credit needed
Not disclosed
Terms apply.
Pay down your existing mortgage
If you didn’t put 20% down when you bought your home, you may need to pay off another chunk of your mortgage before you’re able to secure refinancing.
Work on your credit
If your credit is the problem, take some time off to raise your score. Focus on making on-time bill payments and lowering your credit utilization ratio, or the amount of available credit you’re using. Avoid opening or closing any lines of credit and check your credit reports for any errors.
Experian Boost™ is a free way to improve your credit score. It links utility, phone and streaming service payments to your Experian credit report and uses the You’ll get an updated FICO® score delivered to you in real-time.
Experian Boost™
On Experian’s secure site
Cost
Average credit score increase
13 points, though results vary
Credit report affected
Experian®
Credit scoring model used
FICO® Score
Results will vary. See website for details.
How long should I wait before applying again?
Technically, you can reapply right away, but each application requires a hard credit check, which temporarily lowers your FICO score. So, consider why you were rejected first — if your credit score was too low or you don’t have enough home equity, address the issue before applying again.
If you were turned down because of a recent job change, you may have to wait up to two years to reapply.
How to lower your mortgage payments without refinancing
Whether it’s because you’ve been denied or the rates are still too high, refinancing might not be an option. Fortunately, there are ways you can lower your mortgage payment without refinancing.
Get rid of mortgage insurance
If you have a conventional mortgage, your lender will automatically cancel PMI when you reach 22% equity. You might be able to request cancelation once your equity reaches 20%.
Recast your mortgage
Some lenders will allow you to make a large lump-sum payment toward your principal balance and then re-amortize your loan. The terms remain the same when you recast your mortgage, but the lower balance means smaller monthly payments and an overall decrease in the amount you’ll pay in interest.
Request a loan modification
If you’re facing financial hardship, you can ask to change the terms of your mortgage permanently to help you avoid foreclosure. You can also request a forbearance to temporarily reduce or pause your mortgage, but you’ll eventually have to repay the late or suspended payments.
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FAQ
What is mortgage refinancing?
Refinancing your mortgage is when you replace your existing home loan with a new one, typically to get a lower interest rate.
How much does it cost to refinance a mortgage?
Depending on the lender, there are several fees associated with refinancing, usually 3% to 6% of the loan. Freddie Mac suggests putting aside $5,000 for refinancing closing costs
Can I lower my mortgage payments without refinancing?
Bottom Line
An applicant can be denied refinancing for various reasons, from a low credit score to a new job. If you know why you were turned down, you can work on the problem and reapply.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Everymortgage article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge ofproducts. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.
*Results will vary. Not all payments are boost-eligible. Some users may not receive an improved score or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost™. Learn more.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Your credit score is a three-digit number that reflects your credit history. It’s not the complete financial picture, but lenders consider it when evaluating you for lines of credit and insurance.
But there are multiple versions of your credit score.
For the majority of lending decisions most lenders use your FICO score. Calculated by the data analytics company Fair Isaac Corporation, it’s based on data from credit reports about your payment history, credit mix, length of credit history and other criteria.
Some lenders use another scoring model, VantageScore, especially credit card companies.
But if you’re applying for a mortgage, the score on your application might be different from either of them.
Here’s what you need to know about credit scores if you’re looking to buy a home.
What we’ll cover
Compare offers to find the best mortgage
The credit score used in mortgage applications
While the FICO® 8 model is the most widely used scoring model for general lending decisions, banks use the following FICO scores when you apply for a mortgage:
FICO® Score 2 (Experian)
FICO® Score 5 (Equifax)
FICO® Score 4 (TransUnion)
All the credit reporting agencies use a slightly different version of the FICO score. That’s because FICO tweaks its model to best predict creditworthiness in different industries. You’re still evaluated on the same core factors — payment history, credit use, credit mix and the age of your accounts— but they’re weighed a little differently.
That makes sense — paying off a mortgage is different than using a credit card responsibly.
The FICO 8 model used by credit card companies is more critical of high balances on revolving credit lines. Since revolving credit is less of a factor when it comes to mortgages, the FICO 2, 4 and 5 models have proven to be reliable when evaluating candidates for a mortgage.
Mortgage lenders pull all three credit reports
According to Darrin English, a senior community development loan officer at Quontic Bank, mortgage lenders request your FICO scores from all three bureaus — Equifax, Transunion and Experian. But they only use one when making their final decision.
If all of your scores are the same, the choice is simple. But what if your scores are different?
“We’ll use the median as the qualifying credit score,” English said. “It’s called a tri-merge.”
If two of the three scores are identical, lenders use that one, he added, regardless of whether it’s higher or lower than the third.
If you are applying for a mortgage with a co-signer, like a spouse, each applicant’s FICO 2, 4 and 5 scores are pulled. The lender identifies the median score for each of you, and then uses the lower of the two.
How your credit score affects interest rates
Knowing your credit score is the first step in getting the best rates on your mortgage.
According to FICO, a borrower with a credit score of 760 can expect an interest rate of 6.47% on a 30-year fixed mortgage. For a borrower with a score between 620 and 639 (considered subprime), that rate would be 8.05%.
A 1.58% APR savings may seem negligible, but it could save you hundreds each month and thousands over the life of the loan.
How to improve your credit
Your credit score reflects your history of paying off debt. A higher score can save you thousands in interest payments over the life of your mortgage. If you want to improve your score:
Make on-time payments in full, especially on revolving credit like credit cards.
Ask to increase your credit limit on existing cards
Keep your credit utilization rate under 30%
Avoid opening new lines of credit
Try to get credit for utility payments
*Experian Boost™ is a free service that updates your Experian credit report with on-time payments to your mobile carrier, power company and other utilities not usually linked to credit-reporting agencies. According to the company, users whose FICO scores improve see an average increase of 13 points.
Experian Boost™
On Experian’s secure site
Cost
Average credit score increase
13 points, though results vary
Credit report affected
Experian®
Credit scoring model used
FICO® Score
Results will vary. See website for details.
How to monitor your credit
Since the mortgage industry looks at all three credit reports, consider a paid credit monitoring service that pulls more comprehensive data than a free version would.
In addition to providing regular updates on your FICO score, Experian IdentityWork℠ Premium examines data from all three credit bureaus and informs users about score changes, new inquiries and accounts, changes to your personal information and suspicious activity.
Experian IdentityWorks℠
On Experian’s secure site
Cost
Free for 30 days, then $9.99 to $19.99 per month
Credit bureaus monitored
Experian for Plus plan or Experian, Equifax and TransUnion for Premium plan
Credit scoring model used
Dark web scan
Identity insurance
Yes, up to $500,000 for Plus plan and up to $1 million for Premium plan*
Terms apply.
*Identity Theft Insurance underwritten by insurance company subsidiaries or affiliates of American International Group, Inc. (AIG). The description herein is a summary and intended for informational purposes only and does not include all terms, conditions and exclusions of the policies described. Please refer to the actual policies for terms, conditions, and exclusions of coverage. Coverage may not be available in all jurisdictions.
The most accurate way to keep tabs on your mortgage-specific credit score is with the advanced version of MyFICO®, which shares versions of your FICO score calculated for credit cards, home and auto loans and more for $29.95 a month.
You’ll also have access to $1 million in identity theft insurance and 24-hour expert help if your identity is compromised.
FICO® Basic, Advanced and Premier
On myFICO’s secure site
Cost
$19.95 to $39.95 per month
Credit bureaus monitored
Experian for Basic plan or Experian, Equifax and TransUnion for Advanced and Premier plans
Credit scoring model used
Dark web scan
Yes, for Advanced and Premier plans
Identity insurance
Yes, up to $1 million
Terms apply.
Bottom line
Mortgage lenders use a specific version of your credit score to determine if you’re a good candidate for a home loan. Make sure to monitor the credit score that matters to mortgage lenders if you’re looking to buy a home soon.
Meet our experts
At CNBC Select, we work with experts who have specialized knowledge and authority based on relevant training and/or experience. For this story, we interviewed Darrin English, a senior community development loan officer at Quontic Bank.
Why trust CNBC Select?
At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit monitoringproducts. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
Catch up on CNBC Select’s in-depth coverage of credit cards, banking and money, and follow us on TikTok, Facebook, Instagram and Twitter to stay up to date.
*Results may vary. Some may not see improved scores or approval odds. Not all lenders use Experian credit files, and not all lenders use scores impacted by Experian Boost.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
Content is based on in-depth research & analysis. Opinions are our own. We may earn a commission when you click or make a purchase from links on our site. Learn more.
Home » Credit » 6 Ways to Help Your Child Build Credit During College
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These reviewers are industry leaders and professional writers who regularly contribute to reputable publications such as the Wall Street Journal and The New York Times.
Our expert reviewers review our articles and recommend changes to ensure we are upholding our high standards for accuracy and professionalism.
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College students have a lot on their plate already, including the need to study to get good grades, participating in any number of on-campus activities and potentially working part-time to have some spending money.
That said, college students should also focus on their financial future, including steps they can take to build credit before they enter the workforce.
After all, having a credit history and a good credit score can mean being able to rent an apartment, finance a car or take out a loan, whereas having no credit at all can mean sitting on the sidelines until the situation changes.
Fortunately, there are all kinds of ways for young adults to build credit while they’re still in school. Some strategies require a little work on their part, but many are hands-off tasks that you only have to do once.
Teach Them Credit-Building Basics
Make sure your student knows the basic cornerstones of credit building, including the factors that are used to determine credit scores. While factors like new credit, length of credit history and credit mix will play a role in their credit later on, the two most important issues for credit newcomers to focus on include payment history and credit utilization.
Payment history makes up 35% of FICO scores and credit utilization ratio makes up 30% of scores.
Generally speaking, college students and everyone else can score well in these categories by making all bill payments on time and keeping debt levels low. How low?
Most experts recommend keeping credit utilization below 30% at a maximum and below 10% for the best possible results. This means trying to owe less than $300 for every $1,000 in available credit limits at a maximum, but preferably less than $100 for every $1,000 in credit limits.
Add Your Child as an Authorized User
One step you can personally take to help a child build credit is adding them to your credit card account as an authorized user. This means they will get a credit card in their name and access to your spending limit, but you are legally responsible for any charges they make. Obviously, this move works best when you have excellent credit and a strong history of on-time payments and you plan to continue using credit responsibly .
While this step can be risky if you’re worried your college student will use their card to overspend, you don’t actually have to give them their physical authorized user credit card.
In fact, they can get credit for your on-time payments whether they have access to a card or not. If you do decide to give them their credit card, you can do so with the agreement they can only use it for emergency expenses.
Encourage Them to Get a Secured Credit Card
Your child can build credit faster if they apply for a credit card and get approved for one on their own, yet this can be difficult for students who have no credit history. That said, secured credit cards require a refundable cash deposit as collateral are very easy to get approved for.
Some secured credit cards like the Ambition Card by College Ave even offer cash back1 on every purchase and don’t charge interest2. If your child opts to start building credit with a secured credit card, make sure they understand the best ways to build credit quickly — keeping credit utilization low and paying bills early or on time each month.
Opt for a Student Credit Card Instead
While secured credit cards are a good option for students with little to no credit get started on their journey to good credit, there are also credit cards specifically designed for college students. Student credit cards are unsecured cards, meaning they don’t require an upfront cash deposit as collateral, but charge interest on any purchases not paid in full each month.
Many student credit cards offer rewards for spending with no annual fee required as well, although these cards do tend to come with a high APR. The key to getting the most out of a student credit card is having your dependent use it only for purchases they can afford and paying off the balance in its entirety each billing cycle. After all, sky high interest rates don’t really matter when you never carry a balance from one month to the next.
Student Credit Cards…
“One of the safest ways for college student to build their credit by learning valuable money skills.”
Help Your Child Get Credit for Other Bill Payments
While secured cards and student credit cards help young adults build credit with each bill payment they make, other payments they’re making can also help.
In fact, using an app like Experian Boost can help them get credit for utility bills they’re paying, subscriptions they pay for and even rent payments they’re making. This app is also free to use, and you only have to set up most bill payments in the app once to have them reported to the credit bureaus.
There are also rent-specific apps and tools students can use to get credit for rent payments, although they come with fees. Examples include websites like Rental Kharma and RentReporters.
Make Interest-Only Payments On Student Loans
The Fair Isaac Corporation (FICO) also notes that students can start building credit with their student loans during school, even if they’re not officially required to make payments until six months after graduation with federal student loans.
Their advice is to make interest-only payments on federal student loans along with payments on any private student loans they have during college in order to start having those payments reported to the credit bureaus as soon as possible.
“Making interest-only payments as a student will not only positively affect your credit history but will also keep the interest from capitalizing and adding to your student loan balance,” the agency writes.
Of course, interest capitalization on loans would only be an issue with private student loans and Federal Direct Unsubsidized Loans since the U.S. Department of Education pays the interest on Direct Subsidized Loans while you’re in school at least half-time, for six months after you graduate and during periods of deferment.
The Bottom Line
College students don’t have to wait until they’re done with school to start building credit for the future, and it makes sense to start building positive credit habits early on regardless. Tools like a credit card can help students on their way, whether they opt for a secured credit card or a student card. Other steps like using credit-building apps can also help, and with little effort on the student’s part or on yours.
Either way, the best time to start building credit was a few years ago, and the second best time is now. You can give your student a leg up on the future by helping them build credit so it’s there when they need it.
20% APR. Account is subject to a monthly account fee of $2, account fee is waived for the initial six-monthly billing cycles.
College Ave is not a bank. Banking services provided by, and the College Ave Mastercard Charge Card is issued by Evolve Bank & Trust, Member FDIC pursuant to a license from Mastercard International Incorporated. Mastercard and the Mastercard Brand Mark are registered trademarks of Mastercard International Incorporated.
About the Author
Jeff Rose, CFP® is a Certified Financial Planner™, founder of Good Financial Cents, and author of the personal finance book Soldier of Finance. He was a financial planner for 16+ years having founded, Alliance Wealth Management, a SEC Registered Investment Advisory firm, before selling it to focus on his passion – educating the masses on the importance of financial freedom through this blog, his podcast, and YouTube channel.
Jeff holds a Bachelors in Science in Finance and minor in Accounting from Southern Illinois University – Carbondale. In addition to his CFP® designation, he also earned the marks of AAMS® – Accredited Asset Management Specialist – and CRPC® – Chartered Retirement Planning Counselor.
While a practicing financial advisor, Jeff was named to Investopedia’s distinguished list of Top 100 advisors (as high as #6) multiple times and CNBC’s Digital Advisory Council.
Jeff is an Iraqi combat veteran and served 9 years in the Army National Guard. His work is regularly featured in Forbes, Business Insider, Inc.com and Entrepreneur.
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To get a house with a decent mortgage rate, you need a good to excellent credit score. But your biggest, most important payment — your rent — doesn’t even count. That’s an even bigger problem if your credit score doesn’t show any other key forms of credit, like a credit card or car payment.
It seems like the odds are stacked against you, as though renting an apartment or house, which costs a pretty penny by the way, isn’t a legitimate living situation. Fortunately, there are now ways around that.
In fact, as long as you can get the property owner on board, and sometimes even if you can’t, it’s really easy to ensure your rent payments count toward your credit score.
Why You Should Add Rent Payments to Your Credit Report
There are many factors that go into your credit score, and your payment history accounts for 35%.
But that’s a dilemma if you haven’t yet built or have to rebuild your credit score. How can you prove your creditworthiness if you don’t have something to repay?
Enter rent-payment reporting.
Rent is a massive monthly expense. Unfortunately, credit bureaus like Experian, TransUnion, and Equifax haven’t traditionally accounted for your housing costs unless it was a mortgage, creating a stubborn catch-22 for some would-be homeowners.
You need a higher credit score to afford a home — or even just a credit card with better rates and perks. But you can’t raise your credit score if no one knows about the payments you’re making. It’s so ridiculous it would be funny if it weren’t so depressing.
But thanks to rent reporting, people with a low or no credit score can use their on-time rent payments to bolster their score, improving their odds of obtaining credit.
How to Add Rent Payments to Your Credit Report
You have options when it comes to adding rent payments to your credit report: You can sign up for a service yourself, though the rental property owner may already work with a rent-reporting company. Though the specific steps vary from company to company, the process always follows a predictable pattern.
1. Determine Whether Your Property Reports Rent Payments — & to Whom
Some property owners already allow renters to opt into rent-reporting programs. Typically, the service is free to the renter. However, they may require you to have rent automatically deducted from your bank account each month.
There are even government-sponsored programs to help disadvantaged renters build their credit scores. These are renters the government considers “credit invisible,” which basically just means they have an insufficient credit history. If you’re one of them, you should take the government up on that. Falling into this category makes borrowing more expensive and can throw up barriers to housing and employment, according to the Consumer Financial Protection Bureau.
And if neither of those is an option, there may be free or low-cost rent-reporting services you can sign up for on your own. Those require varying levels of input from the property owner, though, so ensure they’re willing to participate to the degree required before handing over any dough.
Note that not all rent-reporting companies report payments to the same credit bureaus. For instance, some only report to TransUnion, others report to TransUnion and Experian, and still others report rent payments to all three credit-reporting bureaus. Be sure to understand which bureaus your service reports to.
2. Enroll in a Rent-Reporting Service
If the property already has a rent-reporting service, just ask the people in the office how to sign up or opt in. It may be as simple as filling out a form giving them permission to do it. If not, it’s unlikely to take any longer than the DIY method.
If your property is a no-go on rent reporting, it doesn’t hurt to ask if they’d be willing to sign up. Just in case, show up equipped with information on how it could benefit the property owner (like this article on Forbes).
And if they say no, you can sign up for one yourself. That means you have to pay the fees, which are usually less than $100 per year, though they can go higher for more benefits, such as reporting to all the bureaus or expanding the length of time they report for. There may also be a setup fee, though that’s usually less than $100 (often as low as $25 or less).
The one potential hiccup is that the rent-reporting company may ask the property owner to participate by verifying your rent payments. And that means they may have to at least be willing to provide some support. But some services can do it through your bank account without going through the property.
To enroll in a rent-reporting service, you must provide a copy of your lease along with some personal information, such as your name, birthdate, and address. The process is easy, and you can complete it online in a matter of minutes.
3. Ensure Accurate Rent Payment Reporting
If you’re making the effort to report your rent payments to build credit, it’s crucial to verify the accuracy of your credit report. There are a couple of methods to monitor your credit score effectively.
One option is to visit AnnualCreditReport.com, where consumers can obtain a free credit report from each credit bureau once per year. A few months after rent reporting starts, check the relevant bureau’s credit report. If you rent reports to more than one bureau, check them a few months apart so you can keep tabs.
Hint: In light of numerous scams associated with the COVID-19 pandemic, the website now allows individuals to access their credit reports weekly until December 2023.
Another approach is to create an account with the three major credit bureaus. Most allow at least some access for free. Paid accounts have more features, but they can cost $10 to $30 per month and only give you access to one bureau’s reports.
Fortunately, there are other options. Many credit cards, banks, and free credit monitoring apps like Credit Karma also offer similar services, allowing you to stay informed about any updates or modifications to your credit information. Some may even give you access to more than one bureau’s info.
How Much Do Rent-Reporting Services Cost?
The cost for rent-reporting services really runs the gamut. Supposedly, you get what you pay for. But it really depends on what you need, so you can’t just opt for the most expensive one and call it a day. Nor can you opt for the cheapest and expect to get the results you’re looking for.
There are three charges to be on the lookout for.
Many rent-reporting companies charge a setup fee. The more they offer (again, supposedly), the more it costs. For example, Rent Reporters charges almost $100 as a one-time setup fee. And you get a personal credit specialist to help you improve your score. Boom’s setup fee is only $10, but all it does is report rent payments.
Then there’s the monthly subscription fee. You can get Boom for as little as $2 per month. But Rent Reporters and LevelCredit charge a minimum of around $7. But unlike Boom, Rent Reporters provides 24 months of rent history for free, and LevelCredit also reports your cellphone and utilities.
Lots of these companies offer additional paid services. You can get past rent history, often as far back as two years (24 months), discounts for roommates or domestic partners to add it to their credit reports, and even credit monitoring. Past credit history is often around $50, though you can get it for less, but not every service offers it. And the other services depend on what they offer and how much they already cost.
Have I mentioned that they supposedly charge based on their level of service? The reality is that may or may not be true for you. It’s not that the statement is untrue on its face. It’s that it really does depend on what would benefit you the most.
For example, Boom is dirt-cheap compared to its peers, but it also reports to all three bureaus. Rent Reporters and LevelCredit only report to TransUnion and Equifax. So despite having more features, if what’s most important to you is credit bureau coverage, Boom wins out.
And it doesn’t stop there. Experian Boost also gives you credit for paying your utilities. Boom and Rental Kharma include your previous rental history at no additional charge. Some, like Rock the Score and PaymentReport, give you options if the property owner won’t participate. And Piñata has a rewards program.
All these options mean you can get exactly what you want for a price you can afford.
How to Choose a Rent-Reporting Service
When choosing a rent-reporting service, it’s tempting to sign up for the first one with the right price. But there are several factors to consider. Follow these steps to find the best rent-reporting service for you.
Check with the property owner. Check to see if your property already uses a rent-reporting service. If so, sign up through them. That means you could skip the rest of the steps. But if their service doesn’t report to all bureaus, you can still sign up with another one to compliment the one they offer.
Research available services. Look for rent-reporting services online and compare their features, costs, and reputation. Pay attention to factors like the duration of reporting, customer support, and ease of use.
Check credit bureau partnerships. Ideally, the service should report to major credit bureaus like Experian, Equifax, or TransUnion. Reporting to multiple bureaus increases the likelihood of your rental payments being included in your credit history with the specific bureau a particular creditor uses.
Evaluate the reporting method. Some services require a direct connection with property management, while others rely on alternative data sources like bank statements. Choose a method that suits your preferences and provides accurate reporting.
Number of months reported. Some rent-reporting companies can report as far back as 24 months, while others report starting with your first payment while you’re signed up moving forward. The former is expensive, but it could help you qualify for credit or a loan faster. If you don’t need that, sticking with the latter is usually cheaper.
Assess the cost. Some services charge a monthly fee, while others have an annual fee or one-time payment. Consider your budget and choose a service that provides good value for the features offered.
Read customer reviews and ratings. Read reviews on trustworthy platforms like Trustpilot or the Better Business Bureau to get an idea of the experiences and satisfaction levels of other users. That can give you insights into the reliability and performance of the service.
Consider additional features. Some rent-reporting services offer additional features that can enhance your financial well-being. For example, they can provide credit-monitoring services, educational resources, or tools to track your credit score progress.
Understand privacy and data security. Review the privacy policy and data security measures of the rent-reporting service. Ensure they have appropriate safeguards in place to protect your personal and financial information.
Check for customer support. Consider the availability and quality of customer support provided by the rent-reporting service. Determine whether they offer multiple channels of communication, such as phone, email, or live chat, and whether they have a reputation for responsiveness and helpfulness.
It can help to make a chart or spreadsheet and tick off or jot down the features each service has so you can compare them all at once. Once you’ve decided which one’s best for you, all you have to do is sign up.
Final Word
If you’re balking at the idea of paying a company to report your rent payments to credit bureaus, that’s totally fine. Really, this isn’t a service you should waste money on unless it helps you.
But they do have benefits. For example, when you increase your credit score, you receive lower interest rates on loans and credit cards. That alone could help justify the cost.
But as awesome as these services are, that doesn’t mean you need one. If you have stellar credit and your report shows on-time monthly payments for obligations like your car or credit cards, you don’t need to report your rent payments. The service is best-suited to those who are trying to build credit or repair bad credit.
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Heather Barnett has been an editor and writer for over 20 years, with over a decade committed to the financial services industry. She joined the Money Crashers team in 2020, covering banking and credit content for banking- and credit-weary readers. In her off time, she enjoys baking, binge-watching crime dramas, and doting on her beloved pets.
A while back, I cautioned readers to avoid swiping the credit card before applying for a mortgage.
In short, the more you charge, the higher your outstanding balances. And the higher your balances, the lower your available credit.
This can result in lower credit scores since utilization is a big factor for FICO. And it can increase your debt-to-income ratio as well.
Simply put, if you’re seen as overextended due to maxed out credit cards, your credit scores will suffer.
So you can give your credit scores a boost by simply doing nothing, but there are some proactive measures you can take as well.
Increase the Credit Limits on Your Credit Cards
One quick and easy way to boost your credit scores is to increase your available credit
You can do this by raising the credit limits on the credit cards you have open
Simply ask your credit card issuers for credit line increases online or by phone
Once granted your utilization will go down and your credit scores should improve over time
One simple trick to improve your credit scores is via a credit limit increase.
This is something that is very easy (and fast) to accomplish thanks to the many credit card management tools now at our fingertips.
If you visit just about any credit card issuer’s website, you should be able to find an area to increase your credit limit online.
Typically, all you need to do is enter enter your gross annual income and monthly housing/rent payment.
With other issuers, such as American Express, you are asked to enter your desired credit limit and then hope they extend it to you. Apparently you can get 3x your starting limit with little trouble.
So if you started with $5,000, you could get it increased to $15,000 simply by visiting the American Express website and filling out an online form.
Once submitted, you’ll either get that new limit, something in between, or you’ll be denied.
But as long as your credit history and income is sufficient, you should get something. What’s awesome is it can take as little as a few seconds to get your new line of credit.
Note: Some card issuers may need to pull your credit report to do this, which could affect your credit scores temporarily due to the inquiry.
They’ll typically notify you first, but this is why you should request credit increases 3+ months in advance of your mortgage application to let the dust settle.
Lower Your Credit Utilization to Improve Your Scores
The underlying goal of a credit limit increase is to lower your credit utilization, which is the percentage of credit you’re actively using at any given time.
A lower utilization, similar to a lower debt-to-income ratio, is viewed favorably by credit bureaus and mortgage lenders, respectively.
So imagine you have that American Express credit card with a $5,000 limit.
If you currently have a $2,500 balance, even if it’ll be paid off on time and not revolved, you’re essentially using 50% of your available credit. This isn’t a good thing when it comes to credit scores.
You may actually want to keep your utilization rate below 25%. In this case, no more than $1,250 outstanding, even if you pay it off in full by the due date.
But what if you naturally charge a lot on your credit cards each month, despite paying them off in full every month? What can you do to keep utilization low?
Well, if your credit limit happened to be $10,000 instead of $5,000, that $2,500 balance would only represent 25% utilization.
If it were $15,000, it’s only around 17% utilization, which should certainly be viewed favorably.
In other words, all you have to do is ask for higher credit limits, instead of spending less. Of course, spending less will sweeten the deal and ideally push your credit scores even higher.
Tip: It’s easier to get credit limit increases approved if your balances are low because you’re viewed as a lower risk customer.
Pay Off Your Existing Balances at the Same Time
Another trick that goes hand in hand with the first tip is to pay down your balances
Any existing loans and credit card balances that you can chip away at
This will also effectively free up available credit and should give your credit scores a boost
It will also lower your DTI because minimum payments will be reduced in the process
In conjunction with the first tip, you can also pay down any balances you may have, assuming you don’t pay your credit cards in full each month.
If implemented together, you can get higher limits and reduced balances, which will be a one-two punch in the credit utilization department.
So using our same example, if the individual with the $2,500 balance lets carries it from month to month and only has a $5,000 credit limit, imagine if they got a higher limit and started paying it down.
They could push their utilization down from 50% to say 15% if they got the limit increased to $10,000 and paid $1,000 off the balance.
These actions should result in a higher credit score, which generally means a better mortgage rate if you apply for a home loan.
Additionally, smaller credit card balances mean you’ll have more of your income available to use toward a mortgage payment.
So you may actually be able to qualify for a larger mortgage and/or buy more house.
Give It Time to Work
The only caveat here is that a credit limit increase request could result in a hard inquiry on your credit report.
Because you’re requesting additional credit, some card issuers treat it as a quasi-application, meaning they’ll need to review your credit history.
This could ding your credit slightly, like any new line of credit. It’s temporary, but may offset some of the expected gains of a higher limit.
So either request the increased limits several months in advance of applying for a mortgage, or ask the credit card issuer if it will result in a hard or soft pull before making the request.
If it’s the latter, it won’t harm your credit score. Regardless, inquiries typically don’t impact scores much, maybe 3-5 points and the damage is generally short-lived.
One final thing you can do is check out the Experian Boost, which increases credit scores by adding positive payment history to your credit file.
It can be helpful to those who lack traditional credit history, but pay other bills on time like a cell phone or utility.
In closing, you’ll want to approach mortgage lenders with the highest credit scores possible. This ensures you have the best chance of approval and also obtain the lowest interest rate available.
Read more: What credit score do I need to get a mortgage?
Our rights as women have come a long way since we earned the power to vote on August 26, 1920.
But the financial playing field between men and women still isn’t level. Not even close.
To help you make waves in your own financial life, I interviewed several Millennial and Gen Z women to find out what financial advice they’d give to other women today
Here’s what they had to say.
What’s Ahead:
1. “Don’t be afraid to negotiate your salary.”
Anna Barker, Founder of LogicalDollar, offered me this advice.
There’s no question that it can be scary to ask for more money. Especially as women, we often internalize the feeling that we’re going to be seen as pushy or demanding if we ask for a raise.
However, various studies show this is actually one of the reasons women end up earning less over their lifetimes than men, who tend to be more likely to ask for more money.
2. “Take advantage of any employer match ASAP.”
Barker also talked with me about retirement. One of the best things that you can do for your future financial security is to start investing as early as possible.
If your employer offers any matching of your 401(k) contributions, this is basically free money and you should do everything you can to invest up to the limit of the match.
3. “Avoid high-interest debt.”
According to Barker, a big money mistake that a lot of women in their 20s and 30s make is signing up for high-interest credit cards. To be clear, credit cards can actually be a great tool if used correctly — which primarily involves paying the balance off in full by the end of each billing cycle.
The problems start to arise once those interest-free periods run out and you realize you’re not able to immediately pay off the debt you’ve accrued.
4. “It is SO cliché, so hear me out… please start saving early for retirement!”
Heather Albrecht, Financial Coach and Founder of Balance Financial Coaching, discussed this with me.
It’s hard because when you’re young, you seem to have SUCH a long time until that money is needed. But the math doesn’t lie.
Starting young makes it easier because you can save less. Gosh, I wish I had made the space in our spending plan to save earlier even though it seemed impossible. The $25 here or there would have been huge by now.
5. “Start using a spending plan or budget. Zero it out each month, and save the rest.”
Albrecht also spoke with me here. And I have to say if I had been able to get myself into the mindset of “saving money is spending money on my future freedom” at a younger age, there would have been a lot less stress at times.
Budgeting doesn’t have to be difficult, either. Just pick the right method and it’ll become just another habit.
6. “As a Millennial myself, the best money advice I would give women in their 20s and 30s is to diversify how you save and spend money.”
Siobhan Alvarez, Founder of Budget Baby Budget, shared this wisdom with me.
I am a big believer in not being dependent on one checking and savings account! I have a long-term high-yield savings account for an emergency fund, a savings account at my local bank for big purchases, a checking account for everyday expenses; and a checking account for fun purchases throughout the month.
This has helped me not only pay off a huge amount of debt over the past few years but do it in a way so I didn’t feel like I was missing out on life and fun!
7. “Protect yourself and your people financially.”
Brittney Burgett, Head of Communications at Bestow, gave this little nugget of advice. Emergency savings, disability insurance, and life insurance matter, especially if you have financial dependents.
Insurance, in particular, is more affordable to buy the younger and healthier you are. I, for example, have life insurance because I own a home.
My mom is my beneficiary, so if anything were to happen to me, the payout from a policy would enable her to continue the mortgage payments and decide later on what to do with my house — keep it, rent it or sell it. Life insurance would give her flexibility when it’s needed most.
8. “Educate yourself so you understand how money, interest, and debt works.”
Lindsay Feldman, Publicist and Founder of BrandBomb Marketing, broke down this for me.
It wasn’t until I really started reading financial books and listening to podcasts that I really began to take control over my financial situation. Understanding how money, interest, and debt works are key to being able to make your money work for you. I look at everything differently now which has empowered me to make smarter decisions.
9. “Sign up for Experian Boost. It’s free and will report monthly bills that generally don’t boost your credit like a phone bill, gas, and power!”
Feldman offered up a way for folks to finally help their credit the easy way. Experian Boost™ is free and it takes just a few minutes to sign-up.
Always be on the lookout for ways to improve your credit – it’ll only help you in the long run.
Feldman shares a great tip that can help homeowners own their home sooner (and pay wayyy less in interest). If it’s possible, work those extra payments into your budget.
11. “When it comes to money, you can have your cake and eat it too.”
Youmna Rab, Founder of Brilliantly Budgeting offered me this quote.
You don’t need to save every penny you earn and give up your favorite indulgences like spa days or dinners out.
If you make a plan for your money, you can enjoy what you like while also saving money for the future.
12. “Do not share bank accounts with anyone you’re dating but not married to, even if you live together.”
Shannon Vissers, the Financial and Retail Analyst of Merchant Maverick, shared some tough love here.
If you break up or your partner spends on things you don’t agree with, you’ll have no legal recourse to get your money back apart from suing them in small claims or court (which is expensive and stressful and may not go in your favor).
13. “Do not lease your car. Take out a loan instead.”
Vissers makes a good point here as well. A lease is essentially a very expensive car rental, and it’s a bad choice unless you’re wealthy enough to comfortably afford this luxury.
This doesn’t mean you can’t get a new car when you’re young. Rather than leasing a car out of your price range, opt to finance a cute, reliable car that you’ll own in three or five years (ideally three). You’ll build credit history this way and, in a few years, you won’t even have a monthly car payment.
14. “Be a minimalist, especially if you rent.”
While this tip may not be for everyone, there’s a good reason Visser’s offers this pearl of wisdom as well.
A good case can be made for spending on experiences when you’re young – trips, concerts, etc. — but overspending on retail goods is another story. Ever heard of the saying, what you own, owns you?
It’s true.
Remember, you’ll have to deal with all your clothes, shoes, furniture, kitchen items, knick-knacks, etc. the next time you move — and your headaches will be compounded if you have to move to a smaller place.
15. “The greatest gift you can give yourself is to save and invest early.”
Sarah Jane Paulson, CFP® at Valkyrie Financial, gave me this bit of guidance.
The classic pay yourself first mentality is the easiest way to a financially strong future. Build that emergency fund (or F*** You fund, if you prefer) of three to six months worth of expenses in a separate account other than your everyday checking.
Then go out and open an IRA or Roth for yourself. Put your money into cheap, diverse index funds and keep adding to it. The greatest money strength you have on your side is that you have years for the market to create an avalanche out of the first few snowflakes of money you invest.
16. “Becoming a financially grown-up woman means unlearning a lot of money lessons society taught us as girls: that men are better at money and math (they’re not), that investing is scary (it’s not), and that the best route to financial stability is to marry a high earner (absolutely not!).”
Sara Rathner, credit cards expert at NerdWallet, wanted to share this with other women.
So throw all those old lessons in the garbage, because that’s where it belongs. Now, today, learn everything you can about managing your finances on your own.
There is nothing more empowering than being the boss of your own life, and of being an equal partner in your relationships. No one will ever care as much about your money as you will.
17. “Surround yourself with people with similar money values.”
Sue Hirst, Co-Founder and CFO of CFO On-Call shared her experience when we talked.
When I was in my 20s, I used to hang out with many people who didn’t share my money values. As a result, almost every time I went out with my friends, I splurged money recklessly due to peer pressure.
This was one of the top reasons I was unable to save as much money as I would have liked each month. Looking back, I wish I had either told my friends directly that I wasn’t comfortable spending huge amounts of money routinely, or made new friends whose financial values aligned with my own.
18. “Make saving a habit as soon as you start making income.”
Imani Francies, Finance Expert at US Insurance Agents, shared this little mind shift.
Saving becomes easier when you look at yourself with the same significance that you look at your power bill or any other bill. No matter what, you are going to do your best to pay your power bill. You should feel the same way about putting money into your savings.
Paying yourself first every month is investing in your future. Even if you can only put $5 into a savings account once a month, start early.
19. “Budget, but give yourself room to indulge.”
Lisa Thompson, Savings Expert at Coupons.com, offered up ALLLL the good tips when I spoke with her.
What’s your weakness: designer handbags, weekend getaways, fine dining with a great bottle of champagne? Make room for things you love by controlling what you spend in other areas.
20. “Cash back offers are everywhere, from brands like Rakuten, to credit card perks, to apps like Coupons.com. Use them!”
Thompson also offers this bit of advice. Refuse to pay full price for anything until you’ve looked for an offer. If you can pair a coupon or cash back offer with a store discount or sale, bam! That’s a savvy way to shop.
21. “Learn to use credit cards wisely.”
To tack on, Thompson also had this to say.
She makes a good point, too. Today, there are so many options for credit cards that offer perks from cash back to miles to points, as well as incentives, like a free Dash Pass for DoorDash or money toward a Peloton membership. The key, of course, is to not carry a balance and pay so much interest that it cancels out the perks. But if you can learn to use credit cards wisely by paying them off each month, the perks and incentives can help make everything from dining out to travel more affordable.
22. “Get a side gig by turning a passion into a money-making opportunity.”
Finally, Thompson ended our conversation with the quote above.
Do you love essential oils? Make balms, rollerballs, and pillow sprays, and sell them on Etsy or at pop-up shops.
Do you love thrifting, going to estate sales, and visiting antique shops? Find items worth more than what you’re paying and resell them! Facebook Marketplace is the perfect spot for that, and it’s free.
If you can turn a hobby into a source of income, that’s extra money for you to invest, save, or use as your slush/entertainment fund.
23. “Know your worth and advocate for yourself when negotiating.”
Amy Maliga, Personal Finance Consultant at Take Charge America, tells it like it is with her wise advice above.
Since the gender pay gap is still a real thing (ugh), it’s important to do your research on salaries for your position and advocate for yourself when negotiating a new job or discussing your annual performance review.
24. “Set goals and actively work toward them.”
Maliga offered me a simple but strong piece of advice above.
Whether it’s buying a home, starting a business, or embarking on world travel, setting financial goals gives a structure and framework to how you plan your finances.
25. “Forget FOMO. Don’t be afraid to say no.”
Maliga also makes a good point here.
TikTok made me buy it – or did it?
It’s way too easy to shop these days, and social media knows exactly what it takes to get you to press “add to cart.” When you’re tempted to buy something you hadn’t planned on, or friends are trying to talk you into activities you can’t afford, keep those long-term financial goals in mind, and don’t be afraid to say no.
Summary
We celebrate Women’s Equality Day every August 26th to commemorate the day the 19th Amendment finally recognized that women have the right to vote. But that same equality hasn’t trickled to the financial space yet, where the gender pay gap, wealth gap, and investing gap still exist today.
We’ve made a lot of progress over the decades, but a lot still needs to happen at the company, state, and national levels to achieve equal pay and equal opportunities for equal work. Until then, I hope these financial tips from awesome Millennial and Gen Z women serve as inspiration for how you can up the ante in your own financial life.
Are there any tips you’d add to the list? Let me know in the comments below!
Monitoring your credit score sounds about as appealing as writing a term paper.
But having good credit is crucial for everything from getting a loan to getting an apartment. Which means if your credit score is on the lower end, you’ll need to be proactive — not just by monitoring it, but by actively working to improve it.
The problem? There’s a lot of conflicting info out there about what you should do to improve your credit score. Which tactics will actually make a difference, versus the ones that just sound like they’ll work?
Here’s what you really need to know about improving your FICO score, which holds the key to so many financial dreams.
What’s Ahead:
1. Target Collections Accounts First
“If your credit history includes unpaid bills that are in collections, work to pay those off [first] if possible,” says Kelley Long, a member of the National CPA FinLit Commission at the AICPA.
Letting an account get so late it goes to a collections agency is never a good thing for your credit, but the good news is the credit scoring algorithms will reward you for paying these accounts in full.
With collections accounts, the key is to get everything in writing. Request a letter stating that they received your payment in full and that they will update your credit report to show this.
In some cases, a collections agency may be willing to negotiate and settle your debt for less than the full amount. Again, you’ll want to get something in writing showing that the debt was settled and the account closed. But keep in mind this kind of arrangement may appear on your credit report as a settlement, which could be less positive than if you paid in full.
Read more: When Does an Account Go to Collections, and How To Avoid It
2. Pay Off Debts That Are Close to the Credit Limit
Even if you pay your credit card bill on time, it’s never a good idea to hold a balance near the maximum limit. The magic ratio is 35%, says Kevin Gallegos, vice president of Phoenix operations with Freedom Financial Network.
“If you have a credit card with a limit of $10,000 and you owe $3,500 on it, that’s 35% utilization,” he notes. “Anything over 35% is considered high and can [negatively] impact credit scores. Over 50% will have a definite negative impact on a credit score, and a maxed-out card will very negatively impact the score.”
Read more: What’s Your Credit Utilization Ratio?
3. Get a Higher Credit Limit (If You Can)
Believe it or not, requesting a higher credit line with an existing account can actually help your credit score, says Gail Cunningham, a spokeswoman with the non-profit National Foundation for Credit Counseling (NFCC).
“Or, open a new line of credit. The idea is that you’ll owe the same amount of money but it’s against a higher credit line, thus the ratio of credit-to-debt improves,” she explains.
“This option may not help you if you’re already having credit problems, however, because it takes good credit to get more credit. If, however, your credit score is in the high 600s or low 700s and you want to improve it even more, you may be able to find a credit card that offers a good chance of approval for your credit score range.”
She adds, “I’d caution, however, that this strategy only works for a person who’s very disciplined — and knows they won’t charge more simply because they have access to a higher credit line.”
In other words, take it easy at the mall with that credit line increase.
Read more: What Credit Score Do You Need to Get Approved for a Credit Card?
4. Look for Non-Credit Accounts That Will Report Payments to the Credit Bureaus
John Ganotis, Founder of CreditCardInsider.com, makes this remarkable point: “Rebuilding your credit doesn’t always have to involve a line of credit.”
One way is to put a utility service in your name.
“Call your providers to find who reports to the credit bureaus.”
You don’t even need to go direct to the providers if you don’t want to. Experian Boost is a free service that credits you for on-time utility payments — think cellphone, internet, cable, heating, electricity, water, etc. You just connect your bank account and let Experian do the rest.
Another is to report your living expenses to the credit bureaus, including your rent.
“Experian and TransUnion now include rent payments [in assessing FICO scores] when reported through online third party services.”
Read more: Build Credit By Paying Rent
5. Avoid For-Profit “Credit Repair” Companies
Some businesses charge a hefty sum to “repair” your credit, but they can actually do more harm than good, says Carl Robins, Vice President and Mortgage Banker with PrivatePlus Mortgage in Atlanta.
“What they don’t tell the consumer is that they’re signing up for a service to improve their scores that lenders — and current underwriting guidelines for mortgage transactions — won’t accept if there are still unresolved credit disputes on their credit report.”
He adds, “They also don’t explain the cumbersome process to have unresolved disputes removed from credit reports to qualify for a home purchase or refinance their current mortgage.”
If you feel like you need help managing your credit, look towards non-profit counseling options like the NFCC.
How to Get Approved for a Credit Line with a Less-than-Perfect Credit Score
If you follow the steps above and continue to pay all your bills on time, your credit score will improve.
Unfortunately, however, it takes time. Improving your credit score from below average (mid 600s or less) to good (720 or better) may take a couple of years. If you’re hoping to buy a home or take out other new credit in the meantime, it may be a challenge.
Here are some things to keep in mind:
1. Don’t Apply for New Credit Recklessly
The credit bureaus take note every time you apply for credit, and doing it too often will further hinder your efforts to improve your credit score.
Keep in mind that there are factors other than just your FICO score that are taken into account when you apply for a credit card, such as your income and credit utilization ratio.
Avoid applying for new credit unless you absolutely need it or are confident you will be approved.
Read more: Why You Could Be Denied a Credit Card Despite Your Excellent Score
2. Work with a Community Bank or Credit Union
If your credit score isn’t what it should be, a relationship with a community bank or credit union can really come in handy.
“A banker who knows you can perhaps look behind the poor credit history,” says Charlie Crawford, President and CEO of Private Bank of Buckhead in Atlanta. “They’ll look at the big picture rather than just a score or some other stand-alone piece of information.”
Best of all, a community banker can be straight with you and let you know your chances of being approved before you actually apply. Waiting as little as a couple months while you make some tweaks to your credit usage or budget may mean the difference between being approved or denied for a mortgage, and a knowledgable banker can tell you that.
Read more: Credit Unions vs. Banks: Think Local, Save Money?
3. Consider Secured Credit
“Establishing some cash-secured credit is one way to demonstrate your ability to pay while not putting a new bank loan at risk,” says Crawford.
If your credit score is in the low 600s, you may consider a secured credit card to help you establish a new credit line and have timely payments reported to the bureaus.
A secured credit card works just like a regular credit card except you first have to deposit money in a savings account to “secure” your credit line. Most secured credit cards can be converted to traditional credit cards (and you get your security deposit back) after a period of responsible use.
Read more: When To Consider a Secured Credit Card
The Bottom Line
The road to improving your credit isn’t always easy, but it’s well worth it. Consumers with good credit scores pay thousands less in interest over their lifetime and avoid hassles when getting jobs, apartments and, of course, loans.
With the weather warming up, I thought it’d be prudent to check out “Spring EQ,” a lender that specializes in getting cash out of your home.
By that, I mean they offer cash out refinances and second mortgages, including both home equity loans and lines of credit (HELOCs).
They also partner with other lenders to provide secondary financing, so if you get a combo loan, you might find that they’re your lender on the second mortgage.
Aside from allowing you to tap your home equity, they also offer home purchase financing too, so they’re a full-service lender.
Let’s learn more about them to determine if they could be a good option for your first or second mortgage, or even both.
Spring EQ Fast Facts
Direct-to-consumer nonbank lender that offers first and second mortgages
Including home equity loans and home equity lines of credit
Founded in 2016, headquartered in Philadelphia, Pennsylvania
Currently licensed to do business in 39 states and D.C.
Also operates a wholesale lending division for its mortgage broker partners
Spring EQ is a direct-to-consumer mortgage lender based out of Philadelphia, Pennsylvania that got its start in 2016.
Originally, they sought to transform the home equity lending business model from “a long, drawn-out paperwork based process into a 21st century digital experience.”
This mirrors the efforts currently being made by mortgage lenders that focus on first mortgages, moving from a clumsy, slow process into a digital one powered by the latest technology.
While they got their start originating second mortgages, such as home equity lines and HELOCs, today they also originate home purchase loans and refinance loans.
And they refer to themselves as one of the fastest growing mortgage lenders in the country, though it’s unclear how much volume they did last year.
The company also operates a wholesale lending division for mortgage broker partners, and says it serves customers at other lenders including SoFi, Mr. Cooper, and Roundpoint.
Interestingly, Spring EQ Wholesale utilizes the FICO Score 8 model and encourages its clients to use Experian Boost, which can result in higher credit scores almost instantly and maybe lower interest rates too.
At the moment, they’re licensed to do business in 39 states and the District of Columbia.
They’re not available in Alaska, Hawaii, Idaho, the Dakotas, West Virginia, or Wyoming, but say they’re coming soon to Massachusetts, Missouri, New York and Utah.
How to Apply for a Mortgage with Spring EQ
To get started simply visit their website and click on “Get My Options”
This will allow you to see which loan programs are available
An expert guide (loan officer) will then get in touch to further discuss pricing and options
Once your loan is submitted you can manage it via the online Spring EQ Portal
As noted, Spring EQ has turned to technology to make the process of obtaining a home loan (and home equity loan) more pain-free.
They say you can get pre-qualified in just a minute, and apply online when you’re ready to move forward, using the latest tools to speed up the once-arduous process.
This includes the ability to link financial accounts, scan/upload documents, and eSign disclosures on the fly.
Once your loan is submitted, you’ll be able to manage it via the Spring EQ Portal.
It appears they move quickly, as they say many purchase loans and refinances can close in 20 days or less, while home equity customers can get their money in as few as 11 days.
All in all, the loan process should be mostly electronic and doable from any device, such as a smartphone or desktop computer.
Loan Programs Offered by Spring EQ
Home purchase loans
Refinance loans: rate and term and cash out
Conforming loans backed by Fannie Mae and Freddie Mac
Second mortgages
Home equity loans
Home equity lines of credit (HELOCs)
Spring EQ is similar to other standard mortgage lenders in that they offer home purchase loans and refinances, including rate and term and cash out offerings.
It’s unclear what specific loan programs are available other than the popular 30-year fixed, though I’d imagine a 15-year fixed, and maybe an adjustable-rate mortgage like the 5/1 ARM.
I think they only offer conforming loans backed by Fannie Mae and Freddie Mac, with government loans like FHA/USDA/VA perhaps in the works.
What sets them apart is their second mortgages, something that has become a relative rarity these days.
This includes both home equity loans and HELOCs, the latter of which are lines of credit that allow you to draw more cash over time if needed.
These second mortgages can be used concurrently with a first mortgage to extend financing, in the case of a purchase, or simply as standalone financing.
They say you can borrow up to 90% combined-loan-to-value (CLTV), which is the total of your first and second mortgage balances against the property’s value.
This is higher than what you might be able to obtain via a traditional first mortgage, which could be capped at 80% LTV if backed by Fannie Mae or Freddie Mac.
For example, if you have a $300,000 first mortgage you really like that’s fixed for 30 years at 2.5%, you might be able to borrow an additional $60,000 on a home valued at $400,000.
That way the low interest rate on your first mortgage remains untouched while allowing you to tap equity.
I believe they lend on primary residences, second homes, and investment properties, including condos/townhomes.
Additionally, they serve self-employed borrowers, though required income documents may be more extensive.
Spring EQ Mortgage Rates
One slight negative to Spring EQ is the lack of information regarding mortgage rates and lender fees.
After a visit to their website, I was unable to discover any interest rates listed, nor could I find any lender fees charged.
This doesn’t mean their pricing is good, bad, or in-between, it just means you’ll need to get in touch with a loan officer first to determine your rate.
As such, you may want to give them a call first to discuss eligibility and pricing before signing up via their website.
Obviously, loan pricing is a big part of the equation, so knowing how competitive Spring EQ is relative to other lenders is important.
That being said, they may offer proprietary loan programs that other companies may not be able to match, especially in the second mortgage department.
Spring EQ Reviews
On LendingTree, the company has a solid 4.6-star rating out of 5 from nearly 400 customer reviews, along with an 89% recommended score.
Additionally, Spring EQ was the #1 lender in the home equity category for customer satisfaction in the second quarter of 2020, and top-3 in the third quarter of 2020.
Over at Google, they’ve got a 4.2-star rating out of 5 from nearly 300 reviews, which is also a superior rating.
On Zillow, it’s a similar 4.53-star rating from a smaller sample size of about 55 reviews.
Lastly, they’ve got a 4.47/5 rating on the Better Business Bureau website, which is surprisingly high for a complaint-driven site. And they’re an accredited business with an ‘A+’ rating.
In summary, Spring EQ could be a good choice if you’re interested in a second mortgage, such as a home equity line or loan, and want to keep your first mortgage intact.
This could become a popular trend if and when mortgage rates really begin to rise.
But they also provide home purchase financing now as well, and could structure your loan as a combo to take advantage of better pricing while avoiding costly PMI.
Spring EQ Pros and Cons
The Good Stuff
Can apply for a loan directly from their website in minutes
Provide a fast, digital process and an online borrower portal
Offer second mortgages (HELOCs and home equity loans)
They say many loans close in 20 days or less
Serve both salaried and self-employed borrowers
Excellent customer reviews from past customers across all ratings sites
A+ BBB rating and an accredited business since 2016
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