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Snapshot: Provided that you’re a student, you can gain access to fantastic cash back rates (anywhere from 1% – 10%, depending on the category), even if you have no prior credit. Did we also mention the annual_fees annual fee?
Pros
Cons
annual_fees annual fee
This card allows balance transfers but there’s no introductory APR for them
3% cash back on dining, select streaming services, entertainment and grocery store purchases
Potentially higher APR
A potential for relatively low APR for a student credit card
bonus_miles_full
Like what you see? Learn how to apply for the Capital One SavorOne Student Cash Rewards Card
Capital One SavorOne Cash Rewards Card – which you generally have to have at least a good credit score to qualify for (and it has a higher regular APR)*.
You get access to amazing cash back rates on dining and grocery shopping – which are common expenses – in addition to a flat 1% cash back on everything else. This card does have a relatively high APR (see how it compares to other cards) but no annual fee, so as long as you pay your statement on time, you won’t have to worry about interest. (Paying your credit card bill on time will also help you build good credit in preparation for your next card, auto loan, or apartment application, after you graduate).
When you’re just starting out on your own having no credit or bad credit can be a barrier to many things you need in adulthood, like an apartment lease, a car loan or a halfway decent credit card. You need credit to get credit, and most of the time the options aren’t great.
This card is great (actually). Like we said before, many of this card’s benefits are very similar to the card_name. But where you need great credit to qualify for that card, you can qualify for the same benefits by being in school.
So if you’re worried about a low credit score, or maybe you’ve just turned 18 and are starting out on your own and have no credit, provided that you’re a student (among other qualifying factors) this is a great credit card to apply for.
Great Rewards for Dining
If you’re cramming for a test and just don’t have the time to plan out meals and need to Uber Eats some food to keep the study session going uninterrupted, at least you’ll be making a whopping 10% (10%!) cash back on your splurge (through 11/14/2024). 3% cash back on grocery store purchases (excluding superstores like Walmart® and Target®) is also great – not only are groceries a regular expense, but 3% is a decently high rate for a cash back category.
Whether you’re the kind of shopper who loves spending time researching a great deal, or you don’t have the mental energy to pay attention to such things, this card has you covered. Not only does it have great cash back rates, but it also has a varied enough mix of rewards categories that you can earn cash back without having to go out of your way to make unusual purchases.
Like what you see? Learn how to apply for the Capital One SavorOne Student Cash Rewards Card
The Drawbacks
No Introductory APR
If you’re looking for a 0% APR offer, you won’t find it with this card. That means you can’t use this card to make a major purchase you can pay off over a year or two without accruing interest. That’s certainly not a deal breaker for most students, but it’s something to consider.
Potentially High APR
It’s hard to say what ongoing APR you will get when you apply for this card, the quoted range is quite wide at reg_apr,reg_apr_type. If you qualify for a lower APR, great! But if you end up paying a higher APR, that could be a drawback. Especially if you want to rely on this card to help you cover larger purchases.
Is It Worth It?
For students who eat out or grab coffee on the go a lot, this card may be a good option. It lets you earn decent cash back perks, and as long as you pay off your statement every month, that’s cash in your pocket.
What Are The Credit Limits For Capital One SavorOne Student Cash Rewards Card (Minimum and Maximum)?
Your credit limit is determined by your credit history and factors such as income. From what we’ve seen other users report, credit limits may range from $300 to $700 (at least initially), though approvals could certainly fall outside those ranges.
How Soon Can I Increase My Credit Limit After Being Approved For A Capital One SavorOne Student Cash Rewards Card?
Capital One may let you request a credit limit increase after 6 months, though approval of the increase is not guaranteed. During that time you will need to demonstrate that you can handle your credit responsibly, which means both using and paying off your bill on-time.
How Good Is A Capital One SavorOne Student Cash Rewards Card For Building Credit?
This is an excellent card for building credit because you don’t necessarily need great credit to get it. Capital One is a well-recognized credit card provider that typically reports payment history to the credit bureaus. That helps you build a stronger credit profile.
Learn more about how to apply for the Capital One SavorOne Student Cash Rewards Card here:
Advertiser Disclosure: Credit.com has partnered with CardRatings for our coverage of credit card products. Credit.com and CardRatings may receive a commission from card issuers.
While mortgage rates have seen some dips in recent weeks, rates are still higher than they were a year ago. And though there’s plenty of interest in homeownership, it’s still difficult for most people to afford to purchase a house.
A number of closely followed mortgage rates slumped over the last seven days. 15-year fixed and 30-year fixed mortgage rates both decreased. The average rate of the most common type of variable-rate mortgage, the 5/1 adjustable-rate mortgage, also saw rates trending downward.
High interest rates and house prices, together with limited for-sale inventory, have effectively kept a lid on homebuying demand throughout 2023. That was especially clear when mortgage rates surged past 8% in October, causing new-home sales to fall by 5.6% and existing-home sales to fall by 4.1% from the prior month.
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
Once the average rate for a 30-year fixed mortgage fell below 8% in early November, home loan applications started slowly inching up, according to the Mortgage Bankers Association. Mortgage interest rates, which are influenced by macroeconomic factors, such as inflation, job growth and the bond market, as well as investor confidence and global events, are always somewhat volatile. But experts note that changing economic conditions, particularly slowing inflation, could help mortgage rates stabilize in 2024.
Today’s average mortgage interest rates
If you’re in the market for a home, check out how today’s mortgage rates compare to last week’s. We use data collected by Bankrate to track rate changes over time. This table summarizes the average rates offered by lenders across the country:
Average mortgage interest rates
Product
Rate
Last week
Change
30-year fixed
7.32%
7.53%
-0.21
15-year fixed
6.74%
6.80%
-0.06
30-year jumbo mortgage rate
7.39%
7.59%
-0.20
30-year mortgage refinance rate
7.46%
7.63%
-0.17
Rates as of December 12, 2023.
Where mortgage rates are headed
At the start of the pandemic, mortgage rates were near record lows, around 3%. That all changed as inflation began to surge and the Federal Reserve kicked off a series of aggressive interest rate hikes, which indirectly drove up mortgage rates. Now, 20 months after the Fed’s first increase in March 2022, mortgage rates are well above 7%.
The central bank has kept interest rates steady since late July, but mortgage rates continued to climb until fairly recently. Following the Fed’s November meeting, mortgage rates dropped lower for the first time in months due to a mix of economic factors, including a shift in the 10-year Treasury yield, weaker jobs data and a better-than-expected inflation report.
Any mortgage forecast is simply an estimate, but experts say that improved inflation data and an end to the Fed’s rate-hike cycle could be signaling the start of a slow recovery in home loan rates. Most major housing authorities predict average mortgage rates to return to the 6% range around mid-2024.
“Rates will hold steady in the near term, except in the event of unexpected news or developments,” said Matt Dunbar, senior vice president of Southeast Region at Churchill Mortgage. The Fed, which is in a holding pattern to collect more data, will likely stay the course with a rate pause unless there are unwelcome surprises in the December inflation and jobs reports.
Calculate your monthly mortgage payment
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
What is a good loan term?
When picking a mortgage, remember to consider the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages can either be fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are set for the duration of the loan. The interest rates for an adjustable-rate mortgage are only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the current interest rate in the market.
When choosing between a fixed-rate and adjustable-rate mortgage, consider the length of time you plan to live in your home. If you plan on living long-term in a new house, a fixed-rate mortgage may be the better option. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages may offer lower interest rates upfront. As a result, a growing share of homebuyers are leaning toward ARMs.
30-year fixed-rate mortgages
The 30-year fixed-mortgage rate average is 7.32%, which is a decrease of 21 basis points from seven days ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage, the most common loan term, is a good option if you’re looking to minimize your monthly payment. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one, but often a higher interest rate.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 6.74%, which is a decrease of 6 basis points from the same time last week. Though you’ll have a bigger monthly payment compared to a 30-year fixed mortgage, a 15-year loan will usually be the better deal if you can afford the monthly payments. You’ll usually be able to get a lower interest rate, pay less interest in the long run and pay off your mortgage sooner.
5/1 adjustable-rate mortgages
A 5/1 adjustable-rate mortgage has an average rate of 6.67%, a downtick of 11 basis points from the same time last week. You’ll typically get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. But you could end up paying more after that time, depending on how the rate adjusts with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an ARM could be a good option. If not, changes in the market may significantly increase your interest rate.
How to find personalized mortgage rates
You can get a personalized mortgage rate by contacting your local mortgage broker or using an online calculator. To find the best home mortgage, take into account your goals and current finances. Be sure to look at the annual percentage rate, or APR, which reflects the mortgage interest rate plus other borrowing charges. By comparing the total cost of borrowing from multiple lenders, you can make a more accurate apples-to-apples comparison.
Your specific mortgage rate will vary based on factors including your down payment, credit score, debt-to-income ratio and loan-to-value ratio. Having a higher down payment, a good credit score, a low DTI and LTV or any combination of those factors can help you get a lower interest rate.
The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider fees, closing costs, taxes and discount points. You should shop around and talk to several different lenders from local and national banks, credit unions and online lenders to find the best mortgage for you.
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right for you.
The information provided on this website does not, and is not intended to, act as legal, financial or credit advice.
To increase your credit score to 800, you’ll need a nearly flawless payment history, a credit utilization rate well below 30%, a healthy mix of credit types, and an extensive credit history.
The average American has a credit score of 716, well within the range of what is considered a good credit score. Many people may be content with that score, but there are benefits of working your way up to the exceptional range, which starts at 800 according to the FICO® scoring method. If you’re wondering how to increase your credit score to 800, focused and careful financial habits might help you get there.
Learn more about this prestigious credit score and how to work toward it so you can improve your financial situation.
What Is an 800 Credit Score?
A credit score between 800 and 850 is considered exceptional credit. Only 23.3% of consumers have reached this credit tier, which has significant perks, including better interest rates and access to better financial products.
Several different credit scores exist, but lenders most commonly use the FICO Score, which is a number ranging from 300 to 850. Credit scores fall into five categories using this scoring method:
Very Poor: 300 – 579
Fair: 580 – 669
Good: 670 – 739
Very Good: 740 – 799
Exceptional: 800 – 850
How to Get an 800 Credit Score
An 800 credit score is more attainable than it seems. The average number of people with this score has increased steadily since 2010.
Follow the steps below to start your journey to better credit.
1. Obtain Your Credit Report and Resolve Any Discrepancies
First, request a copy of your credit report. Look for any discrepancies. File a dispute for any issues so your credit report is accurate. Credit score companies, such as FICO, base your credit score on the information in your credit report, so accuracy is essential.
If you notice errors on your report, you aren’t alone—according to an FTC study, roughly 25% of people reported errors on their credit report. Fortunately, you can challenge mistakes under the Fair Credit Reporting Act. Gather evidence to support your case and write a dispute letter to the reporting bureau. They have 30 days to investigate your claim and five days to notify you of their findings in writing.
2. Analyze Your Credit Report for Areas of Improvement
Once you’ve resolved any issues, analyze your report to determine why your score is lower than 800. Your FICO score looks at the following to determine your credit score:
Payment history: Whether you pay your bills on time and in full is the most important factor, accounting for 35% of your overall score.
Amounts owed: This refers to how much credit you’re using compared to your total credit limit, and it makes up 30% of your overall score. The less of a balance you carry from month to month, the better it is for your credit health.
Length of credit history: Credit history looks at the following and accounts for 15% of your credit score:
Age of oldest account
Age of newest account
Average age of accounts
How frequently you use revolving credit
Credit mix: FICO considers the types of credit accounts you have, such as revolving and installment credit. This factors into 10% of your score.
New credit: FICO bases 10% of your score on whether you’ve applied for several new lines of credit in a short time frame, indicating you may be overextending yourself.
Analyze your report with those factors in mind. Look for areas that need improvement:
Are you paying your bills on time?
Do you owe more than 30% of your available credit?
Is your credit history too short?
Do you only have one type of credit?
Have you opened too many lines of credit at once?
Based on the answers to those questions, you can determine what to focus on as you raise your credit score to 800.
3. Establish a Strong Payment History
The most significant factor in your credit score is a strong payment history, and Lending Tree found that 100% of people they surveyed with an 800 credit score pay all their bills on time and in full. If your credit report shows you have late payments, focus on improving your payment history.
Enroll in auto pay to ensure debts are paid promptly (but ensure you always have enough in your account to avoid overdraft fees). If you prefer to pay bills manually, add due dates to your calendar and set reminders to pay them.
4. Manage Your Credit Utilization
The second largest impact on your credit score is credit utilization, so you should prioritize lowering it. Total all your revolving credit debts (usually credit cards and home equity lines of credit) and divide that number by your total available credit. Then, multiply that number by 100 to get a percentage.
For example, if you have one credit card with a balance of $3,000 and a second one with a balance of $2,000, your total revolving credit debt is $5,000. If each card has a credit limit of $7,000, your total available credit would be $14,000. A balance of $5,000 in debt divided by available credit of $14,000 would be 0.357. Multiplied by 100, you’d get a credit utilization rate of 35.7%.
People with good credit scores tend to have a credit utilization rate below 30%. But if you’re working to earn an 800 credit score, you’ll want to keep that number even lower: The average credit utilization rate for people with 800 credit scores is 6.1%.
If your credit utilization rate is too high, start paying down your debt. Several strategies can help you tackle this effectively:
Debt snowball method: Use extra money in your monthly budget to pay off your smallest debt. Once you’ve paid that debt off, apply the minimum payment of that debt plus the extra money in your budget toward the next smallest debt. Over time, the money you put toward your debts becomes larger, like a snowball.
Debt avalanche method: Use extra money in your monthly budget to gradually pay off the debt with the highest interest rate. Then, apply that debt’s minimum monthly payment and extra money in your monthly budget to the debt with the next highest interest rate. With this strategy, you’ll save a significant amount of money on interest.
It’s also important to avoid taking on new debt while you pay down the balances of your existing debt. Establish a budget, stick to it, and avoid making large purchases unless absolutely necessary.
5. Maintain a Mix of Credit Types
Lenders want to see a mix of credit types on your credit report. These can include:
Mortgage loans
Installment loans
Credit cards
Retail accounts
Finance company accounts
You don’t need all of these account types on your credit report, but you should aim to have more than one since a person with an 800 credit score has an average of 8.3 open accounts.
But don’t take out an installment loan just to raise your credit score. Instead, consider a credit builder loan, which involves a lender depositing the loan amount into a savings account or a certificate of deposit (CD). You’ll receive the total amount once you repay the loan, which will appear as a personal loan on your credit report.
If you have loans but no credit card, consider opening one with a low credit limit and use it for one type of purchase, such as gas or groceries. Apply for a secured credit card if you can’t get approved for a traditional credit card. This type of credit card requires a cash deposit in the amount of the credit limit that operates as collateral.
6. Lengthen Your Credit History
Lenders want to see a long history of responsible credit, so lengthening your credit history can help you raise your credit score to 800. The average age of the oldest active account for those with an 800+ credit score is 21.7 years.
Improving this area of your credit often requires patience, but you can have someone with a long credit history, such as a parent or spouse, add you as an authorized user to their credit card. For example, if your parents have had the same credit card for 10 years and they add you as an authorized user, you’ll lengthen your credit history by 10 years.
Also, don’t stop using credit cards with a longer account history, or you risk decreasing your credit history. Instead, keep them active by making small monthly purchases and paying them off immediately.
7. Monitor Your Credit Report and Credit Score
As you work through the various strategies, monitor your credit report regularly. Report any errors, monitor your report for areas of improvement, and adjust your plan as needed.
You can check your credit report for free annually using sites like annualcreditreport.com. You can also prevent hard inquiries by placing a security freeze on your credit report. This helps prevent identity theft but can also help avoid unnecessary hard credit pulls that may harm your credit.
Some credit cards may allow you to see your credit score every month as part of your monthly billing statement. (Some issuers may offer this feature for free, while others may do it for a small fee.) Ask if your credit card issuer offers this benefit and use it to track your credit score regularly.
8. Be Patient and Persistent
Working to raise your credit score is a long-term commitment. Predicting how long it will take to improve your credit depends on several factors, such as:
Your current score
Your overall credit history
How much debt you owe
How quickly you can pay the debt down
Even if you don’t see gains right away, or they’re smaller than you’d like, stick with your responsible habits. Over time, your score should improve, and even if you don’t make it to the esteemed 800, you’ll still see the benefits of a higher credit score.
Benefits of an 800 Credit Score
Raising your credit score to 800 isn’t easy, but several benefits make it worthwhile.
Easier approval for credit applications. An applicant with an 800 credit score is a low-risk investment for lenders, so they’ll quickly approve you for credit as long as the debt fits your income level.
Lower interest rates on loans and credit cards. Lenders base the interest they charge partially on borrowers’ credit scores, so the higher your credit score, the lower your rate. Once you reach 800, you’ll be able to access the best interest rates on the market, often lower than the national average, saving you money over the life of the loan.
Higher credit limits on credit cards. Credit card issuers often reward people with good credit with higher credit limits—the average credit limit of someone with an 800 credit score is $69,346, much higher than the of $28,930. While this gives you more purchasing power, its biggest benefit is that it makes it easier to maintain a lower credit utilization rate.
Access to better credit card products. With a higher credit score, you’ll qualify for credit cards with better rewards. For example, you may get access to airport lounges or earn a higher rate of return on your cash back or airline miles.
Lower insurance premiums. Insurance companies often pull your credit before determining your rate. Increasing your credit score to 800 may result in a lower rate on your home or auto insurance when you apply for a new policy.
Improved rental prospects. If you want to rent, boosting your credit score to over 800 can give you access to more rental options. Landlords use credit scores to determine how reliable you’ll be at paying your rent, and with an 800 credit score, nearly every landlord will find you a favorable tenant.
Peace of mind. With an 800 credit score, you can access loans or utilize your higher credit limits on credit cards when hard times happen.
Improve Your Financial Habits With Credit.com
Improving your credit score comes with substantial benefits, especially when you reach the exceptional credit level. While raising your credit score to 800 can take a while, the financial peace of mind, lower interest rates, and other benefits are worth it.
Start your journey to an 800 credit score by addressing any discrepancies. Then, work toward improving financial behaviors that impact your credit, such as making on-time payments and minimizing your credit utilization rate.
While FICO and VantageScore take some of the same factors into account, VantageScore determines your credit score based on six different factors. Let’s look at how VantageScore weighs each factor:
Payment history (41%): Your past ability to pay bills on time.
Depth of credit (20%): The ages and types of credit accounts you have.
Credit utilization (20%): How much of your credit limit you’re using.
Recent credit (11%): The number of hard inquiries on your credit report.
Balances (6%): The total balances on your credit accounts.
Available credit (2%): The amount of credit you have available to you.
What Kind of Loan Can I Get With a 720 Credit Score?
As mentioned above, a good credit score can help you qualify for better rates and terms for loans. However, it’s important to keep in mind that your credit score isn’t the only factor that lenders look at when reviewing your loan application. Your income, employment, credit history, and debt-to-income ratio are also taken into consideration during the approval process.
With that in mind, here’s a look into the loans you can generally expect to qualify for with a 720 credit score. Assuming you also qualify for income thresholds as well.
Mortgages
Generally, mortgage lenders require a minimum credit score of 620, so you should have no problem qualifying for a mortgage with a 720 credit score. You’ll also likely qualify for low interest rates, although you might not get the best rate available. Borrowers who qualify for the lowest interest rates typically have a 760 credit score or higher.
Additionally, how much of a down payment you put down may influence your interest rates. A larger down payment provides less risk to the lender because you have additional stake in the house.
Auto Loans
A 720 credit score will allow you to qualify for an auto loan. When looking at the average car loan interest rates, borrowers with credit scores between 661 and 780 qualify for an average used car APR of 7.83% and an average new car APR of 5.82%. However, if you bring your score to 781 or above, you can expect a 1.84% lower interest rate for used cars and a 1.07% lower interest rate for new cars, on average.
Personal Loans
With a 720 credit score, you’ll have many options for personal loans, so you should shop around for the best rates. Personal loan interest rates can range from 6% to 36%, although a good credit score should allow you to qualify for rates on the lower end of that spectrum. According to recent personal loan statistics, the average interest rate is 11.2%.
Student Loans
While federal student loans don’t have credit score requirements, private student loan lenders typically require a good credit score. With a 720 score, you’ll likely get approved by most lenders and may even qualify for the best interest rates.
Credit Cards
Most credit card issuers will approve borrowers with a 720 credit score and potentially offer the lowest interest rates. You can likely even get approved for a 0% APR card. Keep in mind that certain prestigious credit cards that provide luxurious perks require excellent credit to qualify plus additional requirements. Therefore, you may need to improve your credit score before applying for an exclusive credit card.
How to Further Improve Your 720 Credit Score
If you have a good credit score but want to reach the very good or excellent range, here are some tips for how to make your good credit score even better:
Pay your bills on time: Since 720 is a high credit score, a single late payment can cause a significant drop in points. Make sure to continue paying your bills on time to further improve your credit.
Make payments more frequently: Making multiple payments on your credit card bill each month can help keep your credit utilization low.
Request a credit limit increase: Another way to lower your credit utilization is to increase your credit limit.
Leave credit accounts open: Avoid closing old credit accounts to maintain the length of your credit history.
Space out new credit applications: Wait six months between credit card applications to limit the number of hard inquiries on your credit report.
Get credit for rent and utility payments: If you regularly pay your bills on time, a rent and utility reporting service can report your payments to the credit bureaus, which may help improve your credit.
Dispute any errors: Check your credit report at least once a year and challenge any inaccurate information you find.
While a 720 credit score is considered good, there’s still room for you to stay on top of your credit—that’s where ExtraCredit® comes in. ExtraCredit is a credit management product that helps you check your FICO® scores, view your credit reports from all three credit bureaus, report rent and utilities, and more. Start your free trial* today.
*Your 7-day trial will begin after agreeing to these terms and submitting your ExtraCredit® sign-up. After your trial period, your subscription will automatically continue on the same day every month as the day you started your trial membership. The free trial is available for new ExtraCredit customers only. The credit card you provided will be charged $24.99 (plus any applicable tax) on the next business day and monthly; after your trial period unless you cancel. You may cancel at any time by downgrading your service level in your settings or by contacting us at [email protected]. Dishonored payments will result in an automatic downgrade to the free credit.com product.
Renting after eviction may seem daunting, but it’s not impossible. Yes, getting evicted is a terrible experience to deal with and a frustrating process to handle afterward. It’s something everyone fears and when it happens, you’re left wondering what the process of renting after an eviction is like.
While starting to find a new apartment after getting an eviction notice is a daunting process, it’s not impossible. With the right knowledge and preparedness, renting after eviction will be much easier. Don’t let an eviction weigh you down — we’ve got you covered with useful information so you’ll be renting after an eviction in no time.
Things to do if you’ve been evicted
If you’ve been evicted and are now ready to begin searching for a new space to rent, there are some things you should consider that will help make the process easier. Here are 10 tips for renting after an eviction.
1. Work on your credit score before renting after eviction
Your credit and legal history are two separate records, but when applying for a new place to rent, they become intertwined. An eviction won’t show up on a credit report itself but it will show up on a background check. Almost all landlords or apartment complexes will require a background check as part of the rental application process. So, if you have a past eviction, the landlord will almost certainly see it on your background check.
So how does that impact your credit score? We mentioned an eviction won’t show up on the credit report, but, if a previous landlord sent unpaid rent information to a collection agency or if your landlord sued you in court and won, this will all negatively impact your credit score. If you’ve been evicted, you need to work to improve your credit score so you can use a high score to advocate for yourself when going to rent a new property.
Start by paying off outstanding debts and paying future bills on time. A good credit score can make or break your ability to rent an apartment in the future.
2. Be honest
When people say “honesty is the best policy,” they mean it. It’s always best to share upfront with a possible future landlord about your past eviction notice — honesty is the best policy. Renting after an eviction is already hard enough and you don’t want to make it harder by having your future landlord find out you lied or withheld the truth. If they ask about your previous eviction you can simply explain the situation that led to your eviction.
Sometimes, the landlord will be more willing to work with you after hearing your side of the story.
3. Look at renting from a private party
Renting from a private owner as opposed to an apartment complex is always an option for those with eviction notices on their records. Because they’re renting the space privately they don’t have to work within the guidelines and restrictions that a regular apartment complex does. Because of this, they might be more willing to work with you and your situation. As mentioned above, be as open and honest with them as possible so they can fully understand your situation.
4. Pay more upfront
There are two ways to really get a person to help you out — buy them food or give them money. When looking for a place to rent, try and offer more money upfront. If you have the means, offer to pay a higher security deposit or two months’ rent upfront. This way the landlord knows you’re serious about renting and paying on time.
5. Get a co-signer
Getting a co-signer is another idea to explore while trying to rent after an eviction. If you know someone who is willing to and has good credit, ask if they’ll co-sign. Doing this might make the landlord more inclined to rent to you. But, keep in mind that if you don’t pay, your co-signer will have to.
6. Try and clear your record
An eviction stays on your record for seven years. That being said, there are some ways to clear your record sooner. If you’ve paid off any outstanding rent debts, reach out to your previous landlord and ask them to remove the eviction from your record.
If you haven’t yet been able to pay off an outstanding rent debt, still talk to your previous landlord. Ask them if you are able to pay off your rent if they’ll consider removing your eviction.
7. Refine your search renting after eviction
When searching for an apartment, refine your search and filter for apartments that either don’t do background checks or that accept applicants with previous evictions. By doing this you won’t waste your time looking at places guaranteed to turn you down.
8. Find the right references
Because renting after eviction is a tough road, you should have a lot of references ready before applying to rent an apartment. Because evictions are sometimes seen as a character flaw, you’ll want a reference to point out your good character traits.
Get friends, employers or colleagues to write letters speaking to your character and what a great tenant you’ll make. Submit these letters along with your rental application so that the landlord can read them and get a better sense of who you are and how you’ll be as a potential tenant.
9. Get a letter of credit when renting after eviction
Your goal when renting after an eviction is to get the landlord to understand what happened and still rent to you. Writing a letter of credit is a great start on this process. Write up your previous credit history and how you’ve changed. Tell them if you’ve gotten a new job or how you’re planning on doing things differently this time around.
10. Make a good first impression
First impressions last for a long time. When meeting with the landlord, dress nice and wear something that says you’re a reliable renter. Be polite and positively engage with them whilst speaking. You want to leave with them thinking you’re the best person to rent to. By doing this, they might be more willing to work with you and your situation.
Home sweet home
Being evicted is an extremely difficult moment to go through. And then on top of that, renting after eviction is a hard task. It takes time, effort and energy, but fear not it can be done. Using the knowledge and tips listed above you’ll be able to better prepare yourself for this daunting task.
Make sure to gather all the appropriate documents and references with you when going to meet with your potential new landlord. Tell them your story and appeal to their hearts. While it may seem like your past is still haunting you, there is hope that you’ll be able to find a new place to call home.
Ashley Singleton is a writer who loves following and writing about current lifestyle, DIY and home improvement trends. You can read some of her other work on the Lady Spike Media website. In her spare time, she performs stand-up comedy in Los Angeles.
Renting a house or apartment comes with several perks, like minimal commitment to live in one place. After a certain point, however, most people want to put down roots and purchase their own home.
Owning your own home is the American Dream. Plus, you won’t have a landlord breathing down your neck about what you can and can’t do. But what kind of credit score is needed to buy a house?
We’ve got the answers, plus some extra tips on how to seal the deal, no matter what kind of credit score you have.
How does your credit score affect buying a home?
Your credit score influences your ability to buy a home as a major factor in whether you’re approved for a mortgage. That’s because your credit score is a reflection of how likely you may be to default on your loan.
Weighing all the items on your credit reports, such as payment history and amounts owed, a complex calculation then creates your FICO score. FICO scores are the credit scores that 90% of lenders use. They give mortgage lenders a better idea of how you handle your finances.
Even after you’re approved for a loan, your FICO score also affects the interest rate on your mortgage. Why is that a big deal? Well, depending on how expensive your loan is, you’ll likely end up paying tens of thousands of dollars (if not more) in interest. That’s on top of your principal loan amount.
An interest rate of even just ¼ percent less can save you a lot of money over the course of a 30-year loan. So, it’s clear that your credit history is an important factor not just for getting approved, but also for getting the best interest rates to lower your monthly payments.
Ready to Raise Your Credit Score?
Learn how credit repair professionals can assist you in disputing inaccuracies on your credit report.
What credit score do you need to buy a house?
The minimum credit score needed to buy a house can vary based on the economy and the housing market. However, there are some basic guidelines you can go by to determine how likely you are to be approved for a home loan. First, the minimum credit score depends on the type of mortgage you’re getting.
Conventional Loans
For conventional loans, which come with the strictest lending standards, the credit score needed to buy a house is 620. With a conventional loan, the minimum down payment is 5%, but could also increase based on your credit scores.
FHA Loans
FHA loans are insured by the Federal Housing Administration. For an FHA loan, the minimum credit score requirement is just 580 with a down payment of 3.5%. It’s possible to qualify for an FHA loan with a FICO score as low as 500, but you’ll need a 10% down payment.
Different mortgage lenders have different credit score requirements depending on how much risk they’re willing to take on a loan. Furthermore, you may be required to pay private mortgage insurance for the life of the loan, depending on the size of your down payment.
VA Loans
For VA loans, the U.S. Department of Veterans Affairs has no minimum credit score requirements. However, most VA loan lenders require a minimum credit score of 620. However, some will allow a credit score as low as 580.
USDA Loans
For qualified buyers purchasing a home in designated rural areas, there is no set minimum credit score from the USDA. However, a credit score of at least 640 is recommended.
What factors determine your credit score?
It’s crucial to know what factors affect credit scores so you can plan the most effective way to build or protect your credit.
Payment history: This is perhaps the most important factor, as it accounts for 35% of your overall credit score. Payment history includes whether you have paid your bills on time in the past and any negative marks, such as late payments, collections, or bankruptcies.
Credit utilization: This accounts for 30% of your credit score and refers to how much of your available credit you are using. A high credit utilization ratio could hurt your credit score, while a low one can help.
Length of credit history: This factor accounts for 15% of your credit score and is a measure of how long you have been using credit. Generally, the longer your credit history, the better your credit score will be.
Credit mix: This factor accounts for 10% of your credit score and refers to the types of credit you are using. A good credit mix includes a variety of different types of credit, such as credit cards, student loans, mortgages, etc.
New credit: This factor accounts for the remaining 10% of your credit score and refers to how often you are applying for new credit. Applying for too much new credit in a short period of time can hurt your credit score.
See also: Does Buying a House Hurt Your Credit?
Average Credit Score
The average credit score for buying a home is 680-739. However, those who have a “good” credit score of 740 and higher will be offered the best mortgage rates.
It’s important to check your credit score to know where you stand. However, your credit score alone doesn’t determine whether you’ll be approved. Mortgage lenders also look at your employment history, how much debt you have, and your down payment amount.
For example, buyers with higher credit scores could be eligible to put down as little as 3.5% of the mortgage loan amount with an FHA loan.
However, those with a lower credit score, may be required to pay as much as 10% since mortgage lenders consider them to be more at-risk for defaulting on the loan.
See also: Which Credit Scores Do Mortgage Lenders Use?
More Options for First-Time Homebuyers & Low-Income Borrowers
You can also explore newer mortgage programs available for homebuyers with low to moderate-income. The Freddie Mac Home Possible mortgage, for example, allows you to purchase a home with a down payment of just 3%. Fannie Mae also offers a 3% down payment option with the HomeReady loan, as long as you have a credit score of at least 620.
What else do you need to get approved?
In addition to your credit scores, your mortgage lender looks at a few other factors to approve your home loan. They’ll review your employment situation to make sure you have a steady income to make your monthly mortgage payments.
You’ll most likely need to submit pay stubs, bank statements, W-2s, and sometimes even a verification of employment form. If you’re serious about purchasing a home, start setting these documents aside in a safe place so you have them ready to give to your lender when the time comes.
Not only does the lender look at your debt-to-income ratio and other financials, but they’ll also check out the actual home you’re purchasing. Some types of home loans require the house to be in a certain condition, which can take rehabilitation projects off the table.
Before making an offer, check with your lender on what types of properties you can consider. That allows you to avoid making an offer you can’t follow through on. The property’s appraisal also needs to come in at or above the amount of the loan because a lender cannot loan more than the appraisal value.
Can you get a mortgage with bad credit?
You can still get a mortgage even if you have bad credit, although you’re likely to pay a much higher interest rate to compensate for the increased risk to the lender.
Government-backed loans, like FHA loans, specifically cater to borrowers with lower credit scores. But even if you’re not certain that you’ll qualify, it’s worth offering some extra security to your lender.
For example, you might give a larger down payment or set aside extra cash reserves to show the lender you have the money to repay the mortgage loan. Or you might give proof that you’ve consistently paid your rent on time for an extended period.
Check Out Our Top Picks for 2023:
Best Mortgage Loans for Bad Credit
You could also try writing a letter to explain your credit situation. This can be done, especially if it’s due to an extenuating circumstance like emergency medical bills. Be upfront in asking your lender what you can do to qualify for a loan, even if you might not meet the usual underwriting standards right away.
If you’ve had a bankruptcy or foreclosure in your past, there are a few rules that you simply can’t get around. The exact specifics depend on your loan type.
However, in general, you have to wait for a predetermined “seasoning period” after the bankruptcy or foreclosure has been discharged before you can get approved for a home loan.
For bankruptcies, the seasoning period is typically between two and four years. For foreclosures, you’ll need to wait between three and seven years.
Can a cosigner help you qualify for a mortgage?
Home buyers with a low credit score may want to consider getting a cosigner to help with their mortgage application.
If you can get someone who has a good credit score (such as a family member) to sign the loan with you, it will strengthen your loan application. Just remember that your cosigner is equally accountable as you are for repaying the loan.
If you fail to make loan payments and your account goes into delinquency or even foreclosure, it will affect the cosigner’s credit.
If you decide to take on a cosigner to get approved, make sure that person understands the responsibility and risk that goes into the decision. It obviously takes a close relationship for this kind of situation to work out, so make sure you choose your cosigner wisely.
What if you don’t have any credit at all?
Building credit from scratch is challenging, but it can be done. Adding a cosigner to the mortgage loan application works for people with no credit as well as for those with poor credit. Another option is to start using a credit card responsibly.
Start with a secured card and make your monthly payment in full each month to build credit. Or ask a close relative if you can be added as an authorized user on one of their credit cards.
You can agree not to spend anything (or make quick payments if you do). This simple step will add that credit card’s entire length of use to your credit report.
You can also show your lender that you’ve regularly paid other bills on time, like your cell phone, utilities, or rent. Another method is to make a bigger down payment to compensate for your lack of credit. Talk to your lender to see what else you can provide to make the loan work.
How can you improve your credit to qualify for a mortgage?
There are several ways you can improve your credit score; just realize that it won’t happen overnight.
Order Copies of Your Credit Report
Get started by ordering copies of your credit report. This way, you can get an idea of everything a lender would see when reviewing your loan application.
First, check to make sure that all the information is 100% accurate. From there, look at where there are weaknesses on your report. Is the amount of debt you owe really high?
Lower Your Credit Utilization
Attempt to re-work your budget to pay off your credit card balances and other debt. This will lower your credit utilization ratio and ultimately increase your credit score.
Is your available line of credit minimal? Ask an existing creditor to extend your maximum amount on one of your current credit cards. This will also lower your credit utilization.
Get Negative Items Removed From Your Credit Report
If you have numerous negative marks on your report and feel overwhelmed, you might consider hiring a credit repair company.
Take a look at our list of top ranked credit repair companies in your area to find a reputable one to work with. They’ll take the lead in disputing negative accounts with the credit bureaus and getting them removed from your credit history. Once that happens, you’ll automatically see your credit score increase.
Even if you don’t have the bare minimum credit score to qualify for a mortgage, there are many ways to buy a house. From getting the right loan to improving your credit score, you’ll be able to quickly put yourself on the path to homeownership.
When applying for a mortgage, it’s essential to understand the credit scores that mortgage lenders use to assess your creditworthiness. By familiarizing yourself with these models, you can better prepare for the mortgage application process and increase your chances of obtaining favorable loan terms.
Mortgage Lending FICO Scoring Models
Mortgage lenders typically rely on industry-specific FICO scores from each of the three major credit bureaus—Experian, TransUnion, and Equifax. The commonly used FICO scores for mortgage lending include FICO Score 2 (Experian/Fair Isaac Risk Model v2), FICO Score 5 (Equifax Beacon 5), and FICO Score 4 (TransUnion FICO Risk Score 04).
Lenders often obtain a single report containing credit reports from all three credit bureaus and their associated FICO scores. They may base their decision on your middle credit score or, if you’re applying jointly, the lower middle score.
Understanding the Role of the Major Credit Bureaus
The three credit bureaus—Experian, TransUnion, and Equifax—collect and maintain data in your credit reports, which help determine your credit scores. These reports include information about your payment habits, credit utilization, duration of credit accounts, variety of credit types, and recent inquiries for new credit.
Mortgage lenders rely on your credit reports to evaluate your credit risk and predict your ability to repay a mortgage loan. A good credit score often reflects a positive credit history and indicates that you are a responsible borrower, increasing your chances of securing a mortgage.
Credit Scores and Their Impact on Mortgage Rates
Your credit score affects the mortgage interest rates you’ll be offered. Borrowers with higher credit scores are generally offered lower rates because they are considered less risky. A lower credit score may result in higher rates or even being denied a mortgage.
For example, if you’re applying for an FHA loan, the minimum credit score required is typically 580. However, a higher credit score may qualify you for better interest rates and more favorable terms.
Credit Score Factors that Impact Your Mortgage Application
When mortgage lenders assess your creditworthiness, they consider various factors that make up your FICO credit score. Understanding these components and their impact on your credit score can help you improve your creditworthiness and qualify for better mortgage terms. Here’s a closer look at each factor and how it affects your credit score:
Payment History (35%): Your history of making on-time payments is the most crucial factor in determining your FICO score. Lenders view consistent, timely payments as a sign of financial responsibility, increasing their confidence in your ability to repay a mortgage loan. Focus on making all of your payments on time, as even one late or missed payment can have a significant impact on your FICO score.
Credit Utilization (30%): This factor measures the proportion of your available credit that you’re using. A high credit utilization rate may signal to lenders that you’re overextended and may have difficulty managing your debt. Aim to keep your credit utilization below 30% to show responsible credit management and improve your credit score.
Length of Credit History (15%): The longer your credit history, the more data lenders have to assess your creditworthiness. A lengthy period of responsible credit management signals to lenders your reliability in handling credit. If you’re new to credit, consider becoming an authorized user on a family member’s account or opening a secured credit card to establish a credit.
Types of Credit (10%): A diverse mix of credit types, such as credit cards, a car loan, and a mortgage, can have a positive impact on your FICO score. Lenders like to see that you can manage different types of credit responsibly. However, avoid opening new credit accounts solely to diversify your credit mix, as this could lead to an increase in credit inquiries and a decrease in your credit score.
Recent Credit Inquiries (10%): Each time you apply for credit, a hard inquiry is recorded on your credit report. Multiple hard inquiries within a short period can negatively impact your FICO score, as it may signal to lenders that you’re seeking multiple sources of credit. Limit credit applications, especially in the months before applying for a mortgage.
See also: Does Buying a House Hurt Your Credit?
Different Credit Scoring Models
There are various credit scoring models used by lenders, including FICO credit scores and VantageScore. While FICO scores are the most widely used, especially for mortgage lending, VantageScore is another credit scoring model that is gaining popularity.
FICO and VantageScore have different algorithms, which can result in variations in your credit scores. However, both models consider similar factors when calculating credit scores, such as payment history, credit utilization, length of credit history, types of credit, and recent inquiries.
Debt-to-Income Ratio and Its Impact on Mortgage Approval
The debt-to-income ratio (DTI) is another critical factor that mortgage lenders consider when you apply for a mortgage. Your DTI is calculated by dividing your total monthly debt payments by your gross monthly income. A lower DTI indicates that you have a better balance between debt and income, making you a less risky borrower.
Mortgage lenders typically prefer borrowers with a DTI below 43%, although some may accept higher ratios for borrowers with excellent credit scores or substantial savings. It’s essential to keep your DTI low to increase your chances of mortgage approval and secure better interest rates.
How to Improve Your Credit Score for Mortgage Applications
To maximize your chances of qualifying for a mortgage or getting better rates, take the following steps:
Check your credit score: Obtain your FICO score from your credit card company, bank, or a free credit reporting service. This will give you an idea of your current credit standing and areas that may need improvement.
Review your credit report: Request your free annual credit report from each of the three major bureaus and review them for errors or inaccuracies. Request your free annual credit report from each of the three major bureaus and review them for errors or inaccuracies. Make sure any errors are corrected or removed by disputing them with each credit bureau.
Pay your bills on time: Your payment history is the most significant factor in determining your credit score. Consistently making on-time payments can positively impact all your credit scores.
Pay down credit card balances: High credit card balances can increase your credit utilization ratio, negatively affecting your credit score. Aim to keep your credit utilization below 30% to improve your credit scores.
Avoid applying for new credit: In the months leading up to your application, refrain from applying for credit, as multiple inquiries can temporarily lower your credit score.
Diversify your credit: Having a mix of credit types, such as credit cards, auto loans, and student loans, can positively impact your credit score. However, be cautious not to take on too much debt, as it can increase your DTI and negatively affect the mortgage approval process.
Mortgage Eligibility Beyond FICO Scores
While FICO scores play a crucial role in qualifying for a mortgage, lenders also consider other factors to determine your eligibility for a mortgage. They closely examine the information in your credit reports, as well as your financial records, such as bank statements, investment account statements, tax returns, and pay stubs. This information helps lenders assess your income, debts, and DTI ratio.
Other factors, such as loan amount, home location, down payment, and loan type, can also influence your mortgage approval and terms. It’s essential to shop around and compare different mortgage lenders, as they may have unique assessments and requirements.
Fannie Mae, Freddie Mac, and Credit Scoring Models
Fannie Mae and Freddie Mac are government-sponsored enterprises that buy mortgage loans from lenders. They often use the same credit scoring models as other mortgage lenders. However, they are currently reviewing the possibility of using different scoring models for mortgages, which could open up new opportunities for borrowers in the future.
Bottom Line
To secure favorable mortgage terms, you need to know which credit scores mortgage lenders use and how they impact your application. Improving your credit score, maintaining a low DTI, and managing your finances responsibly can help you become a more attractive borrower to mortgage lenders.
Stay informed about the latest developments in the mortgage industry to enhance your chances of obtaining the best possible mortgage for your needs.
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A financial hardship letter explains an unforeseen circumstance that has made you unable to make regular payments on a loan and requests a modification to help you get back on track.
No matter how well you prepare, many Americans will encounter times of financial hardship due to circumstances outside of their control. Events such as company layoffs, natural disasters, and divorce can throw a wrench in our finances, making us unable to pay our financial obligations.
Instead of falling behind on payments during difficult times, take a proactive approach to your finances. Sending a financial hardship letter to your creditor can help you salvage your credit score while you get back on your feet.
Read on to discover what these letters are, situations that warrant them, and how to write your own.
Table of Contents:
What Is a Hardship Letter?
A financial hardship letter is a correspondence you send to a creditor that explains why your current financial situation prevents you from making debt payments. After providing details about your hardship, such as the cause and timeline, request that the creditor provide a mutually beneficial solution.
Depending on your specific circumstances, you could suggest to your lender that they assist you by:
Suspending your monthly payments for the time being
Decreasing your payment amount
Lowering your interest rate
Pardoning overdue payments
Waiving penalties for late payments
Adjusting the terms of your loan
Resolving your debt for an amount less than you owe
For example, if you were recently injured due to an accident, you could ask the creditor to temporarily pause your payments until you recover.
What Is Considered Financial Hardship?
Since everyone’s situation is different, you may be wondering what qualifies as financial hardship. A financial hardship is any scenario beyond your control that makes you unable to pay for your living expenses.
Examples of financial hardships include, but are not limited to, the following:
Employment layoff
Pay cut
Home foreclosure
Decreased number of working hours
Job relocation
Natural disaster
Emergency event
Divorce or separation
Military deployment or transfer
Death of a spouse or family member
Incarceration
Serious injury or illness
As you can see, the examples above are out of your control. On the other hand, circumstances that creditors are not likely to deem as a financial hardship include:
Poor money management or overspending
Routine expenses
Voluntary employment shift
Purchase of a home
Decrease in property value
Payment of college tuition
Investment losses
How to Write a Hardship Letter
When writing your financial hardship letter, address it to the loss mitigation department of your lender. Include your contact information and loan number so they can identify your account. Write your letter clearly and concisely, following the instructions provided below.
1. Explain Your Hardship
Be honest with your creditor about the circumstances surrounding your hardship, but keep your explanation concise. Aim to keep your explanation under one page.
While you should include relevant details such as what caused the hardship and when it started, don’t include unnecessary information. For example, you might inform the creditor that you’re going through a divorce and the legal fees are causing financial strain, but you don’t need to go into the cause of the divorce.
Remember to be truthful—don’t exaggerate your circumstances or include inaccurate information.
2. Provide Documentation to Back Up Your Claim
Provide up-to-date and relevant documentation as evidence for the statements you make in the letter to bolster your claim. Documents the lender may want to review include:
Bank statements
Pay stubs
Tax returns
Medical bills
Employee termination letter
Divorce certificate
Military orders
Proof of incarceration
3. List Steps You’ve Taken to Alleviate Your Financial Burden
Let the creditor know the actions you’ve already taken to help improve your financial situation and pay your debt. Steps you might take include limiting expenses, selling personal items, or working a side gig to make extra income. This provides the lender with additional context and shows that you’re taking personal responsibility for your financial situation.
4. Clearly State Your Request
The purpose of writing a hardship letter is to request help from the creditor during your difficult time. Make sure to clearly state exactly the action they can take to assist you and how it will help you. Provide your proposed solution or a couple of suggestions the lender might consider.
5. State Your Commitment to Paying Your Debt
Conclude your letter with a statement expressing to the lender that you’re committed to paying your debt and finding a solution that works for both of you. Sign your name to the end to formally close the letter.
Financial Hardship Letter Template + Sample
Below is a hardship letter sample and template to help you get started. When using the template, make sure to enter your own information where there is bolded text.
Harry Jones, Loss Mitigation Department of Georgia Bank
444 Peach Lane
Atlanta, GA 30033
Re: Account #10122467894231
DearHarry Jones:
I am writing this letter to request assistance with my personal loan during a time of financial hardship.
Approximately two weeks ago, I was let go from my job due to company-wide layoffs. As a result, I have been unable to continue making regular payments on my loan. I have included my termination letterthat proves the validity of my hardship.
While I have taken steps to increase my income during this time, such as babysitting and selling old clothes, I am still not able to make full payments.
I fully intend to pay off my loan and am requesting your help to get me back on track. I would like to discuss possible solutions such as temporarily pausing payments, lowering my interest rate, or any other option that might be available to me. I expect my hardship to be resolved in approximately three to six months, after which I can resume my regular payments.
I want to reiterate my intention to fulfill my financial obligation. If you have any questions or would like to discuss a solution, please contact me at (912) 333-3333oremail me at [email protected].
Thank you for taking the time to review my request, and I hope we can come to a mutually beneficial agreement. Your support during this time of financial hardship is greatly appreciated.
Sincerely,
Mary Smith
How to Get Through Financial Hardship
In addition to writing a hardship letter, here are some other tips to help you get through times difficult times and continue to reach your financial goals:
Create a budget: Use a monthly budget template to write down your monthly income, expenses, and debt to paint a full picture of your current financial situation.
Consider debt consolidation: If you have many different debts, debt consolidation can simplify your finances and help you pay your balance quicker and at a lower interest rate.
Limit unnecessary expenses: During difficult times, it’s important to only spend money on the essentials. Consider canceling subscriptions, reducing electricity use, and eating at home to save money.
Start a side hustle: Having multiple income streams can help mitigate financial burdens. Examples of side hustles include pet sitting, driving for a ride-share company, online tutoring, and joining a focus group.
Build an emergency fund: Aim to save three to six months’ worth of expenses as a cushion in case of a personal emergency or unexpected expense.
Writing a financial hardship letter can help you maintain a good credit score during a crisis. While navigating your situation, it’s important to continue monitoring your credit. To make this easier during times of stress, check your free credit report card to see what’s happening with your credit at a glance.
Though mortgage rates remain high compared to a few years ago, improved economic data and signs of cooling inflation have triggered rates to fall over the past three weeks. Experts say it’s been a welcome surprise for homeseekers, who are facing the worst housing affordability in four decades.
A handful of closely followed mortgage rates crept higher over the last seven days. The average 15-year fixed and 30-year fixed mortgage rates both saw growth. For variable rates, the 5/1 adjustable-rate mortgage receded.
The surge in mortgage rates, together with limited for-sale inventory and expensive home prices, has resulted in a reservoir of pent-up demand from anxious and ready homebuyers, said Jared Antin, managing director at the real estate agency Elegran. As soon as average 30-year fixed mortgage rates fell below 8% earlier this month, home loan applications began to increase, according to the Mortgage Bankers Association. Last week, applications for a mortgage hit their highest level in six weeks, but were still 20% lower than the same time last year, per the MBA’s weekly survey..
About these rates: Like CNET, Bankrate is owned by Red Ventures. This tool features partner rates from lenders that you can use when comparing multiple mortgage rates.
There’s always volatility when it comes to mortgage interest rates, which are influenced by an interplay of macroeconomic factors, such as inflation, job growth and the bond market, as well as investor confidence and global events.
Today’s average mortgage interest rates
If you’re in the market for a home, check out how today’s mortgage rates compare to last week’s. We use information collected by Bankrate to track daily mortgage rate trends. This table summarizes the average rates offered by lenders nationwide:
Current average mortgage interest rates
Loan type
Interest rate
A week ago
Change
30-year fixed rate
7.74%
7.69%
+0.05
15-year fixed rate
7.02%
6.96%
+0.06
30-year jumbo mortgage rate
7.82%
7.71%
+0.11
30-year mortgage refinance rate
7.74%
7.78%
-0.04
Rates as of November 24, 2023.
Current mortgage rate trends
Though the Federal Reserve does not directly set mortgage rates, they’re affected by the government’s monetary decisions. Since early 2022, with the onset of aggressive increases to the federal funds rate to combat inflationary pressures, mortgage rates reached record-high levels.
The Fed has kept interest rates steady since late July, but mortgage rates continued climbing due to market expectations of further rate hikes. Most major mortgage rates finally saw significant dips after November’s interest-rate pause, a shift in the 10-year Treasury yield and weaker jobs data, which was then followed by a better-than-expected inflation report.
Experts anticipate we might be nearing the end of the central bank’s rate-hike cycle, which could signal the start of a slow recovery in home loan rates. “If markets believe that the Federal Reserve will adopt a permanent pause, it is reasonable to expect a decline in mortgage rates, following the trend of the 10-year yield for US Treasuries,” said Carlos Garriga, senior vice president and research director at the St. Louis Federal Reserve.
While any mortgage forecast is an estimate at best, it’s not unreasonable to predict downward pressure on rates as the economy continues to cool, according to Rob Cook, chief marketing officer at Discover Home Loans. “As we get more economic data heading into next year, there will be a focus on whether the recent economic trends hold or change,” Cook said.
But homeseekers should keep in mind that even when the Fed stops hiking interest rates, it generally takes 12 months before there are substantial drops, according to Niladri Mukherjee, chief investment officer at TIAA Wealth Management. For mortgage rates to be more affordable, the Fed would have to start cutting rates, which won’t happen until 2024 at the earliest.
Calculate your monthly mortgage payment
Getting a mortgage should always depend on your financial situation and long-term goals. The most important thing is to make a budget and try to stay within your means. CNET’s mortgage calculator below can help homebuyers prepare for monthly mortgage payments.
What is a good loan term?
When picking a mortgage, remember to consider the loan term, or payment schedule. The most common mortgage terms are 15 years and 30 years, although 10-, 20- and 40-year mortgages also exist. Mortgages can either be fixed-rate and adjustable-rate mortgages. The interest rates in a fixed-rate mortgage are set for the duration of the loan. The interest rates for an adjustable-rate mortgage are only fixed for a certain amount of time (commonly five, seven or 10 years), after which the rate adjusts annually based on the current interest rate in the market.
When choosing between a fixed-rate and adjustable-rate mortgage, consider the length of time you plan to live in your home. If you plan on living long-term in a new house, a fixed-rate mortgage may be the better option. Fixed-rate mortgages offer more stability over time compared to adjustable-rate mortgages, but adjustable-rate mortgages may offer lower interest rates upfront. As a result, a growing share of homebuyers are leaning toward ARMs.
30-year fixed-rate mortgages
The 30-year fixed-mortgage rate average is 7.74%, which is an increase of 5 basis points from one week ago. (A basis point is equivalent to 0.01%.) A 30-year fixed mortgage, the most common loan term, is a good option if you’re looking to minimize your monthly payment. A 30-year fixed rate mortgage will usually have a lower monthly payment than a 15-year one, but often a higher interest rate.
15-year fixed-rate mortgages
The average rate for a 15-year, fixed mortgage is 7.02%, which is an increase of 6 basis points from seven days ago. Though you’ll have a bigger monthly payment compared to a 30-year fixed mortgage, a 15-year loan will usually be the better deal if you can afford the monthly payments. You’ll usually be able to get a lower interest rate, pay less interest in the long run and pay off your mortgage sooner.
5/1 adjustable-rate mortgages
A 5/1 adjustable-rate mortgage has an average rate of 6.83%, a fall of 11 basis points from the same time last week. You’ll typically get a lower interest rate (compared to a 30-year fixed mortgage) with a 5/1 ARM in the first five years of the mortgage. But you could end up paying more after that time, depending on how the rate adjusts with the market rate. For borrowers who plan to sell or refinance their house before the rate changes, an ARM could be a good option. If not, changes in the market may significantly increase your interest rate.
How to find the best mortgage rates
You can get a personalized mortgage rate by contacting your local mortgage broker or using an online calculator. To find the best home mortgage, take into account your goals and current finances. Be sure to look at the annual percentage rate, or APR, which reflects the mortgage interest rate plus other borrowing charges. By comparing the total cost of borrowing from multiple lenders, you can make a more accurate apples-to-apples comparison.
Your specific mortgage rate will vary based on factors including your down payment, credit score, debt-to-income ratio and loan-to-value ratio. Having a higher down payment, a good credit score, a low DTI and LTV or any combination of those factors can help you get a lower interest rate.
The interest rate isn’t the only factor that affects the cost of your home. Be sure to also consider fees, closing costs, taxes and discount points. You should shop around and talk to several different lenders from local and national banks, credit unions and online lenders to find the best mortgage for you.
Though mortgage rates and home prices are high, the housing market won’t be unaffordable forever. It’s always a good time to save for a down payment and improve your credit score to help you secure a competitive mortgage rate when the time is right for you.
A recent Forbes article reported that the average American has $65,100 in their savings account, but averages are skewed by outliers. A better representation of how much money Americans have in their savings account is the midpoint value, also known as the median. The median savings amount for American households is only $5,300.
Setting financial goals is one of the best ways to improve your financial health and have a secure financial future. If you’re closer to the median savings amount or have far less in your savings account, it may be time to start setting financial goals.
We’re here to provide you with a five-step plan to set financial goals that can help you increase your savings, plan for your retirement, and provide you with some extra funds to treat yourself.
Key takeaways:
Financial goals are personal and professional goals designed to improve your financial well-being.
Financial goals can be short-term, medium-term, or long-term goals.
Financial goals can help you build wealth, but it’s also important to set aside money to treat yourself every now and then.
What Are Financial Goals?
Financial goals can vary depending on who you ask, but essentially, they’re personal and professional goals you set to improve your financial well-being. Good financial goals will allow you to work toward a life with less stress about your finances. These goals also allow you to spend money on the things you enjoy without feeling guilty.
5 Steps for Creating Financial Goals
Getting your financial goals in order can seem overwhelming, which is why it’s a good idea to map it out and have some structure. Below, we provide five steps to help you design financial goals that work for you. These steps allow you to focus on what matters most while also keeping you motivated to stay on the right track.
1. Discover What Inspires Your Financial Goals
Financial goals can take some time, so it’s helpful to find something that will help keep you motivated throughout the process. To start, make a list of what you want to achieve and details for why these items are important to you. For example, you may include:
“I want to save enough money to have my dream wedding.”
“I want to build an emergency fund to afford to pay my bills should I lose my job.”
“I want to start a retirement fund so I can enjoy my retirement by finally traveling the world.”
“I want to pay off all of my debt so I can experience less stress and spend without feeling guilty.”
Reminding yourself of your goals and what inspires you are actions that psychologists recommend while pursuing what matters most to you. While vision boards may seem like pseudoscience, Tchiki Davis, Ph.D., explains, “Initial research suggests [vision boards] can help us more easily reach our goals. This may be due to how vision boards help us gain self-awareness and self-reflect on what is important to us.”
2. Make a Plan for Your Situation
The second step is to make a plan that’s specific to you because everyone’s financial situation is different. Take a look at where you currently are with finances to start making a plan. This will allow you to create a plan that will allow you to reach your short-term financial goals and ones that may take a little longer.
The following are some financial goal examples, along with an idea of how to prioritize them.
Create a Budget
Learning how to create a budget and then implementing it is a great short-term financial goal. A budget is how you give your financial goals a strong foundation. Your budget will help you monitor how much you’re spending and decrease the likelihood of overspending. It will also let you know if you have extra money to spend on other things.
Plan for Retirement
Planning for your retirement is a long-term financial goal, but you get the most value out of it by starting sooner rather than later. Experts at Vanguard recommend that you start investing in your retirement funds in your 20s if possible. When you start investing earlier, your money has more time to compound, giving you more retirement funds. If you start your retirement later, don’t worry. By putting a little more into your retirement, you may have the ability to catch up for lost time.
Start an Emergency Fund
Unfortunately, we don’t know when an emergency will happen, so a good financial goal is to start an emergency fund. Many financial planners recommend[1] saving at least three to six months’ living expenses. This can take some time, but it can provide peace of mind should an emergency arise. As part of your budget, you can save a set amount every month to get closer to your emergency fund goal.
Some expenses to consider:
Rent or mortgage
Utility bills
Groceries
Car payments
Credit card and other debt payments
Pay Off Debts
Having debt can restrict your ability to achieve your financial goals. Your personal situation should determine how you prioritize this within your budget and other goals. When you get out of debt or decrease it significantly, you can save money on interest fees and improve your credit. This will free up additional funds and help you pursue more of your financial goals.
Begin Investing
Investing outside of your retirement fund is one way to generate passive income or have more money for your other financial goals. Your investments will ideally grow over time. If you invest in dividend stocks, these pay out money each quarter based on company profits. You can also continue investing and holding onto your investments to sell later for additional funds.
Get a Higher-Paying Job
Finding a higher-paying job is one financial goal many people may overlook. When you make more money, you have more resources to achieve your short- and long-term financial goals. It’s something to consider if your current job doesn’t allow you to budget properly, save for retirement, pay off your debts, or pursue your other goals.
Before searching for a new job, it’s also helpful to consider how happy you are at your current job. One benefit of financial goals is that they can help decrease stress and increase happiness. Leaving a job that makes you happy may counteract the benefits of making more money.
3. Map Out S.M.A.R.T. Financial Goals
It’s easy to get off track with your financial goals, so it’s helpful to organize your individual goals to improve your chances of success. A popular strategy for creating and managing goals of all types is to make S.M.A.R.T. goals. S.M.A.R.T. stands for:
Specific
Measurable
Achievable
Relevant
Time-bound
If your goals are vague and unrealistic with no time frame, they will be much harder to achieve. Using the S.M.A.R.T. goal strategy helps you make a plan relevant to what you want to accomplish within a realistic amount of time.
Let’s say you want an emergency fund with $5,000. An example of turning this into a S.M.A.R.T. goal would be, “By next year, I’ll have an emergency fund of $5,000 by saving $416.66 each month.”
If these numbers are unachievable for your financial situation, that’s OK. Make adjustments and see what works for your financial situation and your budget.
4. Keep Track of Your Goals
Keeping track of your financial goals can help you stay on the right track while also keeping you motivated. The S.M.A.R.T. model includes measuring your progress, and this is where the motivation comes from. Whether it’s paying down your debts, adding to your emergency fund, or saving for retirement, seeing the progress can inspire you to continue.
5. Don’t Overshoot Your Financial Goals
People commonly overshoot their financial goals and leave no room for spending on themselves. Treating yourself as you pursue your financial goals is important because it can feel like a chore. Sometimes, it’s also difficult to maintain motivation as you pursue your long-term goals. Part of setting financial goals is having extra spending money to do something fun occasionally.
Maybe you want to save money for a big purchase like a relaxing vacation or new furniture. Be sure to include these as you create your goals. When creating your monthly budget, you can also create space for extra spending money to make sure you take the time to enjoy yourself each month.
Improving Your Credit Is a Financial Goal Priority
If you don’t have a good credit score, it can be difficult to achieve your other financial goals. Lower credit leads to additional interest fees, higher deposits, and potentially more debt. Making your credit a priority will improve your ability to pursue all your other financial goals.
Credit.com has a variety of credit tools and services to assist you while you work on your financial goals. You can start by getting your free credit report card to see where your credit stands. We also offer our ExtraCredit® service, which includes credit monitoring, rent and utility reporting, and more.