by Shelton on March 5th, 2016
filed under Credit Scores
What is a good credit score?
Fair Isaac Corp. produces the most commonly used credit scoring algorithm in the United States. FICO scores range from 300 to 850, and the higher the score, the better.
Each lender sets its own standards for what constitutes a “good” FICO score. But, in general, FICO scores fall along the following lines:
- 300-629: Bad credit
- 630-689: Fair credit
- 690-719: Good credit
- 720 and up: Excellent credit
The average FICO score was 695, according to the latest data as of April 2015.
But there are several commonly used credit scores, not just FICO. The increasingly popular VantageScore also employs a 300-850 scoring range, as do most other credit scores. “Good” or “excellent” scores depend on what an individual lender decides, but in general 720 and up is considered excellent.
Even if your score is in the low 500s, you may still be able to get credit, but it will come with very high interest rates or with specific conditions, such as depositing money to get a secured credit card. You may have to pay more for car insurance or put down deposits on utilities.
At the other end of the scale, borrowers with scores above 750 or so have many options, including the ability to qualify for 0% financing on cars or a 0% credit card.
That’s why you want good credit. Here’s how to get there:
7 steps toward a better credit score
- Pick a score (FICO, VantageScore or another) and monitor it — we suggest monthly.
- Check your free annual credit reports and dispute any errors.
- Pay your bills on time.
- Use less than 30% of your total credit limit.
- Apply for credit only when you need it.
- Keep old credit accounts open.
- Watch your mix of credit types.
Find the starting point
The first thing to do is to see where you stand. Some credit cards offer free scores, and you may also be able to get a free score online. The important thing is to use the same score every time, as each weighs your credit history a little differently. (Doing otherwise is like trying to monitor your weight on different scales.)
So, pick a score and stick with it to monitor your progress. Advancements you make measured by one score will be reflected in the others.
And be aware that, like weight, scores fluctuate. Your score is a snapshot that can vary every time you check it.
Check your credit reports for errors
Next, check your credit reports — the information used to calculate your scores. You are entitled to one every 12 months for free from each of the three major credit reporting agencies, Equifax, Experian and TransUnion. You can access your reports at AnnualCreditReport.com.
Check them for errors, making sure your name, address and Social Security number are correct and that you recognize the accounts listed. (Here’s a guide on how to read credit reports.) If you believe there is an error, dispute it.
Because credit scores are derived from information in your credit reports, an error could potentially lower your score — and correcting one might improve it.
Pay every bill on time
Your payment history accounts for about a third of your credit score.
A late payment can stay on your credit report for seven years. The more recent the late payment is, the more it hurts. The later the payment, the worse the damage. Sixty days late is worse than 30.
If you are a few days late, your creditor is unlikely to report the account in arrears. If it’s more than 30 days, though, expect a ding. A single, recent late payment can deal a heavy blow to a good credit score, as much as 100 points if your credit had been considered excellent until then.
On the other hand, if you begin now to establish a history of on-time payments, your older late payments won’t matter as much. Nothing will improve your credit score faster than paying your debts.
Use credit sparingly
Your credit utilization also accounts for about a third of your score.
The more of your available credit that you use, the less likely you are to be able to repay your debts. In general, you need to use 30% or less to get the best credit scores.
Credit algorithms look at your credit utilization on both your individual cards and as a total against all your cards. That is, if you have two cards, one that is charged up to its limit and the other with zero balance, you would be penalized even if your total credit use is below 30%.
Keep credit utilization in mind when you decide which balance to attack first.
Another way to reduce credit utilization is to get a higher credit limit. If your financial situation or credit has changed for the better since you applied for the card, it might be worth calling your issuer to ask for a higher limit.
Apply for new credit only when you need it
New credit accounts for about 10% of your credit scores; applying for a lot of credit in a short time could hurt your score, as it represents increased risk that lenders won’t get repaid.
Inquiries fall in this category.
A “hard” credit inquiry involves an actual application for credit and can cause a small, temporary drop in your score. You are not penalized for shopping around for a mortgage or a car loan over the course of a few days or weeks; those inquiries are typically grouped together as a single hard credit pull.
A single credit card application may ding your scores, but this is often offset by having a higher credit limit that improves your credit utilization ratio.
A “soft” credit check, on the other hand, isn’t an application for credit and doesn’t affect credit scores. A soft pull is either informational, as when you check your own credit, or promotional, as when a credit card company makes you a preapproved offer or a personal loan provider quotes you a rate.
The length of your credit history matters
The age of your credit accounts for about 15% of your score. If you’re new to credit, the length of your credit history could hurt your score.
You might be able to counter it by becoming an authorized user on an older credit card, assuming the primary user pays on time and keeps balances low. Not all issuers report authorized users, so make sure the issuer does.
If you have established credit and have been tempted to cancel an older card, you may want to reconsider, unless there is a compelling reason — like a fee — to ditch it. (Even then, the issuer may be able to switch you to a different card and keep the account age.)
Have the right kinds of credit
There are several types of credit accounts, and consumers with high credit scores tend to have more than one. Your credit mix accounts for about 10% of your scores. Each account on your report will be noted as Revolving, Installment or Open.
Revolving accounts such as credit cards set a limit on how much you can spend, and you can repay either the minimum, the whole balance or anything in between. You can carry a balance until the day you die.
An installment loan applies fixed monthly payments against a specified payoff date. Paying off an installment loan demonstrates responsibility over time; that’s why a current mortgage is typically part of an excellent credit score.
An open account involves accounts where the entire amount is due at the end of the billing period. Typically these involve services such as cell phones and utilities, but also can include some gas station cards and credit cards.
The designation of each credit type can affect your score. For example, revolving credit card debt of more than 30% of your available limit can hurt your score. A debt consolidation loan could move that credit card debt over to the installment column, improving the credit utilization ratio on your revolving accounts.
Making it count
It’s smart to focus your efforts where they have the most impact. Keep in mind that credit applications, the kind of credit you have, and how long you have had credit — combined — make up only about a third of your score.
Although every little bit helps, it’s all but impossible to improve your score if you don’t pay on time.
Bev O’Shea is a staff writer at NerdWallet, a personal finance website. Email: email@example.com. Twitter: @BeverlyOShea.
Image via iStock.
by Shelton on March 5th, 2016
filed under Credit Scores
Borrowers in the city with the highest credit scores pay interest rates on mortgages that are 29 basis points less than borrowers in the city with the lowest scores.
The highest average credit scores of any metropolitan statistical area last year was 673. That was in the San Francisco-Oakland-Fremont, California, MSA.
The No. 2 MSA, which also had an average credit score of 673, was the
San Jose-Sunnyvale-Santa Clara, California, MSA. The area includes Silicon Valley.
Moody’s Assigns Aa3 to Logan County Public Prop. Corp., KY’s $7.7M First Mortgage Refunding Revenue Bonds
by Shelton on March 4th, 2016
filed under Below Average Credit
New York, February 04, 2016 — Issue: First Mortgage Refunding Revenue Bonds (Justice Center Project), Series 2016; Rating: Aa3; Sale Amount: $7,650,000; Expected Sale Date: 02-17-2016; Rating Description: Lease Rental: Appropriation
Summary Rating Rationale
Moodys Investors Service has assigned a Aa3 rating to $7.7 million Logan County Public Properties Corporation, KYs First Mortgage Refunding Revenue Bonds (Justice Center Project), Series 2016. The bonds are expected to price on or around February 17. The outlook is stable.
The rating is based on the credit quality of the Commonwealth of Kentucky (issuer rating of Aa2, stable), the subject-to-appropriation nature of the payments supporting the bonds, and the commonwealths significant reliance on appropriation-backed financings to fund capital investments. The rating also reflects Kentuckys record of proactive financial control and an economy that has benefitted from auto sector recovery. Low per-capita income levels, above-average state debt and very large unfunded pension liabilities contribute to a below average credit profile compared to most other states.
Kentuckys outlook is stable based on the expectation it will continue to manage its finances responsibly and work to improve the financing of teacher pensions, against a background of continued below-average state economic growth.
Factors that Could Lead to an Upgrade
Sustained economic slowing, resulting in weaker revenue performance that strains commonwealth finances
Build-up and maintenance of reserves
Significant reduction in adjusted net pension liabilities (ANPL)
Factors that Could Lead to a Downgrade
Sustained economic slowing, resulting in weaker revenue performance that strains commonwealth finances
Depletion of reserves with no replenishment, or indications of strained liquidity
Continued trend of negative GAAP basis ending balances, or continued reliance on non-recurring resources, particularly use of additional deficit financing, to balance the commonwealths budget
Failure to address large net pension liabilities
PAYMENTS FOR DEBT SERVICE PROVIDED UNDER BIENIALLY RENEWABLE LEASE
The bonds are payable solely from lease rental payments from the commonwealths Administrative Office of the Courts under a lease agreement, as supplemented, with the corporation. Per the lease, AOC is obligated to make rental payments, including payment of a Use Allowance equal to debt service and an Operating Costs Allowance payment to cover operating costs.
AOC is obligated to make semi-annual rental payments of the Use Allowance directly to the trustee two business days prior to the debt service payment due dates. The Operating Costs Allowance payment is made to the county. Rental payments are made pursuant to the terms of the lease agreement, which is automatically renewable for successive biennial periods unless terminated in writing by AOC.
AOC covenants in the lease to seek sufficient legislative appropriations to make rental payments for each biennial period. The General Assembly has no obligation to make appropriations for rental payments, and AOC has no obligation to renew the lease. Under the Mortgage Deed of Trust, a foreclosable mortgage lien on the project has been granted to the trustee. In addition, the interests of the corporation in the lease (excluding the Operating Costs Allowance) have been assigned to the trustee. In the event of a default on the bonds, the trustee may sell or re-let the facility to benefit bondholders. The lease may be amended to reduce AOCs use of the facility and, correspondingly, reduce its required rental payments. Any such amendment, however, would be contingent on the countys assumption of the reduced portion and confirmation by Moodys that the outstanding rating on the bonds would not be withdrawn or downgraded as a result of the amendment.
LEASE PERMITS ABATEMENT, RENTAL CREDITS
Should the project be destroyed or damaged such that it is rendered unusable by AOC, rental payments may be abated until AOC regains use of the project. As protection against such an event, rental interruption insurance sufficient to cover twenty-four months of debt service is required per the lease. In addition, the lease provides for an assessment of whether or not the project could be sufficiently renovated in twenty-four months. If the project cannot be repaired within twenty-four months of the date of damage to the point that it is sufficiently of use to AOC that AOC will make rental payments, insurance proceeds will be used to discharge the bonds. Per the lease, casualty insurance is provided at full replacement value of the project. Certain rental credits are permitted if AOC incurs operating costs in performing maintenance or other functions that are the obligation of the county under the lease. These credits, however, may only be taken against the Operating Costs Allowance, which AOC pays to the county for operating costs.
Use of Proceeds
The bonds are being issued to advance refund the Logan County Public Properties Corporation First Mortgage Revenue Bonds (Justice Center Project) Series 2008. The refunding plan is being undertaken to provide interest cost savings to the county and the AOC.
The Commonwealth of Kentucky has a population of 4.4 million people and a gross state product of $150 billion. It has a large and diverse economy, but relatively low wealth levels.
The commonwealth has a four-tiered court system called the Court of Justice that includes the Supreme Court, the Court of Appeals, circuit courts and district courts. The Administrative Office of the Courts (AOC) serves as the staff for the Court of Justice, administered by the Commonwealths Chief Justice of the Supreme Court. AOCs duties include, among other things, providing offices and court space for the entire court system and dispersing and maintaining supplies and equipment. The Court of Justice is funded through appropriations from Kentuckys General Assembly and represents approximately 3% of the total General Fund.
Logan County Public Properties Corporation is a nonprofit, non-stock public and governmental corporation organized and existing under the law of the Commonwealth. The corporations principal purpose is to act as an agency and instrumentality of the county in the planning, promotion, development, financing and acquisition by the corporation for and on behalf of the county of public improvements and public projects for the county.
The principal methodology used in this rating was The Fundamentals of Credit Analysis for Lease-Backed Municipal Obligations published in December 2011. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moodys rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support providers credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moodys legal entity that has issued
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Moodys Investors Service, Inc.
7 World Trade Center
250 Greenwich Street
New York 10007
Moodys Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Southwest Solutions, JPMorgan Chase and Mission Asset Fund Launch Peer Lending Circles to Boost Credit Scores of …
by Shelton on March 3rd, 2016
filed under Credit Scores
DETROIT, Jan. 28 /CSRwire/ – Southwest Solutions, JPMorgan Chase amp; Co. and Mission Asset Fund (MAF) today announced the launch ofLending Circles, a new social loan program that will allow Detroit residents to safely build credit through zero-interest loans. Participants make monthly loan payments and take turns receiving zero-interest social loans, ranging from $300 to $2,500. All loan payments are reported to credit bureaus, enabling participants to build a credit history, raise credit scores and work towards greater financial stability.
MAFs award-winning Lending Circles are a fresh take on social lending, helping participants build credit while increasing assets and improving financial health. The average credit score increase for participants is 168 points.
More than 30% of the people weve assisted with their financial situation in the last two years start with no credit history, and those with credit start with an average credit score of only 547, said Hector Hernandez, executive director of Southwest Economic Solutions. Lending Circles will enable our clients to build and enhance their credit so they can take advantage of opportunities to become homeowners, entrepreneurs and college graduates.
Bringing Lending Circles to Detroit is the next step in JPMorgan Chases $ 100 million commitment to Detroits economic recovery. JPMorgan Chase recentlyawarded MAF a $1.5 million, three-year grantto expand Lending Circles to even more communities across the country and develop new technology to connect clients with on-demand loan information. Southwest Solutions is part of a growing network of 53 Lending Circles providers and the first in the state of Michigan.
We are proud to partner with Southwest Solutions and Mission Asset Fund to expand Lending Circles to Detroit, said Colleen Briggs, Program Officer, Financial Capability Initiatives, JPMorgan Chase. Building a solid credit score is the critical first step to managing daily financial lives and accessing affordable capital to achieve long-term financial goals, such as purchasing a home or starting a business.
Of the 27 zip codes in the City of Detroit, the median credit score among residents is below 600 in all but one, according to Urban Institute tabulations of credit bureau data. Furthermore, a 2015 report from the Consumer Financial Protection Bureau reported that one in four Detroit households are underbanked. Without sufficient access to checking or savings accounts, Detroit residents often turn to payday lenders and check cashers to meet their basic financial needs.
Without credit scores, there are no lsquo;good options when you want to start a business or get a small loan, said Jose A. Quinonez, CEO, MAF. Now, with the support of JPMorgan Chase and partners like Southwest Solutions, we are working together to provide innovative solutions to help Detroit residents succeed.
About Southwest Solutions
For more than 40 years, Southwest Solutions has pursued its mission to help build a stronger and healthier community in southwest Detroit and beyond. The nonprofit organization provides more 50 programs and partnerships in the areas of human development, economic development and resident engagement. These three areas together form a comprehensive neighborhood revitalization effort that helps more than 20,000 a year. For more information, please visitwww.swsol.org.
About JPMorgan Chase amp; Co.
JPMorgan Chase amp; Co. (NYSE: JPM) is a leading global financial services firm with assets of $2.4 trillion and operations worldwide. The Firm is a leader in investment banking, financial services for consumers and small businesses, commercial banking, financial transaction processing, and asset management. A component of the Dow Jones Industrial Average, JPMorgan Chase amp; Co. serves millions of consumers in the United States and many of the worlds most prominent corporate, institutional and government clients under its JP Morgan and Chase brands. The firm uses its global resources, expertise, insights and scale to address some of the most urgent challenges facing communities around the world including the need for increased economic opportunity. Information about JPMorgan Chase amp; Co. is available atwww.jpmorganchase.com.
About Mission Asset Fund
Mission Asset Fund(MAF) is a San Francisco-based nonprofit dedicated to helping financially excluded communities namely, low-income and immigrant families gain access to mainstream financial services. Learn more atmissionassetfund.organdlendingcircles.org.
by Shelton on March 2nd, 2016
filed under Credit Scores
Earning a high credit score can open doors — literally.
Americans with good or excellent credit scores have an easier time qualifying for mortgages, renting apartments and finding lower interest rates for all types of loans.
Credit scores between 690 to about 720 are considered good, while people with scores above 720 to the maximum of 850 are viewed as excellent borrowers. While individuals receive their own credit scores based on their history with handling debt, certain types of credit scores tend to cluster by ZIP codes, according to recent research by Credit Sesame.
That often correlates with income, said Stew Langille, chief strategy officer at Credit Sesame. Residents in towns with lower median household incomes tend to suffer from lower credit scores, which can make borrowing more expensive for them. The flip side of the coin are higher-income towns, where Credit Sesame found residents have correspondingly higher credit scores.
Theres another link, as well: education, Langille said.
Areas that have higher education levels as well as higher income levels have higher credit scores, Langille said. Those with post-doc educations tend to be more responsible and more aware of credit. Theres a very high correlation with education level and credit score.
Of course, higher education and income are also linked, in that college graduates generally earn much heftier incomes than those with only high school educations.
The American towns with the highest credit scores tend to be clustered in California, which claimed six slots on the list.
Read on to learn more about the cities whose residents have the nations highest credit scores.
by Shelton on March 1st, 2016
filed under Below Average Credit
This content is sponsored by Air Force FCU, which serves the diverse needs of members worldwide with a full array of financial services. The credit union serves service members from all branches of the military, Department of Defense, National Guard and their families.
Whether you work in downtown Dallas or commute to a job in the Fort Worth Stockyards, you likely rely on your car to get around this sprawling Metroplex. If you’re in the market for a new or used car to drive around Dallas, take these seven steps to get the best auto deal possible — and maybe even save some cash for Dallas Cowboys tickets.
Related: Why Paying Off Your Auto Loan Early Doesnt Always Save Money
1. Build Healthy Financial Habits
According to myFICO’s Loan Savings Calculator, improving your credit score can save you thousands of dollars in interest over the life of a loan. For example, Texas residents with credit scores in the highest range — from 720 to 850 — will likely qualify for a 60-month new auto loan with a 3.339% APR, which adds up to $1,744 in interest over the life of a $20,000 loan. On the other hand, borrowers with credit scores in the lowest range — from 500 to 589 — can be saddled with a 14.326% APR, resulting in a whopping $8,125 in interest over the course of five years.
In Dallas, the average consumers credit score is 652, according to Experian’s 2015 State of Credit Report, which uses the Vantage model to determine credit score. To boost your number toward the higher end of the spectrum, focus on paying bills on time, carrying little to no credit card debt and keeping your utilization rate — the percentage of available credit that you are using — low. You should also regularly request copies of your credit report and review it for mistakes. Correcting errors can boost your score and lead to lower interest rates on Dallas auto loans.
Additionally, many Dallas auto buyers save money by securing their car loans from credit unions like Air Force Federal Credit Union instead of relying on dealer financing. Air Force FCU offers its members financial advisement services as well. We look for ways to [help our members] save when buying a car, help determine their budget or even consolidate their existing debt to improve the credit profile and get better rates, said Monica Olivarez, Air Force FCU senior loan officer.
Related: 7 Mistakes to Avoid When Refinancing a Car Loan
2. Save for a Down Payment
By putting healthy down payments on Dallas cars, buyers can often secure lower interest rates on their auto loans. If you have a below-average credit score, you might be required to put down at least 10 percent of the car’s cost to qualify for financing, according to car cost-comparison site Edmunds.com.
No matter your score, a larger down payment can help minimize how much debt you need to take on and the amount of interest you will pay on that debt over the life of the loan. For best results, save some cash before you start shopping for a car in Dallas.
3. Determine What Type of Car You Want — and Need
Auto-buying expert Mike Rabkin recommended that car buyers consider their specific needs early on in the sales process. For example, do you have a long commute that makes good gas mileage crucial? Is a vehicle’s environmental impact important to you? Do you frequently carry several passengers? Do you want a used car or a new one?
Answer those questions and review ratings for vehicles that best suit your budget and lifestyle before visiting a Dallas car dealer. In addition to questions about the car, you also need to consider your financial needs and preferences.
Do not buy on impulse, said Rosa Johnson, Air Force FCU corporate trainer. Determine your budget and how a car will affect it. Consider insurance, gas and maintenance costs.
4. Apply for a Dallas Auto Loan and Get Pre-Approval
Auto loan terms and interest rates can vary widely depending on which lender you choose. For example, some dealerships try to convince buyers to spend more than they can afford by offering seemingly sweet dealer-arranged loans. However, the truth is that these loans often have higher interest rates after the first few years and can include hidden fees in the fine print.
In many cases, car buyers can find better deals through credit unions like Air Force FCU, which currently offers auto loans with rates from 1.49% APR for used car loans of up to 36 months and new car loans of up to 72 months. Air Force FCU members can apply in person, by phone or online to be preapproved for a loan.
Research your financing and prequalify for your loan, said Johnson. Dispute any inaccurate information on your credit report before applying for a loan.
Johnson also recommended applying for the loan within 30 to 60 days before you plan to start shopping for your car. Not only does getting preapproved provide you with peace of mind, but it also gives you a bargaining chip to enter negotiations because you know exactly how much you can afford to spend on a car, whereas the dealer does not.
Shop for low interest rates and never settle for the first offer, said Johnson.
5. Research Vehicle Prices Online
Its smart to use the internet to comparison shop before you set foot in a Dallas auto sales showroom. Research the range of features offered by different vehicles and compare the prices of similar cars and extras. Tools such as Kelley Blue Book can provide a solid idea of what you should pay for the cars on your list.
Along with visiting dealers online, auto shoppers should ask for recommendations from family and friends. Although many buyers are attracted to dealerships offering promotions, such as cash back rebates, its important to do the math to ensure you are in fact getting a good deal. Although a cash back bonus might be tantalizing, if salespeople aren’t willing to negotiate on price and other factors, the deal might be a dud.
6. Shop for Your Vehicle
Before purchasing a car, you should visit car lots and test drive a few of your top options. After you’ve settled on a make and model, look for the same car at different Dallas dealerships.
“Shoppers should always cross-shop dealerships of the same brand in their town,” said Brian Moody, site editor at Autotrader. “If you know you want a Ford Fusion, be sure to ask two or three local Ford dealers for their best price and give the other dealership a chance to beat it.”
7. Negotiate the Price of the Vehicle
Use your online research to show dealerships you’ve done your homework. After all, a dealer is unlikely to negotiate with you if your desired price ranges for particular cars and features are completely unreasonable. Additionally, you should ask car dealers if they can match lower prices offered in the area.
As you research the price of the vehicle, you also should obtain the vehicles true market value, said Johnson. If trading in a vehicle, research your trade-in by using NADA.com. Additionally, youll want to check the manufacturers website for any rebates or recalls, which can come in handy when youre sealing the deal, according to Johnson. Use these numbers as a negotiation tool, she said.
After taking these steps, you should be in a good position to settle on an attractive price for a car in Dallas. Knowing your covered all your bases and got a great deal can make driving your new car even more enjoyable.
Related: 3 Things You Should Never Tell a Car Salesman