Interest rates have generally remained stable because of the COVID-19 pandemic, but if they start moving up again, your credit card rate could rise as well.
If you do some digging, however, you might be able to find a credit card with a rate that’s locked in place – and many of these fixed-rate cards carry interest rates that are much lower than the national average, which is 16.15%, as of April 21, 2021.
“Our goal is to look out for our membership” by offering several fixed-rate, low-interest credit cards, said George De Leon, lending manager at Border Federal Credit Union in Del Rio, Texas.
“We want to be upfront with our members” when it comes to their card’s interest rate, De Leon added. With variable-rate cards, “you really don’t know where you’ll end up.”
What is a fixed-rate card?
With a fixed-rate credit card, your rate will typically remain the same for as long as you have the card.
And you might even be able to score a low introductory rate for a few months, however, before the rate rises.
For example, at Border Federal Credit Union, a Visa Platinum card has an introductory rate of 5% for six months and then jumps to a fixed rate of 9%. A Visa Gold card has a six-month introductory rate of 6%, then increases to a fixed rate of 11%.
Like other credit unions, Border is a nonprofit, “we are able to offer a little bit better rates,” De Leon explained.
“With a fixed-rate card, you know what your rate is expected to be and can budget and plan for that,” said Melinda Opperman, president of the nonprofit consumer credit counseling agency Credit.org.
“If you’re making a big purchase and won’t pay off the balance right away, knowing the rate lets you calculate exactly how much the purchase will cost with interest.”
If your financial institution decides to change the rate on your card, it has to give you 45 days’ written notice, Opperman said.
Your existing balances will remain at the original fixed rate. According to the Office of the Comptroller of the Currency, the higher rate will apply only to transactions that occurred more than 14 days after the notice was provided.
Note that your rate also can increase if you’re more than 60 days late making your payment, said Jeff Arevalo, a financial wellness expert with GreenPath Financial Wellness.
Variable-rate cards are common
The vast majority of credit cards carry a variable interest rate.
With variable-rate cards, “the interest rate is tied to the prime rate. That can cause some variations” in the rates you pay, Arevalo said.
But “interest rates have been stable lately,” Arevalo added.
Rates are typically tied to the prime rate, as reported by The Wall Street Journal. The prime rate is linked to the federal funds rate set by the Federal Reserve.
Since the COVID-19 pandemic was declared in March 2020, the prime rate has remained at 3.25%, compared to 4.25% prior to the pandemic. For half of 2018 and much of 2019, the prime rate was above 5%, according to JPMorgan Chase.
The federal funds rate is currently 0% to 0.25% and is the interest rate at which banks and other depository institutions lend money to one another.
If those rates increase, your credit card rates could rise, too.
A variable-rate card “can be very enticing at the beginning, then can change,” De Leon said.
Some variable-rate credit cards, such as the Citi® Diamond Preferred® Card, the Discover it® Cash Back card, are currently offering a 0% introductory interest rate for either balance transfers or purchases or both for more than a year. Then the interest jumps.
The Discover it Cash Back card has a variable rate of 11.99% to 22.99%, while the Citi Diamond Preferred Card has a variable rate of 14.74% to 24.74%.
The rate you pay will depend on your credit score and credit history.
Do some digging
Fixed-rate cards aren’t easy to find, so it’s best to check with your local credit union or community bank.
You also need to check to see if the card that interests you carries annual fees or other fees, which can drive up its costs.
Tropical Financial Credit Union in Pembroke Pines, Florida, for example, has several Mastercard credit cards, with fixed rates starting as low as 8.99%.
Goldenwest Credit Union, based in South Ogden, Utah, has a fixed rate card with rates starting at 9.75%. Based in Hiawatha, Iowa, First Federal Credit Union has a fixed-rate card with a rate as low as 6.99%.
Credit unions often have strict membership rules, such as requiring members to live in a certain location or work for a certain business, so if you find a fixed-rate credit card you like, make sure you qualify for membership at that credit union.
Opperman said getting a credit card with a small local bank or credit union can give you the opportunity to build a relationship with a representative and ask detailed questions about the terms and conditions of the card you’re considering.
Creditors tend to prefer variable-rate cards, Opperman said, “because the lender is protected in the event of an interest rate hike. If they give you a low fixed rate, then the federal funds rate goes up, they can’t pass their extra costs on to you with a higher rate.”
Be careful with credit
Arevalo said for those who carry a balance month to month “a lower rate is better. It doesn’t matter if it’s fixed or variable.”
If you pay off your balance every month, interest rates are less of an issue, he added.
Because it is more likely you’ll be offered a variable rate credit card, Opperman recommended reading the fine print and finding out when penalty rates kick in – which would drive your interest rate up even higher.
Also, consider a credit card’s rewards program and annual fees. “Don’t let your interest rate be the sole factor that sways your decision,” Opperman warned.
If you’re struggling with credit card debt, Arevalo suggested contacting a nonprofit consumer credit counseling agency to help you find strategies for dealing with your debt.
“Keeping healthy credit behaviors is going to the best way you don’t get overwhelmed with your credit card debt,” he said.
The weather is turning, fall is in the air, and Halloween is around the cornerâwhich means itâs National Cybersecurity Awareness Month. How can you ensure October is full of treats while not falling for any scammers’ tricks? By arming yourself with these identity protection tips.
Every American should understand the basics of identity theft protection. According to the most recent report by the Bureau of Justice Statistics, 10% of people 16 and older have been the victim of identity theft. That’s why we’re encouraging people to educate themselves on identity protection tips this autumn. After all, there’s nothing quite as scary as identity fraud!
Here are some identity theft tricks to watch out for and identity security treats to take advantage of.
Trick: Using Your Data to Open New Accounts
According to the FTC, credit card fraudâincluding opening new credit card accountsâwas the most commonly reported form of identity theft in 2019. Thieves can rack up hundreds of dollars’ worth of bills before you know it happened.
Here are a few things to keep in mind when it comes to your cybersecurity to avoid your data being used to open new accounts in your name:
Never use the same password across multiple accounts. Switch your passwords up.
Never use a password that’s easy to guess. This includes passwords that include your birthday, first or last name, or address.
Use passwords that are random combinations of numbers, letters, and symbols.
Never click on unknown email links or pop-ups on websites.
Make sure websites are secure before entering your payment information.
Never connect to public Wi-Fi that isn’t secure.
Never walk away from your laptop in public places.
Enable firewall protection.
Monitor your accounts and credit reports for unusual activity.
Treat: Check Your Credit Reports
Identity theft protection starts by being proactive and regularly monitoring your information for suspicious activity. That includes monitoring your credit report.
Did you know that you’re entitled to one free copy of your credit report each year from all three credit reporting agencies? In honor of National Cybersecurity Awareness Month, make October the month that you request your reports and go over them with a fine-toothed comb. Make sure you recognize all the open accounts under your name.
[Note: Through April 2021, you can review your credit reports weekly.]
An added bonus of checking your reports early in the month is that you can give your credit a good once-over before the upcoming holiday shopping season. Unexplained dips in your credit score could be a sign that something is wrong.
When you request your free credit report from the credit bureaus, your report does not come with your credit scoreâyou have to request that separately. Sign up for ExtraCredit to get 28 of your FICO® scores and your credit reports from all three credit bureaus. Youâll also get account monitoring and $1 million identity theft insurance.
Protect Your Identity with ExtraCredit
Trick: Charity Fraud
October also happens to be Breast Cancer Awareness Month, and everywhere you look, pink is on display. With so much national attention on breast cancer, it’s easy to fall for scams that claim to be legitimate charities.
Consumers should also be on the lookout for phony COVID-19 related scams this fall and winter. For example, watch out for fake charities that pretend to provide COVID relief to groups or families but are simply stealing money.
Even worse than handing over money to these heartless fraudsters is that you may have handed over your credit card numbers or other personally identifiable information in the process.
Treat: Know Your Worthy Causes
Before donating to a charitable cause, do your homework. You can use websites such as Charity Navigator, CharityWatch, and the Better Business Bureau’s Wise Giving Alliance to check a charity’s reputation. Additionally, consider contacting your state’s charity regulator to confirm the organization is registered to raise money in your state.
After you’ve verified the status of the charity, consider making donations directly through the national organization. Avoid giving money or financial information directly to someone that reaches out to you through email, phone calls, or door-to-door interactions.
It might be a bit of extra work, but at the end of the day, you can feel good knowing your money is going to support a real cause. If you want to support October’s Breast Cancer Awareness Month, consider donating directly on the national website. An added bonus is that you’ll receive a receipt you can use for tax deduction purposes.
Trick: Tax Refund Fraud
Every year, the Internal Revenue Service announces its “dirty dozen” scams. These are the tax fraud scams the IRS determines to be the most common for the year. The 2020 list includes refund theft. A tax thief gains access to your information, files a fraudulent return in your name before you do, and has the funds paid out them. The only way you find out about it is that your legitimate tax returnâthe one you submitâis rejected for having already been filed.
Another way individuals fall victim to tax refund fraud is by using an unscrupulous return vendor. Dishonest vendors and ghost preparers steal personal information to file a tax refund and pocket the money or use that information for other types of identity fraud.
Itâs unclear what exactly the next round of stimulus legislation will include, but if another stimulus check is included, watch out for attempts to steal your COVID stimulus checks. Remember that the IRS never contacts you via email, social media, or text.
Treat: File Early
It may feel like you just finished filing your 2019 taxes, but itâs never too early to start preparing for next year. While filing your taxes might be the last thing you want to think about this month, it’s crucial to stay on top of your tax return documents so you’re ready to file as early as possible. This is especially true for individuals who have reason to believe that their personal data has already been breached.
Always ensure you work with a reputable tax return vendor. You can look at the vendor’s online reviews before considering them as an option for tax return help.
Additionally, individuals that are paid to assist with or prepare federal tax returns must have a Preparer Tax Identification Number (PTIN). Paid preparers must sign and include their PTIN on returns. Always ask for this number before you hire an individual and hand over your personal information.
If you file early, you can beat out someone filing before you and receiving your return first. The earliest you can file is January.
Trick: Social Media Scams
Our social media accounts allow us to stay connected with friends and family. Unfortunately, scammers understand this and have started using social media to commit identity fraud.
There are many variations of social media phishing scams, but the basics are generally that a scammer creates an account to gain your trust and gather personal information from you. For example, many people have their name, birthday, and workplace information on their Facebook or other social media account. Those three things alone could be enough for someone to gain everything else they need to create a credit card application under your name or access your existing accounts.
Treat: Be More Exclusive and Private
Consider taking a quiet October morning to comb through your social media accounts. Start with your followers. Consider deleting everyone you don’t know personally.
If a follower base is important to you, consider another approach. Go through each social profile and scrub any personal details. Change the spelling of your last name slightly, delete your birthday, and remove other personal information, such as place of work. Ultimately, this can reduce the risk of being an easy target for identity fraud.
These core identity protection tips should help you stay safer online. With COVID-19 causing people to feel scared, individuals are more vulnerable to being tricked. Remember that identity fraud happens to millions of people every year, and it’s important to remain vigilant.
Stay Vigilant This Fall
Identity theft can have long-lasting consequences. If you’re recovering from identity fraud or simply unhappy with your credit score, consider signing up for ExtraCredit. ExtraCredit is a five-in-one credit product that provides tools to helps you build, guard, track, reward, and restore your credit.
Sign Up Now
The post Don’t Get Tricked: Identity Protection Tips You Need appeared first on Credit.com.
When it comes to affording a new home, you have a few types of home loans to choose from. Prospective homebuyers often compare the FHA vs. the conventional loan when researching loans. Each loan type has certain stereotypes associated with them, but we are here to give you the facts about both FHA and conventional loans. This post will help you understand what each loan is, familiarize you with the differences between them, and provide some guidelines for how to pick which one is best for you.
What Is An FHA Loan?
An FHA loan is insured by the Federal Housing Administration (FHA). These loans are issued by private lenders, but lenders are protected from losses by the FHA if the homeowner fails to repay. FHA loans are generally used to refinance or buy a home.
What Is A Conventional Loan?
A conventional loan is supplied by a private lender and isnât federally insured. Requirements for obtaining a conventional loan vary depending on the lender. When used to buy property, conventional loans are typically known as mortgages.
Differences Between FHA and Conventional Loans
The main difference between FHA and conventional loans is whether or not they are insured by the federal government. Conventional loans arenât federally backed, so itâs riskier for the lender to loan money. On the other hand, FHA loans are protected by the government, and as a result of less risk, they can typically offer better deals.
This difference in federal insurance is the reason why FHA and conventional loans vary when it comes to the details of the loan. Keep reading to learn the differences regarding credit requirements, minimum down payments, debt-to-income ratios, loan limits, mortgage insurance, and closing costs.
FHA Loan
Conventional Loan
Minimum Credit Score
500
620
Minimum Down Payment
3.5%
3%
Maximum Debt-to-Income Ratio
Credit score of 500: 43%
Credit score of 580+: 43-50%
Credit score of 620: 33-36%
Credit score of 740+: 36-45%
Contiguous US: $548,250
High-cost counties, AK, HI, and US territories: $822,375
Mortgage Insurance
Mortgage insurance premiums required.
Private mortgage insurance required with down payments less than 20%.
Property Standards
Stricter standards, property purchased must be a primary residence.
Flexible standards, property purchased doesnât have to be a primary residence.
Sources: FHA Single Family Housing Policy Handbook | Fannie Mae 1 2 | Federal Housing Finance Agency | Freddie Mac | HUD 1 2 | Consumer Financial Protection Bureau 1 2
Credit Score
Your credit score is a determining factor in your loan eligibility. Your credit score is measured on a scale of 300 (poor credit) to 850 (excellent credit). Good credit helps you get approved for loans more easily and at better rates. FHA and conventional loans differ in their credit score requirements and represent financial options for individuals at either end of the credit spectrum.
Minimum Credit Score for FHA Loan: 500
Accepts a credit score as low as 500, but usually with a 10% down payment
These loans accept lower credit scores because they are insured
Note: Some lenders may only issue FHA loans with higher credit scores
Minimum Credit Score for Conventional Loan: 620
Accepted score may vary from lender to lender
These loans are usually offered to individuals with strong credit because they present less risk to lenders
Minimum Down Payment
A down payment is the sum of money that is paid as a percentage of your purchase up-front.
Minimum Down Payment on an FHA loan:
10% of your purchase with 500 credit score
3.5% of your purchase with 580+ credit score
Minimum Down Payment on a Conventional Loan:
3% of your purchase can be put down with good credit
5% to 20% of your purchase price is typical
Debt-to-Income Ratio
Your debt-to-income ratio is the amount of money paid toward debt each month divided by your total monthly income. To be eligible for a loan, you must be at or below the maximum debt-to-income (DTI) ratio.
Maximum DTI Ratio Guidelines for FHA loans:
43% with a credit score of 500
43â50% with a credit score of 580
Maximum DTI Ratio Guidelines For Conventional Loans:
33-36% with a credit score lower than 740
36-45% with a credit score of 740 or higher
50% highest allowed through Fannie Mae
Loan Limits
Both FHA and conventional loans have limits on the amount that you can borrow. Loan limits vary based on your location and the year your loan is borrowed. Find 2021 loan limits specific to your county through the Federal Housing Finance Agency.
2021 FHA Loan Limits
High-cost counties: $822,375
Low-cost counties: $356,362
2021 Conventional Loan Limits
Contiguous US (excluding high-cost counties): $548,250
Alaska, Hawaii, US territories, and high-cost counties: $822,375
Mortgage Insurance
Mortgage insurance is taken out to protect the lender from losses in case you fail to repay your loan. Whether you will pay private mortgage insurance or mortgage insurance premiums is based on your loan type and down payment percentage.
FHA Loan
Mortgage insurance is required for all FHA loans.
It is paid to the FHA in the form of mortgage insurance premiums and includes an up-front and monthly premium.
MIP payments last the entire life of your FHA loan.
To get rid of MIPs after paying 20% of your loan, you can choose to refinance into a conventional loan.
Conventional Loan
Private mortgage insurance (PMI) is only required when a down payment below 20% is made.
PMI comes in different forms: monthly premium, up-front premium, and split premiums.
PMI requirements stop once you have met one of three requirements:
Principal loan amount is reduced to 80% before the loan term ends.
At least 78% of the principal balance is scheduled to be paid down.
The halfway point of your loan term has passed.
Property Standards
There are different property standards that must be met to use each loan. FHA loans have stricter requirements, while conventional loans have more flexibility.
FHA Loan
Property purchased with FHA loans must be your principal residence, meaning the borrower has to occupy the residence
FHA loans canât be used to invest in property (e.g., renting out or flipping)
Title must be in the borrower’s name or name of a living trust
Conventional Loan
Property purchased with a conventional loan doesnât have to be a principal residence â second or third residences are allowed
Conventional loans can be used to purchase investment properties
Pros and Cons of FHA vs. Conventional Loans
As a result of the various differences between FHA and conventional loans, each type has its respective pros and cons.
FHA Loan
Conventional Loan
Pros
Qualify with low credit and high DTI
Smaller down payments overall
More affordable with low credit
Lowest option for down payments with good credit
PMI cancellable
More affordable with good credit
Property doesnât have to be your main home
Cons
Mortgage insurance premiums required for life of loan
Property purchased must be your main home
Need higher credit and lower DTI to qualify
Typically has larger down payments
PMI required with a down payment less than 20%
Pros and Cons of FHA Loans
FHA loans are government-regulated and insured to extend flexible opportunities for homeownership. Theyâre flexible regarding credit and DTI, but stricter about insurance and property standards.
Pros
Flexible qualification with low credit and high DTI
Smaller down payments overall
More affordable with low credit
Cons
Mortgage insurance premiums required for life of loan
Property purchased must be your primary residence
Pros and Cons of Conventional Loans
Conventional loans can also offer flexibility, but generally only if you have good credit and demonstrate reduced risk to the lender. These loans have stricter qualifications, but flexibility in other areas.
Pros
Lowest option for down payments (3% with good credit)
Private mortgage insurance can be canceled (must meet requirements)
More affordable with good credit
Property purchased doesnât have to be a primary residence
Cons
Strict qualifications require higher credit and lower DTI
Larger down payments are typical
Private mortgage insurance required with a down payment less than 20%
Which Loan Is Better For You?
Both FHA and conventional loans have their advantages and disadvantages. Here are some general guidelines for when to use an FHA loan or a conventional loan.
When To Use an FHA Loan
You have a low credit score (500â619)
Your DTI ratio is on the higher side (between 45â50%)
You can only afford a small down payment
You plan to use the property as your primary residence
When To Use a Conventional Loan
Your credit score is fairly good (620 or above)
Your DTI ratio is on the lower side (33â36%)
You can afford a larger down payment
You want flexibility with insurance and repaying your loan
Itâs important to thoroughly research your options before choosing a loan. A key takeaway when comparing FHA vs. conventional loans is that FHA loans are federally insured and conventional loans arenât. This distinction results in different qualification and payment requirements for each loan.
Use the information in this post to carefully compare the differences in accepted credit scores, minimum down payments, loan limits, maximum debt-to-income ratios, mortgage insurance and property standards. In doing so, choose the loan that works for your circumstances and helps you best afford the home of your dreams.
Sources: FHA Single Family Housing Policy Handbook | US Dept. of Housing and Urban Development | Federal Housing Finance Agency | Freddie Mac
The post FHA vs. Conventional Loans: Which Is Better? appeared first on MintLife Blog.
Understanding how much money you need to buy a house can give you an idea of how much you should expect to save.
You’re probably excited about the thought of buying your first home? If so, you have every right to be.
But how much money do you need to buy a house? A calculator can help you determine that. But the average cost of buying a $300,000 is typically around $17,000.
In this article, we’ll go over the main costs of buying a house including the down payment, inspection cost, appraisal cost, closing cost, etc.
Check Current Mortgage Rate
How much money do you need to buy a house?
Out of Pocket Cost of buying a house
The five main out of pocket costs of buying a house are 1) the down payment; 2) inspection cost; 3) the appraisal cost; 4) earnest money and 5) closing costs. These out of pocket costs or upfront costs are money yo need to pay before you become the owner of the property.
In addition, some lenders also require you have some cash reserves to cover 2 to 3 months of the mortgage repayments.
Determining how much cash needed to buy a house depends on the type of loan you’re using.
Let’s suppose you’re buying a $300,000 house with an FHA loan.
An FHA loan requires a 3.5% of the home purchase price as a down payment as long as you have a 580 credit score. So, for the down payment alone, you will need $10,500.
Here’s a quick breakdown for how much cash needed to buy a $300,000 house:
Down payment: $10,500
Inspection cost: $300
Appraisal cost: $300
Closing cost: $6000
So, $ 17,100 is how much money you need to buy a house.
Whether you’re buying a house with a 20% down payment or 3.5% down payment, you can certainly find a loan with both the price and features to suit your needs as a first time home buyer. You can compare First Time Home Buyer home loans on the LendingTree website.
The down payment
The biggest cost of buying a house is obviously your down payment. But that depends on the type of loan you are looking for.
For example, a conventional loan requires a 20% down payment. You can pay less than that, but you will have to pay for a private mortgage insurance – which covers the lender in case you default on your loan.
A 20% down payment however can also mean that you’ll get a better interest rate, which also means you’ll save money on interest.
For an FHA loan, you only need 3.5% down payment as long as your credit score is 580.
FHA loans are very popular these days. Not only it’s easier to get qualified (low down payment and low credit score), but also your down payment can come from a friend, a relative or your employer.
Using our example above, you only need $10,500 for a down payment for a $300,000 house.
If you’re using a VA loan then you pay $0 down payment.
Check to see if you’re eligible for an FHA loan or VA loan
How much money do you need to buy a house also depends on other factors, such as whether you are a first time home buyer or not. Your state may have a range of programs that may contribute toward your down payment.
So visit your local government office to find out if you are eligible for any down payment assistance for first time home buyers.
Inspection cost
Another upfront cost of buying a home is the inspection cost.
It is highly recommended to perform inspection for your home for any defects so there are no surprises later on.
Inspections typically cost between $300 to $500, but it depends on the property and your local rates.
Compare home loans for first time home buyers with LendingTree
Appraisal cost
Before a lender can give you a loan to finance a house, they will want to know how much the house is worth. So appraisal means an estimate of the home’s value. A home’s appraisal usually costs between $300 to $500. A home appraisal will also determine what your property tax will likely be.
If you’re pay the home appraisal, it will be deducted from the closing cost. (see below).
Earnest money
Earnest money is a deposit you will have to pay upfront as soon as an offer is accepted, while you working on other aspects such as getting the home inspected, etc…
This deposit is part of the down payment, and it is usually between 1% to 3% of the final sale price. It is held by an escrow firm or attorney until the closing process is completed.
So if the sale is successful, that money is applied to your down payment. If it’s not, you get 100% of your money back.
Closing costs
The closing costs are fees by the lenders. They typically cost 2% to 5% of the final price. The costs include fees for homeowner’s insurance, title insurance, title insurance, property tax, HOA dues, private mortgage insurance.
It’s possible to lower these costs by comparing mortgage options.
Other costs of buying a home:
In addition to upfront costs, there are other recurring costs associated with buying a home. They include moving fees, repair costs, furniture, remodeling, etc. So consider these costs when making your budget to buy a house.
So how much money do you need to buy a house? The answer is it depends on the type of loans you’ re using. But if you’re buying a $300,000 house with an FHA loan, which requires a 3.5% down payment, $ 17,100 is how much money you need.
For more information about upfront costs of buying a house, check out this guide.
Read more cost of buying a house:
How Much House Can I Afford?
How Long Does It Take to Buy a House?
Buying a House for the First Time? Avoid these Mistakes
5 Signs You’re Not Ready to Buy a House
Work with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning for retirement, saving, etc). So, find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How Much Money Do You Need to Buy a House? appeared first on GrowthRapidly.
Granite State Credit Union (GSCU) provides members with a variety of mortgage products across the state of New Hampshire.
GSCU AT A GLANCE
Year Founded
1945
Coverage Area
New Hampshire
HQ Address
1415 Elm Street, Manchester, New Hampshire 03101
Phone Number
1-800-645-4728
GSCU COMPANY INFORMATION
Services the state of New Hampshire
Offers conventional loans, such as fixed- and adjustable-rate mortgages
Provides FHA and VA loans to qualifying individuals
Allows first-time homebuyers to make down payments of zero to three percent
Member of the NHCUL and CUNA
Allows borrowers to use gifted funds for the down payment and closing costs on certain loan products
Granite State Credit Union provides a variety of mortgage products to individuals across the state of New Hampshire. It offers traditional loans, such as fixed- and adjustable-rate mortgages, as well as government-assisted loans and options for individuals who cannot put 20 percent down on a new home.
GSCU Mortgage Facts
Services the state of New Hampshire
Offers conventional loans, such as fixed- and adjustable-rate mortgages
Provides FHA and VA loans to qualifying individuals
Allows first-time homebuyers to make down payments of zero to three percent
Member of the NHCUL and CUNA
Allows borrowers to use gifted funds for the down payment and closing costs on certain loan products
Overall
Granite State Credit Union provides a variety of mortgage products to individuals across the state of New Hampshire. It offers traditional loans, such as fixed- and adjustable-rate mortgages, as well as government-assisted loans and options for individuals who cannot put 20 percent down on a new home.
Current GSCU Mortgage Rates
GSCU Mortgage Products
Granite State Credit Union provides a variety of home mortgage products. Its offerings consist of traditional mortgages and government-assisted loans, as well as programs for first-time home-buyers and affordable home refinances.
Fixed-Rate Loans
Fixed-rate loans are the best choice for homebuyers who plan on staying in their home for an extended period. With fixed-rate loans, buyers can expect their principal and interest rates to remain the same throughout the loanâs lifetime. GSCU offers fixed-rate mortgages for lengths of 10, 15, 20, and 30 years.
Adjustable-Rate Loans
An adjustable-rate mortgage (ARM) provides borrowers with an interest rate that may vary throughout the loan term. Typically, these mortgages have a lower initial rate than fixed-rate loans, giving potential customers more financial freedom when looking for a new home.
After the initial period, the rates and payments associated with these mortgages may rise or fall to adjust to market prices. Typically, these costs will fluctuate on an annual basis.
Many companies, including GSCU, provide a cap that prevents these costs from getting too high from one year to the next. GSCU recommends these types of mortgages for home-buyers who do not plan on staying in the house for the loanâs full term. GSCU offers 1/1, 3/1, 5/1, and 7/1 ARMs.
First-Time Homebuyer Loans
GSCU offers excellent deals on mortgages for first-time buyers. The credit union gives borrowers the flexibility to choose a fixed- or adjustable-rate mortgage and even provides no and low down payment options to first-time buyers. The No Down Payment mortgage allows borrowers to take out a 5/1 ARM and pay zero percent down on the home.
The Low Down Payment Adjustable loan offers a 3 percent down payment with a 3/3 ARM and the option to refinance into a fixed mortgage if so desired. The Low Down Payment Fixed loan offers a 3 percent down payment and a 30-year fixed-rate mortgage. For Low Down Payment Adjustable and Fixed mortgages, borrowers can use gifted funds for the down payments and closing costs on their homes.
FHA Loans
Unlike some other credit unions, GSCU offers FHA loans to home-buyers who do not qualify for other loan programs. Borrowers may have a high debt-to-income ratio, low credit score, or the inability to put 20 percent down on the home. The Federal Housing Administration (FHA) created these types of home loans to grant buyers the opportunity to invest in property. GSCU allows 100 percent of the closing costs to be gifted.
VA Loans
GSCU allows veterans, military members, and their spouses to apply for VA loans. These types of mortgages are backed by the U.S. Department of Veterans Affairs (VA). Qualified individuals can make a low down payment on the home and keep up with affordable monthly payments.
HARP Loans
The Federal Housing Finance Agency (FHFA) introduced the Home Affordable Refinance Program (HARP) as part of their Making Home Affordable⢠initiative. HARP allows eligible homeowners to refinance their mortgages into a lower interest rate to keep their finances secure. HARP provides this opportunity for individuals who otherwise may not qualify for refinancing due to their declining home value.
GSCU Mortgage Customer Experience
Granite State Credit Union offers a variety of online resources that help current and prospective borrowers research home loan options. GSCU’s website contains several mortgage calculators, which assist home-buyers in determining how much they can take out on a home loan.
It also provides information about their different mortgage products, which helps borrowers figure out what type of home loan is right for them. GSCU has a Refer-a-Loan option, which incentivizes borrowers who refer a New Hampshire resident or business owner to procure a loan with the credit union.
In exchange for this referral, both parties can receive $25 for consumer loans or $50 for the mortgage and home equity loans.
GSCU Lender Reputation
Founded in 1945, Granite State Credit Union has provided affordable mortgage rates to New Hampshire residents for over 70 years. Its Nationwide Mortgage Licensing System ID number is 477276.
Since the credit union only services the states of New Hampshire, it does not have many online customer reviews. It is not accredited by the Better Business Bureau, and has no reviews on the site, but maintains an A+ rating.
GSCU Mortgage Qualifications
Although GSCU has flexible mortgage qualifications for individuals taking out FHA loans, its qualification requirements for individuals requesting other home loans are similar to mortgage industry standards.
First and foremost, the credit union prioritizes credit score when approving someone for a loan or for calculating their rates. FICO reports that the industry-standard credit score is 740. However, those with credit scores above 760 can expect the best mortgage rates.
Credit score
Quality
Ease of approval
760+
Excellent
Easy
700-759
Good
Somewhat easy
621-699
Fair
Moderate
620 and below
Poor
Somewhat difficult
No credit score
n/a
Difficult
Buyers should typically expect to put 20 percent down on the home, unless they qualify for a government-assisted loan. In some cases, buyers can anticipate paying as little as zero to three percent on their mortgage down payment.
With certain types of loans, such as first-time home-buyer, FHA, and VA loans, GSCU allows borrowers to use gifted funds to make down payments and pay closing costs. However, those taking out a traditional fixed- or adjustable-rate mortgage should anticipate paying these costs on their own.
History of GSCU
Granite State Credit Union (GSCU) was founded in 1945 in Manchester, New Hampshire. Founder John Edward Grace, who previously worked as a city bus driver, put down an initial deposit of $15.
With the work put forth by John and his wife, Betty, GSCU achieved notability and success before merging, in late 2003, with the Acorn Credit Union. GSCU is currently a member of the New Hampshire Credit Union League (NHCUL) and Credit Union National Association (CUNA). It offers a selection of home loan products, including fixed- and adjustable-rate, VA, FHA, HARP, and first-time home-buyer loans.
Bottom Line
If you live in New Hampshire, GSCU may be a great fit for you! With a variety of mortgage products, GSCU has something to offer for everyone. For more information, visit their website.
The post GSCU Mortgage Rates Reviews: Today’s Best Analysis appeared first on Good Financial Cents®.
You have all kinds of financial goals you want to achieve, but where should you begin? There are so many different aspects of money management that it can be difficult to find a starting point when trying to achieve financial success. If you’re feeling lost and overwhelmed, take a deep breath. Progress can be made in tiny, manageable steps. Here’s are 16 small things you can do right now to improve your overall financial health. (See also: These 13 Numbers Are Crucial to Understanding Your Finances)
1. Create a household budget
The biggest step toward effective money management is making a household budget. You first need to figure out exactly how much money comes in each month. Once you have that number, organize your budget in order of financial priorities: essential living expenses, contributions to retirement savings, repaying debt, and any entertainment or lifestyle costs. Having a clear picture of exactly how much is coming in and going out every month is key to reaching your financial goals.
2. Calculate your net worth
Simply put, your net worth is the total of your assets minus your debts and liabilities. You’re left with a positive or negative number. If the number is positive, you’re on the up and up. If the number is negative — which is especially common for young people just starting out — you’ll need to keep chipping away at debt.
Remember that certain assets, like your home, count on both sides of the ledger. While you may have mortgage debt, it is secured by the resale value of your home. (See also: 10 Ways to Increase Your Net Worth This Year)
3. Review your credit reports
Your credit history determines your creditworthiness, including the interest rates you pay on loans and credit cards. It can also affect your employment opportunities and living options. Every 12 months, you can check your credit report from each of the three major credit bureaus (Experian, TransUnion, and Equifax) for free at annualcreditreport.com. It may also be a good idea to request one report from one bureau every four months, so you can keep an eye on your credit throughout the year without paying for it.
Regularly checking your credit report will help you stay on top of every account in your name and can alert you to fraudulent activity.
4. Check your credit score
Your FICO score can range from 300-850. The higher the score, the better. Keep in mind that two of the most important factors that go into making up your credit score are your payment history, specifically negative information, and how much debt you’re carrying: the type of debts, and how much available credit you have at any given time. (See also: How to Boost Your Credit Score in Just 30 Days)
5. Set a monthly savings amount
Transferring a set amount of money to a savings account at the same time you pay your other monthly bills helps ensure that you’re regularly and intentionally saving money for the future. Waiting to see if you have any money left over after paying for all your other discretionary lifestyle expenses can lead to uneven amounts or no savings at all.
6. Make minimum payments on all debts
The first step to maintaining a good credit standing is to avoid making late payments. Build your minimum debt reduction payments into your budget. Then, look for any extra money you can put toward paying down debt principal. (See also: The Fastest Way to Pay Off $10,000 in Credit Card Debt)
7. Increase your retirement saving rate by 1 percent
Your retirement savings and saving rate are the most important determinants of your overall financial success. Strive to save 15 percent of your income for most of your career for retirement, and that includes any employer match you may receive. If you’re not saving that amount yet, plan ahead for ways you can reach that goal. For example, increase your saving rate every time you get a bonus or raise.
8. Open an IRA
An IRA is an easy and accessible retirement savings vehicle that anyone with earned income can access (although you can’t contribute to a traditional IRA past age 70½). Unlike an employer-sponsored account, like a 401(k), an IRA gives you access to unlimited investment choices and is not attached to any particular employer. (See also: Stop Believing These 5 Myths About IRAs)
9. Update your account beneficiaries
Certain assets, like retirement accounts and insurance policies, have their own beneficiary designations and will be distributed based on who you have listed on those documents — not necessarily according to your estate planning documents. Review these every year and whenever you have a major life event, like a marriage.
10. Review your employer benefits
The monetary value of your employment includes your salary in addition to any other employer-provided benefits. Consider these extras part of your wealth-building tools and review them on a yearly basis. For example, a Flexible Spending Arrangement (FSA) can help pay for current health care expenses through your employer and a Health Savings Account (HSA) can help you pay for medical expenses now and in retirement. (See also: 8 Myths About Health Savings Accounts — Debunked!)
11. Review your W-4
The W-4 form you filled out when you first started your job dictates how much your employer withholds for taxes — and you can make changes to it. If you get a refund at tax time, adjusting your tax withholdings can be an easy way to increase your take-home pay. Also, remember to review this form when you have a major life event, like a marriage or after the birth of a child. (See also: Are You Withholding the Right Amount of Taxes from Your Paycheck?)
12. Ponder your need for life insurance
In general, if someone is dependent upon your income, then you may need a life insurance policy. When determining how much insurance you need, consider protecting assets and paying off all outstanding debts, as well as retirement and college costs. (See also: 15 Surprising Insurance Policies You Might Need)
13. Check your FDIC insurance coverage
First, make sure that the banking institutions you use are FDIC insured. For credit unions, you’ll want to confirm it’s a National Credit Union Administration (NCUA) federally-covered institution. Federal deposit insurance protects up to $250,000 of your deposits for each type of bank account you have. To determine your account coverage at a single bank or various banks, visit FDIC.gov.
14. Check your Social Security statements
Set up an online account at SSA.gov to confirm your work and income history and to get an idea of what types of benefits, if any, you’re entitled to — including retirement and disability.
15. Set one financial goal to achieve it by the end of the year
An important part of financial success is recognizing where you need to focus your energy in terms of certain financial goals, like having a fully funded emergency account, for example.
If you’re overwhelmed by trying to simultaneously work on reaching all of your goals, pick one that you can focus on and achieve it by the end of the year. Examples include paying off a credit card, contributing to an IRA, or saving $500.
16. Take a one-month spending break
Unfortunately, you can never take a break from paying your bills, but you do have complete control over how you spend your discretionary income. And that may be the only way to make some progress toward some of your savings goals. Try trimming some of your lifestyle expenses for just one month to cushion your checking or savings account. You could start by bringing your own lunch to work every day or meal-planning for the week to keep your grocery bill lower and forgo eating out. (See also: How a Simple "Do Not Buy" List Keeps Money in Your Pocket)
The best student loans can help you earn a college degree that will lead to higher earnings later in life. They also come with low interest rates and reasonable fees (or no fees), which will make it easier to keep costs down while youâre in school and once youâre in repayment mode.
For most people, federal student loans are the best deal. With federal student loans, you can qualify for low fixed interest rates and federal protections like deferment, forbearance, and income-driven repayment plans. To find out how much you can borrow with federal student loans, you should fill out a FAFSA form. Doing so can also help you determine if you qualify for any additional student aid, and if so, how much.
While federal student loans are usually the best deal for borrowers, many students need to turn to private student loans at some point during their college careers. This is often the case when federal student loan limits have been exhausted, or when federal student loans are no longer an option due to other circumstances. We’re providing the top 8 options, at least according to us, as well as a guide to help you get the best rate.
Apply now with our top pick: College Ave
Most Important Factors When Applying for Student Loans
Start with a federal loan. Fill out a FAFSA form prior to applying for a private loan to make sure youâre getting all the benefits you can.
Compare loans across multiple lenders. Consider using a comparison company like Credible to do so.
Always read the fine print. Fees arenât always boasted on the front of a lenderâs website, so take time to learn about what youâre getting into.
Start paying as soon as you can to avoid getting crushed by compound interest.
Best Private Student Loans of 2021
Fortunately, there are many private student loan options that come with low interest rates and fair terms. The best student loans of 2021 come from the following private lenders and loan comparison companies:
Best for Flexibility
Get Started
Best Loan Comparison
Get Started
Best for Low Rates and Fees
Get Started
Best for No Fees
Get Started
Best Student Loans from a Major Bank
Get Started
Best Student Loans with No Cosigner Required
Get Started
Best for Fair Credit
Get Started
Best for Comprehensive Comparisons
Get Started
#1: College Ave â Best for Flexibility
College Ave offers private student loans for undergraduate and graduate students as well as parents who want to take out loans to help their kids get through college. Variable APRs as low as 3.70% are available for undergraduate students, but you can also opt for a fixed rate as low as 4.72% if you have excellent credit. College Ave offers some of the most flexible repayment options available today, letting you choose from interest-only payments, flat payments, and deferred payments depending on your needs. College Ave even lets you fill out your entire student loan application online, and they offer an array of helpful tools that can help you figure out how much you can afford to borrow, what your monthly payment will be, and more.
Qualify in Just 3 Minutes with College Ave
#2: Credible â Best Loan Comparison
Credible doesnât offer its own student loans; instead, it serves as a loan aggregator and comparison site. This means that, when you check out student loans on Credible, you have the benefit of comparing multiple loan options in one place. Not only is this convenient, but comparing rates and terms is the best way to ensure you get a good deal. Credible even lets you get prequalified without a hard inquiry on your credit report, and you can see loan offers from up to nine student lenders at a time. Fixed interest rates start as low as 4.40% for borrowers with excellent credit, and variable rates start at 3.17% APR with autopay.
Compare Dozens of Rates at Once with Credible
#3: Sallie Mae â Best for Low Rates and Fees
Sallie Mae offers its own selection of private student loans for undergraduate students, graduate students, and parents. Interest rates offered can be surprisingly low, starting at 2.87% APR for variable rate loans and 4.74% for fixed-rate loans. Sallie Mae student loans also come without an origination fee or prepayment fees, as well as rate reductions for students who set up autopay. You can choose to start repaying your student loans while youâre in school or wait until you graduate as well. Overall, Sallie Mae offers some of the best âdealsâ for private student loans, and you can even complete the entire loan process online.
Get Access to Chegg Study FREE with Sallie Mae
#4: Discover â Best for No Fees
While Discover is well known for their excellent rewards credit cards and personal loan offerings, they also offer high-quality student loans with low rates and fees. Not only do Discover student loans come with low variable rates that start at 3.75%, but you wonât pay an application fee, an origination fee, or late fees. Discover student loans are available for undergraduate students, graduate students, professional students, and other lifelong learners. You can even earn rewards for having a 3.0 GPA or better when you apply for your loan, and Discover offers access to U.S. based student loan specialists who can answer all your questions before you apply.
Apply for a Loan with Discover
#5: Citizens Bank â Best Student Loans from a Major Bank
Citizens Bank offers their own flexible student loans for undergraduate students, graduate students, and parent borrowers. Students can borrow with or without a cosigner and multi-year approval is available. With multi-year approval you can apply for student funding one time and secure several years of college funding at once. This saves you from additional paperwork and subsequent hard inquiries on your credit report. Citizens Bank student loans come with variable rates as low as 2.83% APR for students with excellent credit, and you can make full payments or interest-only payments while youâre in school or wait until you graduate to begin repaying your loan. Also keep in mind that, like others on this list, Citizens Bank lets you apply for their student loans online and from the comfort of your home.
#6: Ascent â Best Student Loans with No Cosigner Required
Ascent is another popular lender that offers private student loans to undergraduate and graduate students. Variable interest rates start at 3.31% whether you have a cosigner or not, and there are no application fees required to apply for a student loan either way. Terms are available for 5 to 15 years, and Ascent even offers cash rewards for student borrowers who graduate and meet certain terms. Also note that Ascent lets you earn money for each friend you refer who takes out a new student loan or refinances an existing loan.
Get a Loan in Minutes with Ascent
#7: Earnest â Best for Fair Credit
Earnest is another online lender that offers reasonable student loans for undergraduate and graduate students who need to borrow money for school. They also offer a free application process, a 9-month grace period after graduation, no origination fees or prepayment fees, and a .25% rate discount when you set up autopay. Earnest even lets you skip a payment once per year without a penalty, and there are no late payment fees. Variable rates start as low as 3.35%, and you may be able to qualify for a loan from Earnest with only âfairâ credit. For their student loan refinancing products, for example, you need a minimum credit score of 650 to apply.
Learn Your Rate in Minutes with Earnest
#8: LendKey â Best for Comprehensive Comparisons
LendKey is an online lending marketplace that lets you compare student loan options across a broad range of loan providers, including credit unions. LendKey loans come with no application fees and variable APRs as low as 4.05%. They also have excellent reviews on Trustpilot and an easy application process that makes applying for a student loan online a breeze. You can apply for a loan from LendKey as an individual, but itâs possible youâll get better rates with a cosigner on board. Either way, LendKey lets you see and compare a wide range of loan offers in one place and with only one application submitted.
Pay Zero Application Fees with LendKey!
How to Get the Best Student Loans
The lenders above offer some of the best student loans available today, but thereâs more to getting a good loan than just choosing the right student loan company. The following tips can ensure you save money on your education and escape college with the smallest student loan burden possible.
Consider Federal Student Loans First
Like we mentioned already, federal student loans are almost always the best deal for borrowers who can qualify. Not only do federal loans come with low fixed interest rates, but they come with borrower protections like deferment and forbearance. Federal student loans also let you qualify for income-driven repayment plans like Pay As You Earn (PAYE) and Income Based Repayment (IBR) as well as Public Service Loan Forgiveness (PSLF).
Compare Multiple Lenders
If you have exhausted federal student loans and need to take out a private student loan, the best step you can take is comparing loans across multiple lenders. Some may be able to offer you a lower interest rate based on your credit score or available cosigner, and some lenders may offer payment plans that meet your needs better. If you only want to fill out a loan application once, it can make sense to compare multiple loan offers with a service like Credible.
Improve Your Credit Score
Private student loans are notoriously difficult to qualify for when your credit score is less than stellar or you donât have a cosigner. With that in mind, you may want to spend some time improving your credit score before you apply. Since your payment history and the amounts you owe in relation to your credit limits are the two most important factors that make up your FICO score, make sure youâre paying all your bills early or on time and try to pay down debt to improve your credit utilization. Most experts say a utilization rate of 30% or less will help you achieve the highest credit score possible with other factors considered.
Check Your Credit Score for Free with Experian
Get a Quality Cosigner
If your credit score isnât at least âvery good,â or 740 or higher, you may want to see about getting a cosigner for your private student loan. A parent, family member, or close family friend who has excellent credit can help you qualify for a student loan with the best rates and terms available today. Just remember that your cosigner will be liable for your loan just as you are, meaning they will have to repay your loan if you default. With that in mind, you should only lean on a cosignerâs help if you plan to repay your loan amount in full.
Consider Variable and Fixed Interest Rates
While private student loans offer insanely low rates for borrowers with good credit, their variable rates tend to be lower. This is why you should always take the time to compare variable and fixed rates across multiple lenders to find the best deal. If you believe you can pay your student loans off in a few short years, a variable interest rate may help you save money. If you need a decade or longer to pay your student loans off, on the other hand, a low fixed interest rate may provide you with more peace of mind.
Check for Discounts
As you compare student loan providers, make sure to check for discounts that might apply to your situation. Many private student loan companies offer discounts if you set your loan up on automatic payments, for example. Some also offer discounts or rewards for good grades or for referring friends. It’s possible you could qualify for other discounts as well depending on the provider, but you’ll never know unless you check.
Beware of Fees
While the interest rate on your student loan plays a huge role in your long-term loan costs, donât forget to check for additional fees. Some student loan companies charge application fees or prepayment penalties if you pay your loan off early, for example. Others charge origination fees that tack on a few additional percentage points to your loan amount right off the bat. If you can find a student loan with a low interest rate and no additional fees, youâll be much better off. Since loan fees may not be prominently advertised on student loan provider websites, however, keep in mind that you may need to dig into their fine print to find them.
Make Payments While Youâre in School
Finally, no matter which loan you end up with, it makes a lot of sense to make payments while youâre still in school if you’re earning any kind of income. Even if you make interest-only payments while you attend college part-time or full-time, you can save yourself from paying thousands of dollars in additional interest payments later in life. Remember that compound interest can be a blessing or a curse. If you can keep interest at bay by making payments while youâre in school, you can squash compound interest and keep your loan balances from growing. If you let compound interest run its course, on the other hand, you may wind up owing more than you borrowed in the first place by the time you graduate school and start repayment.
What to Watch Out For
A private student loan may be exactly what you need in order to finish your degree and move up to the working world, but there are plenty of âgotchasâ to be aware of. Consider all these factors as you apply for a new private student loan or refinance existing loans you have with a private lender.
Interest that accrues while youâre in school: Remember that subsidized loans may not accrue interest until you graduate from college and enter repayment mode, but that unsubsidized loans typically start accruing interest right away. Since private student loans are unsubsidized, youâll need to be especially careful about ballooning interest and long-term loan costs.
Getting a cosigner: Make sure you only apply for a private student loan with a cosigner if youâre entirely sure you can repay your loan over the long haul. If you fail to keep up with your end of the bargain, you could destroy trust with that person and their credit score in one fell swoop.
Youâll lose out on some protections: Also remember that private student loans come with fewer protections than federal student loans. You wonât have the option for income-driven repayment plans with private loans, nor will you be able to qualify for federal deferment or forbearance. For this reason, private student loans are best for students who are confident in their ability to repay their loans on their chosen timeline.
In Summary: The Best Student Loans
Company
Best Of…
College Ave
Best for Flexibility
Credible
Best for Loan Comparison
Sallie Mae
Best for Low Rates and Fees
Discover
Best for No Fees
Citizens Bank
Best Student Loans from a Major Bank
Ascent
Best Student Loans with No Cosigner Required
Earnest
Best for Fair Credit
LendKey
Best for Comprehensive Comparisons
The post Here Are The Best Student Loans of 2021 appeared first on Good Financial Cents®.
Paying off debt can be an excruciating process, depending on how much money you owe. But your debts may not haunt you forever. Most consumer debts have a statute of limitations. That means that after a certain amount of time has gone by, collectors canât sue you for failing to pay off outstanding debts. Hereâs everything you need to know about the statute of limitations on debt.
See how long itâll take to pay off your credit card debt.
Understanding the Statute of Limitations on Debt
You can be taken to court for not paying off certain debts. But thereâs a limit on how long debt collectors can chase after the borrowers they want to sue.
The period in which someone can take legal action against you for owing money is known as the statute of limitations. In many cases, that time period either begins on the date you last made a payment or when your account becomes delinquent (which usually happens 30 days after a borrower fails to make a payment). But sometimes, the statute of limitations begins whenever you last used the account, acknowledged that you owed debt or agreed to make a payment (more on that later).
Statutes of limitations offer consumers with old debts some protection from debt collection agencies. After the statute of limitations on a debt expires, that unpaid debt is considered to be time-barred. At that point, borrowers no longer have a legal obligation to pay off their debts.
Different states have different statutes of limitations. And there are different rules attached to different types of debts. In Iowa for example, the statute of limitations on credit card debt is 10 years. In Alaska, Alabama and Washington D.C. itâs only three years.
Not all consumer debts have a statute of limitations, however. Federal student loans, for example, havenât had a legal expiration date for over two decades.
What to Do With Time-Barred Debts
While you may no longer be legally responsible for your time-barred debts, youâre not totally off the hook. Most negative credit information â like unpaid debts â can stay on your credit report for up to seven years. But tax liens can remain on your credit report for up to 15 years and bankruptcies can be reported for 10 years.
Not repaying the old debt you owe after the statute of limitations expires could hurt your credit score. And you could have a hard time trying to buy a house or take out a new loan.
Related Article: The Worst Ways to Deal With a Bill Collector
If you decide to pay off an old debt, itâs important to make sure you have documentation confirming that the debt is yours before making a single payment. You may have to pay off your debt in full in order to avoid restarting or extending the statute of limitations on your debt. So talking to a lawyer before making a single payment is a good idea.
When a Collector Asks About Your Time-Barred Debt
Even though you canât be sued for your time-barred debts, a debt collector may try to come after you anyway. Bill collectors are required to follow certain rules under the Fair Debt Collection Practices Act (FDCPA). But they have the right to contact you even after the statute of limitations on a debt runs out. If a debt collector threatens to sue you for a time-barred debt, he or she could be violating the FDCPA.
Statutes of limitations can be tricky. So if youâre not sure whether your debt is past its legal expiration date, itâs a good idea to ask a debt collector who contacts you if your debt is time-barred. If he or she says no, itâs best to ask for the date of the last payment and request written proof that the debt theyâre trying to collect is actually yours.
Youâll need to be careful when speaking to debt collectors, especially when dealing with a debt you believe is time-barred. If you say the wrong thing, the statute of limitations could be restarted or extended and you could end up having to pay a bill collector what you owe. The debt collector could also sue you and win.
The clock on your debt can restart if you admit to owing a debt, promise to start paying it or attempt to start repaying it by sending money to a debt collector. But the guidelines associated with extending and restarting the statute of limitations vary depending on where you live.
Related Article: Understanding Debt
Final Word
If you donât know if the statute of limitations on your debt has expired, you can check with someone from a local legal aid society, an attorney or your state attorney generalâs office. Or you can figure it out yourself by finding out when the statute of limitations begins and looking up your stateâs laws regarding the statute of limitations on debts.
After you can confirm that the statute of limitations on your debt has in fact expired, youâll have to decide what to do with it. You can pay off the debt and improve your credit score or ignore it and wait until it disappears from your credit report. You could also dispute the old debt or try to work out an agreement so that you end up paying less than what you owe your creditor.
Credit card bills can be confusing. If everything was straightforward and clear, credit card debt wouldn’t be such a big issue. But it’s not clear, and debt is a massive issue for millions of consumers.Â
One of the most confusing aspects is the minimum payment, with few consumers understanding how this works, how much damage (if any) it does to their credit score, and why it’s important to pay more than the minimum.
We’ll address all of those things and more in this guide, looking at how minimum credit card payments can impact your FICO score and your credit report.
What is a Credit Card Minimum Payment?
The minimum payment is the lowest amount you need to pay during any given month. It’s often fixed as a fraction of your total balance and includes fees and interest. Â
If you fail to make this minimum payment, you may be hit with late fees and if you still haven’t paid after 30 days, your creditor will report your activity to the major credit bureaus and your credit score will take a hit.
When this happens, you could lose up to 100 points and gain a derogatory mark that remains on your credit report for up to 7 years. Making minimum payments will not result in a derogatory mark, but it can indirectly affect your credit score and we’ll discuss that a little later.
Firstly, it’s important to understand why you’re being asked to pay a minimum amount and how you can avoid it.
How Much is a Minimum Credit Card Payment?
Prior to 2004, monthly payments could be as low as 2% of the balance. This caused all kinds of problems as most of your monthly payment is interest and will, therefore, inflate every month so that every time you reduce the balance it grows back.Â
Regulators forced a change when they realized that some users were being locked into a cycle of credit card debt, one that could see them repaying thousands more than the balance and taking many years to repay in full.
These days, a minimum payment must be at least 1% of the balance plus all interest and fees that have accumulated during that month, ensuring the balance decreases by at least 1% if only the minimum payment is met.
Do I Need to Make the Minimum Payment?
If you have a rolling balance, you need to make the minimum monthly payment to avoid derogatory marks. If you fail to do so and keep missing those payments, your account will eventually default and cause all kinds of issues.
However, you can avoid the minimum payment by clearing your balance in full.
Let’s assume that you have a brand-new credit card and you spend $2,000 in the first billing cycle. In the next cycle, you will be required to pay this balance in full. However, you will also be offered a minimum payment, which will likely be anywhere from $30 to $100. If this is all that you pay, the issuer will start charging you interest on your balance and your problems will begin.
If you spend $2,000 in the next billing cycle, you have just doubled your debt (minus whatever principal the minimum payment cleared) and your problems.
This is a cycle that many consumers get locked into. They do what they can to pay off their balance in full, but then they have a difficult month and that minimum payment begins to look very tempting. They convince themselves that one month won’t hurt and they’ll repay the balance in full next month, but by that point they’ve spent more, it has grown more, and they just don’t have the funds.
To avoid falling into this trap, try the following tips:
Only Spend What You Have: A credit card should be used to spend money you have now or will have in the future. Don’t spend in the hope you’ll somehow come into some money before the billing period ends and the credit card balance rolls over.
Get an Introductory Interest Rate: Many credit card issuers offer a 0% intro APR for a fixed period of time, allowing you to accumulate debt without interest. This can help if you need to make some essential purchases, but it’s important not to abuse this as you’ll still need to clear the full balance before the intro period ends.
Use a Balance Transfer: If you’re in too deep and the intro rate is coming to an end, consider a balance transfer credit card. These cards allow you to move your full balance from one card (or cards) to another, taking advantage of yet another 0% APR and essentially extending the one you have.
Pay the Minimum: If you can’t pay the balance in full, make sure you at least pay the minimum. A missed payment or late payment can incur fees and may hurt your credit score.Â
Why Pay More Than the Minimum?
You may have heard experts recommending that you pay more than the minimum every month, but why? If you’re locked into a cycle of credit card debt, it can seem counterproductive. After all, if you have a debt of $10,000 that’s costing you $400 a month, what’s the point of taking an extra $100 out of your budget?
Your interest and fees are covered by your minimum payment and account for a sizeable percentage of that minimum payment. By adding just 50% more, you could be doubling and even tripling the amount of the principal that you repay every month.
What’s more, your interest accumulates every single day and this interest compounds. Imagine, for instance, that you have a balance of $10,000 today and with interest, this grows to $10,040. The next day, the interest will be calculated based on that $10,040 figure, which means it could grow to $10,081, which will then become the new balance for the next day.Â
This continues every single day, and the larger your balance is, the more interest will compound and the greater the amount will be due over the term. By paying more than your minimum payment when you can, you’re reducing the balance and slowing things down.
Does Paying the Minimum Hurt My Credit Score?
Paying the minimum amount every month ensures you are doing the bare minimum to avoid hurting your credit history or accumulating fees. However, it can indirectly reduce your score via your credit utilization ratio.
Your credit utilization ratio is a score that compares the credit limit of all available credit cards to the total debt on those cards. It accounts for 30% of your credit score and is, therefore, a very important aspect of the credit scoring process.
The more credit card debt you accumulate, the lower your credit utilization rate will be and the more your score will be impacted. If you only pay the minimum, this rate will become stagnant and may take years to improve. By increasing the payment amount, however, you can bring that ratio down and improve your credit score.
You can calculate your credit utilization score by adding together the total amount of credit limits and debts and then comparing the latter to the former. A combined credit limit of $10,000 and a balance of $5,000, for instance, would equate to a 50% ratio, which is on the high side.
Can Credit Card Fees Hurt My Credit Score?
As with interest charges, credit card fees will not directly reduce your score but may have an indirect effect. Cash advance fees, for instance, can be substantial, with many credit card companies (including Capital One) charging 3% with a $10 minimum charge. This means that every time you withdraw cash, you’re paying at least $10, even if you’re only withdrawing $10.
What many consumers don’t realize is that these fees are also charged every time you buy casino chips or pay for some other form of gambling, and every time you purchase money orders and other cash products.Â
Along with foreign transaction fees and penalty fees, these can increase your balance and your minimum payment, making it harder to make on time payments and thus increasing the risk of a late payment.
Does Paying the Minimum Hurt Your Credit Score is a post from Pocket Your Dollars.
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Granite State Credit Union provides a variety of mortgage products to individuals across the state of New Hampshire. It offers traditional loans, such as fixed- and adjustable-rate mortgages, as well as government-assisted loans and options for individuals who cannot put 20 percent down on a new home.
