Credit Repair News

How to Get Your First Credit Card

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You probably won’t remember getting your first credit card as much as you do other firsts in life: Date, job, getting your driver’s license, buying a home, and others. But it could set the path for how some other life decisions play out.

Your first credit card can be the start to building your financial future, and how you use it could affect you for years down the road.

Build a good credit score and you could see lower interest rates on home and auto loans, for example, and receive better credit card perks. Make too many mistakes with a first card and you could have less financial flexibility. Landlords, lenders and utility companies could view a low credit score as a risky customer for them and deny you services, or at least charge you more for them.

How you handle your first credit card is important. Here are some ways to get it and use it wisely:

If you have a steady income, getting your first credit card may be as simple as applying for one.

If you’re a student, some credit cards are aimed at students — though they require the ability to repay debt or have a cosigner.

Some card issuers may require new customers to have a good credit history already, which sounds oxymoronic. How can you be required to have good credit to get credit if you don’t have credit?

But if you don’t have an established credit history, you may have difficulty being approved for a first credit card. There are options for newbies, however.

Probably the easiest is to apply for a gas station or store credit card. These cards only allow you to use them for credit at the business offering the card — a Target credit card can only be used at Target stores, for example. But buy a few things with the card and pay the bill on time each month and your credit score will grow. Try not to leave a balance because store-branded credit cards are notorious for charging high interest rates.

Another option is to get a secured credit card. It will be attached to your bank account and the spending limit on the card will be based on the amount of money in the account, or a predetermined percentage of it. If you don’t pay the credit card bill, the issuer can deduct money directly from your bank account.

Two ways of establishing credit require joining someone else’s credit account. If you can convince a parent or other relative with good credit to be a cosigner on a credit card with you, then both of you can improve your credit scores if the card is used well. Also, both of you are responsible if you don’t pay the bill.

The second option with a relative with good credit is for you to become an authorized user on a credit card they already have. Your name is added to the account and you get a credit card to use.

Paying the card on time as an authorized user will help build your credit, while late payments could hurt your credit score — and the score of the main user. Generally, you won’t be responsible for all of the debt on the card.

Good habits can take a lifetime to master. Establishing good credit card habits early shouldn’t be as difficult, however, and will pay off over time as your credit score increases.

Start by only using your new credit card for emergencies. Don’t use it for everyday purchases. Set up an emergency fund that you automatically transfer money to on payday from your checking account to pay for a broken car, hospital stay or other emergencies, and then pay the credit card bill in full when they happen.

Once you’ve set up an emergency fund and have a household budget to follow, then add some recurring charges to your credit card. These can be a cellphone bill, utility bill, Netflix or other monthly payment.

If you can handle those bills without a problem — meaning you can pay them in full and on time each month — then it’s time to start making everyday purchases on your credit card if they fit in your budget.

Paying your credit card bill in full each month — and on time — will mean you won’t pay interest charges or late fees. Those two steps are the best things you can do to raise your credit score. If you can’t pay your bill in full each month, at least make the minimum payment and don’t charge anything more until you’ve paid off the balance.

Having a credit card balance is OK, as far as a credit score goes, as long as it’s less than 30 percent of your total credit card limit. A higher debt-to-credit ratio and creditors could look at you as a risk because you may be spending more than you can afford.

From time to time you may get blank checks from your credit card company. Don’t use them. They’re cash advances on your credit and carry higher interest rates than regular charges do.

After getting your first credit card, you’ll likely get more credit card offers in the mail from other credit issuers. They may offer all types of rewards and better rates than your current card. Don’t go for them until you’ve established a good credit report for at least a year. Having too many credit cards can only complicate your finances and make it easier to overspend.

Lastly, read your credit card statement carefully each month. Look for fraudulent charges and other errors, and report them to your credit card company immediately. And get in the habit of checking your credit report for free at least once a year from the three main credit reporting agencies to check for errors on your report.

Following these habits can help you establish good credit and keep it for the rest of your life, providing cheaper financial products as you tackle other “firsts.”

About Author

Aaron Crowe

Aaron Crowe

Aaron Crowe is a journalist who specializes in personal finance. He has written for AOL Real Estate, HSH.com, US News & World Report, Wisebread, LearnVest, AOL Daily Finance, AARP, Wells Fargo, Allstate, the USC Marshall School of Business, and Credit.com, as well as other insurance, credit and investment websites. Check out his website at AaronCrowe.net.



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The Pros and Cons of Only Using One Bank for all Your Finances

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In a bid to get the best financial services, you may find yourself considering the idea of trying several banks. However, you might want to consider a one-stop shop for all your banking services. It can prove to be a more convenient option especially if you choose a bank that caters for your specific financial needs. To help you make an even better decision, here are the pros and cons of only using one bank for all your finances.

Pros;

It is easier to ensure the security of your accounts in one bank

The levels of security in banks are different; the higher the security, the more the measures required from you. You may be required to have customer ID, password, pin and secret questions among other things. If you choose a bank with exceptional security, you can put all the necessary measures to ensure that your money is secure.

These may include; limiting the amount of money per withdrawal, maintaining the confidentiality of your account details, getting alerts on any account activity etc. It will be a bit hectic to take this personal responsibility for the safety of your money with multiple banks.

Your loyalty is rewarded with personalized service

If you do all your banking with one bank, your relationship with them grows with time and so does the treatment you receive. This leads to a better understanding of your account activity in terms of expenditure, loan payments, credit card payments and other financial transactions.

The bank is able to make a more personalized decision in situations like over draft extension, credit rating, saving interests and account fees. With a good standing, you are entitled to better products, prompt response and you never know, a little bending of the rules at a time when you really need it.

It is easier to keep track of your money

Dealing with one bank comes in handy especially when you have a lot going on in your life financially. You can keep track of expenditures like alimony, child support, student and other loan repayments, standing orders etc. as well as debits form your various sources of income.

In a nut shell, a visit to your bank or a request of a bank statement will show you all your account’s(s’) activity for a period of time. This is much easier when you are dealing with one bank.

You can have FDIC cover for up to $250,000 for each account

You do not need more than one bank just because you have more than$ 250,000 individually or $500,000 jointly. You can actually put your money in several eligible FDIC accounts in the same bank.  These include; Negotiable order of withdrawal (NWO) accounts, Savings accounts, money market deposit account and certificates of deposit (CDs).

Other options can be investing your money manually or automatically when it reaches a certain limit. This ensures that you don’t have all that money sitting in your account without earning you some interest.

Cons;

You lose opportunity for better rates or terms

No particular bank offers the best of all as a package. However, you can choose to opt for the best that each bank has to offer. When you use one bank only, you miss out on what others can give. Online banks for example are known to offer better interest rates compared to traditional banks. The latter on the other hand provide better checking accounts.

Increase risk of losses

In case someone gets hold of your account information or in a case of identity theft, your account can be swept clean. This is even worse if your accounts are linked to cover each other when credit is low.

You may lose out on FDIC cover

If you happen to have more money than can fit into FDIC eligible accounts, you may lose cover for the extra amount. This can lead to losses in case the bank goes under. Spreading it among different banks ensures that it is secure.

In conclusion

Using only one bank for your finances has both its advantages and disadvantages. Your unique needs and preferences should guide you to make an informed decision on where to maintain you accounts. The above information gives you a place to start.



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The Dangers of Title Loans & Why You Should Avoid Them

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A title loan is a form of short-term lending in which you give the title of your car as collateral in return for a loan. The lender gets authority to take your car as payment should you fail to pay the loan within the stipulated time.

The loan is payable as a lump sum, usually 30 days later or spread out in installments over a period of 3-6 months. A balloon payment is usually paid at the end of the loan term.

Title loans do not require a credit check or proof of income plus they can be processed super fast, you can literally walk in with your car title and walk out with cash. Sounds appealing right? Except they are not! If you are thinking of getting one, here are several reasons why you should steer clear of title loans.

You may Lose Your Car

This is as plain as it sounds. When you put up your car as collateral for a loan, failure to repay gives the lender rights over your car. According to Consumer Financial Protection Bureau (CFPB), 1 out of 5 cars used for title loans end up being repossessed.

This means that you have a 20% risk of losing your car with a title loan. How many aspects of your life will be affected by this?

You Risk Increasing the Cost of Borrowing for up to 3 Times your Initial Loan

The (APR), Annual Percentage Rate of title loans averages at 300%. APR translates to the amount of money in percentage that your loan will cost you if it was outstanding for a year.

If you are unable to pay your loan by the end of the loan term, you can have your car repossessed or request to have a roll-over. A roll-over translates to extended payment period at an extra fee.

With more amounts to pay now, you may have to keep on rolling over your loan. If you do it for up to a year, the accumulated cost of your loan in interest and rates can add up to 300% which translates to 3 times what you borrowed.

It Puts you into a Cycle of Debts

A Car Title Lending report by CFPB states that only 12% of title loan debtors are able to pay without renewing their loans. If you end up in the 88%, this means that you will have to either keep renewing your loan or opt to re-borrow in order to keep your car and pay either part or all of the accumulating debt.

CFPB also did an analysis on 3.5 Million single payment title loans given to more than 400,000 borrowers between 2010 and 2013. The report showed that 1 out of 3 borrowers defaulted. Of the remaining ones, 1 out of 3 renewed their loans up to 7 or more times.

The same analysis showed that loans that were re-borrowed on the same day that previous ones were repaid accounted for 83%. If you find yourself in such situations, you will be in caught up in a cycle of debts that goes on and on.

You might still be in Debt if your Repossessed Car fetches Less!

If you thought losing your car is the worst that can happen; you’ve got another thing coming! Before you are given the loan, your car is valued. Failure to pay leads to repossession after which it is put up for sale. There are instances when the car is sold for less than its value.

This can happen if the market value of the car goes down or if the lender fails to find a buyer who can buy it at the original price. They sell it to the highest bidder and in some states; you are required to assume the balance. On the other hand, if the car fetches more, you may not get the surplus depending on the state that you come from.

The Take Away

While taking a title loan is a decision you get to make on your own or as a family, it is important to weigh the risks against the benefits of such a decision. There must be a very good reason why 25 states have banned title loans. Be informed and make the right decision.



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The Housing Tax Credit’s Impact on QAPs

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When we talk about health and the measures we take to maintain it, we typically think in terms of our bodies. The food we eat, our exercise routines, and the way we take care of ourselves physically. What we may not think about –– even though it is intrinsically linked to our sense of wellness –– is where we live.

As the saying goes, home is where we hang our hat, but our living situation dictates so much more than the placement of our headwear after a long day. Housing provides geographical access to the things we need to maintain good health: grocery stores, affordable eateries, and parks and recreational exercise facilities, for example. Our home should also make us feel safe, provide location-based accessibility to healthcare, and to the public transit that gets us there. Housing is the gatekeeper to our health and wellness –– and if we don’t have access to good housing, that gate can be tough to get through.

Unfortunately, the facilities that promote good health are often considered luxuries or conveniences and not necessities. Thus, higher-income occupants battle it out for higher-priced rental housing, driving up costs for those who couldn’t afford to live there in the first place.

This leaves low-income housing residents to choose from options in less safe neighborhoods with limited access to health-promoting necessities. The catch-22 of this is that lower-income residents end up having to pay more for these necessities because they have to travel further to gain access to them. Ultimately, “affordable housing” is very often synonymous with “bad housing.”

The Low-Income Housing Tax Credit

To combat this unsettling practice and to give those with lower incomes access to better, health-promoting housing, the Low Income Housing Tax Credit (LIHTC) was developed. This measure, which came to fruition in 1986 and was made permanent in 1993, was created to motivate builders to provide affordable, high-quality housing to low-income residents.

The LIHTC provides a credit to those builders who are able to allocate parts of their residences to those who other wouldn’t be able to afford living there. Each year, states are given an amount of credits to distribute via a state agency –– usually a housing finance agency (HFA) –– to builders who qualify. But how do these state agencies determine and standardize the terms on which builders can qualify? Enter the Qualified Action Plan.

What is a Qualified Action Plan?

A Qualified Action Plan (QAP) is a vehicle for determining the guidelines by which builders are eligible for receiving the tax credit, and is developed by HFAs on a state-by-state basis. Since these guidelines are malleable and can change over time, housing advocates do what they can to influence the state agencies that assess the QAP to push their own agendas; motivations might include maintaining existing affordable housing, or lobbying for the development of housing in higher-opportunity neighborhoods that have not yet seen LIH.

How Do Housing Tax Credits Impact QAPs?

While the impacts on QAPs by LIHTC are not always clear, studies have shown that there are some correlations. A recent article called, Points for Place: Can State Governments Shape Siting Patterns of Low-Income Housing Tax Credit Developments, provided evidence on a study related to the Impact of LIHTC on QAP’s. The authors of this study analyzed the QAP standards in 20 states in 2002 and 2010, and examined the subsequent LIHTC allocated in those states during those years.

What they found was that those states who used their QAPs to favor development in higher-opportunity areas saw increased shares of LIHTC allocated towards builders in low-poverty neighborhoods, but a decrease in tax credits allocated for minority neighborhoods. Developers may have sought opportunities to build in these higher-opportunity areas because they were directly motivated by QAPs, but unfortunately this isn’t completely implicit. According to the authors, more research will have to be done to provide concrete correlations.

Builders and developers should know that state-specific QAPs should be taken into serious consideration when planning for new housing. According to this study, QAPs are best viewed “as critical planning tools,” and that developers should “pay careful attention to the neighborhood priorities they communicate.”

 

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Credit Trends of Each Generation

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The effect of generational gaps is far more significant than mere music taste or avocado preferences. The American economic landscape is in a constant state of flux, and as a result, the financial divide between individuals and their parents, or even their grandparents, is growing.

Every generation both inherits credit habits from their predecessors while simultaneously upsetting the status quo. Each new crop of consumers pave a new market path by changing lending and borrowing norms. Whether driven by cultural norms, economic conditions, or budgetary necessity, no age group borrows money in the same fashion.

In general, older generations have better credit and less debt. But, the credit rules we once regarded as fact are changing. Millennials recently became the largest working population in the country, which means market trends are now beholden to their financial habits, for good or ill.

Here is how each American generation engages with credit:

Millennials

Raised in the midst of one of the greatest economic downturns in American history — which was predicated on subprime real estate lending — Millennials are the generation that is least likely to take out a mortgage. Millennials had a front row seat to the housing market crash of 2008 and are keenly aware of the corporate corruption that caused it.

Distrust in the system is not the only deterrent for prospective MIllennial homeowners. This generation is not only afraid to buy a house, but in fact have no interest in doing so. Owning a home was once perceived as the pinnacle of American prosperity — the ultimate consumer luxury reserved for diligent, nuclear breadwinners. And yet, times have changed.

Millennials are not buying homes despite being at the age people have historically done so, according to a Business Insider report. This is due to many factors: strict credit requirements, waning trust in real estate, and, above all, culture change.

“We believe the delay in homeownership is due to tighter credit standards and lifestyle changes, including delayed marriage and children,” according to Michelle Meyer, a US economist at Bank of America Merrill Lynch.

While many Millennials are forgoing mortgages, that does not mean they are not borrowing money. And no, the stereotype of borrowing from mom and dad is no longer applicable — these consumers at the genesis of their professional lives are taking out credit cards and auto loans at a record pace. In fact, millennials are taking out auto loans at a rate 136 percent above the national average.

Millennials, fundamentally, have different priorities than other generations. The lifestyle subversion we have seen from these young professionals will continue to punctuate the market — millenial credit habits are not a phase, but actually the new norm.

Generation XWhile Generation X has reportedly more family income in their adulthood than the Boomers before them, that has not necessarily translated to more wealth. According to Pew Research, Gen Xers have as much as six times more debt than their parents ever did. This means the MTV Generation has become the IOU Generation.

The typical Gen Xer has an average $125,000 in debt, stemming from mortgages, car loans, credit cards and even lingering student loans. As the most indebted generation alive today, Gen Xers sacrifice much of their income to high interest payments. Without the help of credit repair services, this generation will have little-to-no room for their most pressing financial concern: budgeting for retirement.

While this generation still has a while before they can be AARP members, retirement is certainly top of mind. In light of dwindling social security, a volatile market, and increasing debt levels, Gen Xers will have little more than their remaining 401K balance to retire on. This financial crunch promotes further borrowing, which leads to more debt, and thus the cycle continues.

Baby BoomersBaby Boomers remain the largest generation in the country comprised of over 77 million individuals. Members of the population boom following WWII were especially interested in pursuing the American Dream — white picket fence and all — which has lead to significant debt.

Importantly, the largest generation in America are now heading into their retirement years. According to AARP, 10,000 Boomers will turn 65 every day for the next 18 years. Yet, even in spite of reaching retirement age, many Boomers are still supporting their adult children. Forbes found that 60 percent of adults from 18 – 39 still depend on financial support from their parents.

Acting as the financial lifeline has been a major money drain for Boomers. Although they have a slightly higher than average credit score, Boomers are actually not much better off than the generation after them. They possess the second highest level of debt in the country — only slightly less than Gen Xers — with an average of $101,951.

The Greatest GenerationThe Greatest Generation, those who grew up during the Depression and WWII, also have some of the greatest financial stability. Americans aged 70+ have the least amount of debt and better credit scores than any other generation. This is thanks, in part, to having had more time to handle their financial affairs. But, it’s also because they took out loans during a time that favored repayment.

The Greatest Generation took out mortgages at a time when it was sensible to do so, and generally benefited from a growing American economy. For the most part, these individuals were able to pay off their principal before the market went into a tailspin.

Overall, the Greatest Generation is in a very stable credit and financial position. Not only are these retirees the last group who can fully cash in on social security, but diligent saving habits during their professional years are now paying off in their old age.

Recognizing the financial differences among generations offers a snapshot of the overall American economy. Credit habits inform how people borrow and spend money which is a great barometer for the health of the credit market.

In need of credit restoration? At Lexington Law, we offer a free credit report summary and consultation. Contact us today at 833-333-2281 .

 

 

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Credit Absolute Receives 2018 Best of Scottsdale Award

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Scottsdale Award Program Honors the Achievement

SCOTTSDALE June 28, 2018 — Credit Absolute has been selected for the 2018 Best of Scottsdale Award in the Credit Counseling Service category by the Scottsdale Award Program.

Each year, the Scottsdale Award Program identifies companies that we believe have achieved exceptional marketing success in their local community and business category. These are local companies that enhance the positive image of small business through service to their customers and our community. These exceptional companies help make the Scottsdale area a great place to live, work and play.

Various sources of information were gathered and analyzed to choose the winners in each category. The 2018 Scottsdale Award Program focuses on quality, not quantity. Winners are determined based on the information gathered both internally by the Scottsdale Award Program and data provided by third parties.

About Scottsdale Award Program

The Scottsdale Award Program is an annual awards program honoring the achievements and accomplishments of local businesses throughout the Scottsdale area. Recognition is given to those companies that have shown the ability to use their best practices and implemented programs to generate competitive advantages and long-term value.

The Scottsdale Award Program was established to recognize the best of local businesses in our community. Our organization works exclusively with local business owners, trade groups, professional associations and other business advertising and marketing groups. Our mission is to recognize the small business community’s contributions to the U.S. economy.

SOURCE: Scottsdale Award Program



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How to Calculate Debt-to-Income Ratio for a Mortgage

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Unless you come by a huge influx of cash either by winning the lottery or through an inheritance; a mortgage remains the most affordable way to own a home. Among the tools that lenders uses to determine your eligibility for a home loan is debt-to-income ratio, or DTI.

The ratio is used to determine how much of your income can go towards monthly mortgage payments as compared to other monthly debts that your income settles. Read on to find out how to calculate DTI and what ranges are desirable according to the industry standards.

What is DTI and how is it calculated

The US Consumer Protection Financial Bureau defines DTI as ‘all your monthly debt payments divided by your gross monthly income’ expressed as a percentage. Mortgage lenders consider two different types of DTI ratios: Front-end and Back-end. We will get to them shortly but before you get down to the calculations, you need to;

STEP 1. Determine your monthly liabilities. These include;

Monthly Home-related costs – If it is your first mortgage this will be sum of all monthly expenses that go towards paying your rent. It has to be expressed as a monthly amount i.e. if you pay an annual sum then divide it by 12. Similarly if you pay it quarterly, divide by 4. Add in the proposed or expected monthly payment for the mortgage you are considering.

Also included in this will be other housing costs such mortgage insurance, real estate taxes and homeowner’s association payments. In case you are a homeowner in the market for a second mortgage, the monthly payments you make towards your first mortgage will constitute the cost.

Although you could be paying monthly for utilities like power and gas, they are not taken into account in this summation. Same goes for food, health and car insurances, phone bill, your taxes and cable bill.

Monthly loan payments – A sum of all monthly loans that are deducted from your pay and show on your credit report. These include monthly remittances towards car loan, student loan, credit union and personal bank loans.

Monthly credit card payments – This is the sum of minimum payments that you make for each credit card. It excludes credit card debt that you settle monthly in full.

Other monthly obligations – This could be any other line of credit that involves financing. Monthly child support or alimony payments fall under these obligations.

TIP: Monthly liabilities= (Home related costs + loan payments + credit card payments + others)

Step 2. Determine your monthly gross income

This refers to your total pay before any deductions are made or simply pre-tax pay. This comprises of;

  • Basic wages or salary.
  • Bonuses and commissions
  • Alimony and or child support.
  • Income from investments (must be verifiable via your tax returns)

Tip: If you draw a salary, bonus or commission annually then divide it by 12 to arrive at its monthly value.

How to Calculate the Front-end Ratio

This is the home-related costs divided by your monthly gross income. It shows the amount of monthly income that can be freed to service the house loan you propose to get. To put this into context, suppose your monthly gross income is $6,000 and total monthly home-related costs are $1,500.

Front-end DTI = ($1500/ $6000) * 100 = 25%

How to Calculate the Back-end ratio

When lenders speak of DTI, this is mostly what they have in mind. It’s a ratio that shows the amount of your income that goes towards settling all your debts. It’s the sum of all monthly debts divided by your monthly gross income. Suppose your total monthly liabilities (including home related costs) in the above example is $2500 then,

Back-end DTI= ($2500/ $6000) *100 = 41%

Standards for Debt-to-income Ratio  

A low DTI means that you have more of your income left after paying bills. Back-end ratio of 36% and front-end ratio of 28% or below is considered favorable by most lenders.

Back-end ratios of between 36%-49% translate to less amount left to spend. Lenders will view you as a potential defaulter. You may have to contend with higher interest rates and huge down payments for your loan.

Anything higher than 50% puts you on the red. It means half of your pay is going toward debt payments leaving you with little to spend or even take up a new financial obligation. This greatly reduces your chances of landing a mortgage.

How to improve your Debt-to-income Ratio

For better mortgage terms your DTI should be as low as possible. This can be achieved by taking a part-time job or increasing your overtime to boost your income. Work aggressively towards clearing your credit card debts before applying for the loan. You may also consider saving for huge purchases like a car rather than racking up more credit.



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Should Millennials Buy Property? – Lexington Law

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It has been 10 years since the real estate market crash of 2008, and the market has never fully returned to its pre-crash glory. Home ownership was at an all-time high in 2004, just four years before the worst economic recession since the Great Depression, to which a volatile real estate market contributed. The oldest among the millennial crowd were only moderately affected by the real estate bubble, as many of them were not financially prepared for home ownership at the time of the recession anyway.

However, as home ownership rates remain much lower than their pre-recession counterparts, it’s clear that home ownership remains out of reach for many people, especially millennials. However, most financial advisors will tell you: real estate is a good investment. So should millennials buy property? The short answer is, yes. Everyone should buy property if at all possible. Not only is it a good way to invest in your own future, but it remains a cornerstone of the American dream. The question should be: HOW can millennials buy property?

There are several things millennials can do to prepare themselves for home ownership, regardless of income and student debt:

Raise your credit score

Before you can make any major financial moves, you’ll need to ensure your credit is in tip-top shape. Some things that may prevent you from raising your score: a high debt-to-income ratio (your debt is too high for the amount of money you bring in), unpaid or very late bills, negative items on your credit report, and a lack of attention to finances.

When you raise your credit score to at least 700, a whole new world of options becomes available to you. A credit repair service may be able to assist in this area much faster than you could do it on your own.

Apply for an FHA loan

Federal Housing Administration (FHA) loans were designed to help first-time home buyers achieve their dream of homeownership. Under this program, buyers only need 3.5 percent of their purchase price to use as a down payment, rather than the 20 percent usually needed for a conventional loan. So if you find a home you like, and the asking prices is $250,000, you’d need a down payment of $8,750.

Relocate to a less expensive area

People choose their geographical locations for a reason. Usually proximity to where they grew up, close family members, jobs, or familiarity that keep them where they are. However, if you’re willing to search a little outside your comfort zone, there are plenty of places in the U.S. that still have incredibly affordable housing in addition to good job markets. Additionally, as technology continues to advance, more and more people find themselves able to work remotely. If your company is one of them, consider moving to another location to find the best property your money can buy.

At the end of the day, if any person in any generation can afford to buy property, there are ways to make it happen. It will take some hard work and sacrifice on your part (apparently, cutting down on avocado toast will fix your problems), and possibly even delving into credit repair, but home ownership is well within reach, and can even help ease the burden of student loan debt in the form of tax refunds.

 

 

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How Gerrymandering Affects Your Credit

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As borrowers, you expect certain financial decisions and governmental factors to affect your credit. However, one popular political issue you may not expect to influence your credit is gerrymandering. In fact, gerrymandering has several local economic influences — a major one being your availability to access credit. Before explaining the credit implications of gerrymandering, it’s important to understand what the practice is, how it occurs, and where it’s most likely to happen.

What is gerrymandering?

At the most basic level, gerrymandering is the process of manipulating the boundaries of an electoral constituency to favor one political party over the other. The practice was first recognized in 1812 when Governor Elbridge Gerry redistricted Massachusetts in order to benefit the Democratic party. Named after him, gerrymandering has since been used by both the Republican and Democratic parties to influence elections.

How does it happen?

Every 10 years following the U.S. census, states redraw the boundaries of local districts to reflect population changes with the intention of ensuring districts are evenly populated. This process is referred to as redistricting. In most states, the state legislature and Governor draw these lines and when they draw them in their own political favor, gerrymandering begins. This essentially allows politicians to choose their constituents, instead of the other way around.

Most gerrymandering follows one of two processes, referred to as packing and cracking. The packing strategy over-concentrates supporters of a particular political party into a single district in order to reduce its ability to affect the outcome for surrounding districts. The cracking strategy does the opposite by separating a voting bloc into multiple districts to water down its influence. Regardless of strategy, gerrymandering allows politicians to give their opponents a small number of safe votes to give themselves a larger number. This reduces competition and increases the likelihood of a party’s re-election.

Where is it happening?

While gerrymandering occurs from coast to coast, North Carolina, Maryland, Florida, Pennsylvania and Texas have some of the most gerrymandered districts.

How does it affect my credit?

So, how does this all affect your credit? According to NPR social science correspondent Shankar Vedantam, when gerrymandering occurs, you decrease a politician’s risk of losing, making them less responsive to their constituents. As a district becomes more and more gerrymandered, it becomes harder for that district’s constituents to get access to credit. In fact, in a gerrymandered district, someone would need to have $3,400 more in personal income to get a loan approved. This is because lenders are very aware of political regulations and oversight, so when the local government is less concerned about its constituents, lenders have more freedom to do wrong by their customers. As a result, lenders make it more difficult and expensive for you to get credit.

Being aware of your local redistricting can have a large impact on your credit health. If you’re in a position where you need credit help or credit repair services, visit CreditRepair.com to check, challenge, and change your credit.

 

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Can Business Card Cards Hurt Your Personal Credit Score?

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A business credit card can be an invaluable tool for business owners. It can allow them to put expenses on credit that can be paid later when they’re paid by customers, making cash flow problems easier to manage.

But if not used well, a business credit card can cause the small business owner’s credit score to drop, affecting their personal credit.

Just like a consumer credit card, a small business credit card will have balance and payment information recorded on the credit histories of the primary account holder. If the business card is managed well, it won’t hurt your credit.

There are a number of ways to cause a credit score to drop. One that may affect business owners the most, though, is carrying too much debt on their business credit card that raises their debt-to-credit ratio, also called a credit utilization ratio.

This is the total amount of debt divided by the total amount of credit you’ve been extended — both personal and business. Keeping this number at 30 percent is a good way to improve a credit score. Much higher and lenders may consider you more of a risk.

Because business and personal credit card balances are combined to calculate a debt-to-credit ratio, having a large balance on a small business card, or even a balance near the middle of your credit limit, can have a huge impact on your credit ratio.

If a business and personal credit card each have $5,000 limits, carrying a $1,500 balance on each card will get you to the 30 percent threshold recommended by many experts.

Most small business credit cards require the cardholder to personally guarantee the debt. If the balance isn’t paid off through the business, the owner must pay the entire amount out of their personal pocket.

If there’s a problem paying a business credit card bill, the card issuers may report it to the cardholder’s personal credit reports. Some card issuers will report all activity, negative or positive.

Again, this isn’t a problem if you pay your business card on time and avoid high balances. Such habits on a business credit card may help boost a credit score when combined with a personal credit report. But using a business credit card too often could hurt your personal credit.

On the other side of this issue, if you have a thin credit profile because you don’t use credit cards but use cash and a debit card, adding a business credit card to your finances should help your credit score.

Not making on-time payments and not paying the bill in full each month can also hurt your credit score. As a business owner, you should weigh your company’s cash flow to make sure you can pay your business credit card bill in time and in full each month.

Remember that paying the balance off in full each month is a matter of timing. The balance that’s reported to the credit agencies is usually the balance of the statement closing date, not after a payment has been made. To have a lower balance be reported, make your payments before the statement closing date, or ask the issuer what date it reports payments made.

Having too many recent applications for credit, including for a business credit card, can drop a credit score.

Two credit applications in a short period of time isn’t a big deal, but more can be interpreted as a sign of financial distress and that you owe a lot of money.

When applying for a small business credit card, don’t apply for several business credit cards at once. If you’ve recently applied for a few personal credit cards, then wait a few months before trying to get one for your business.

Another type of loan to avoid when applying for a business credit card is a home loan. Wait until your home loan closes before applying for new credit cards. A new inquiry into your credit for a credit card can delay your home loan.

Also avoid applying for a small business credit card when applying for other types of loans, such as a small business line of credit, auto loan or other type of major loan.

Before opening a small business credit card, check with the credit card issuer to see if it reports your business card activity to your personal credit reports. Chances are you don’t want your business activity to spill over into your personal finances and credit reports.

If the issuer doesn’t combine them, it make using a business credit card a lot easier. Stocking up on holiday inventory, going to a big tradeshow, or just buying supplies to prepare for a big order can be key times to need such a credit card without having the activity combined with your personal credit file and bringing down your credit scores.

About Author

Aaron Crowe

Aaron Crowe

Aaron Crowe is a journalist who specializes in personal finance. He has written for AOL Real Estate, HSH.com, US News & World Report, Wisebread, LearnVest, AOL Daily Finance, AARP, Wells Fargo, Allstate, the USC Marshall School of Business, and Credit.com, as well as other insurance, credit and investment websites. Check out his website at AaronCrowe.net.



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