First Comes Love, Then Comes Marriage, Then Comes. . .Identity Theft?

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Guest Article by Alayna Pehrson – Content Management Specialist at Best Company

Family members can be your best friends — the people you feel closest to and the ones you trust the most. And someone who loves you, would never do anything to hurt you, right? What many families fail to realize is that one or more of their family members may be an identity thief.

What is family identity theft?

Family identity theft, also known as “familiar fraud”, occurs when a family member steals your identity and uses it for irresponsible/illegal means. It’s often easier for thieves to steal their family members’ identities because of the level of trust and information sharing that takes place in the family unit. For example, parents could easily steal and use their child’s identity because they are responsible for the safekeeping of their child’s important documents (birth certificate, social security number, medical records, etc.). Family identity theft could occur between a parent and child, siblings, cousins, and even spouses. Family members, especially spouses, tend to share a significant amount of sensitive information with one another which makes it relatively easy for identity theft to occur. For instance, most spouses share bank account information, credit card numbers, social security numbers, and much more.

How to handle family identity theft

First, check your credit reports from the three major credit bureaus: Experian, Transunion, and Equifax. If you do notice fraudulent activity, it may be smart to put a freeze on your credit and place fraud alerts on your credit as temporary security measures to avoid further credit damage. Long-term resolutions may prove difficult since family identity theft situations involve large betrayals of trust, and can be awkward to deal with. There are two main ways you can handle a family-based identity theft crime:

  1. Keep it in the family. Keeping it in the family will mean that you and your family member will work things out between yourselves without involving law enforcement. For instance, if the identity theft involved an opening and maxing out of several credit card accounts in your name, then you would have to work with your family member to get rid of the accumulated debt and financial damage. Since this option does not include legal action, you have to determine what type of relationship you want to have with the family member who stole your identity.
  2. Involve the law. Another way you could handle the situation is by reporting the identity theft crime to the police and pressing charges. This resolution option may result in arrest, separation/divorce, a permanent criminal record, and other long-term negative consequences for the family member who committed the crime. It’s important that you prepare yourself for what might happen to your family member. Since you are choosing to involve the law with this type of resolution, you will not be able to weigh in much when it comes to the consequences for your family member.

Family identity theft recovery and prevention

Recovery from this type of identity theft can be a challenge depending on which family member committed the crime and how you decided to handle it. Regardless of which path you choose, it’s important that you strive to make a full recovery. Your identity is incredibly important which makes recovery and future prevention also important. You may have to look into professional identity recovery services as well as credit repair depending on the damage. To keep your identity secure in the future, here are some things you can do:

  • Create strong passwords and regularly change passwords
  • Install antivirus software
  • Keep your documents in a safe place
  • Regularly check your credit reports
  • Get professional identity protection services
  • Shred old documents and mail
  • Inspect your bank statements each month
  • Memorize your social security number instead of writing it down

Although these things can help prevent identity theft, it is impossible to completely avoid the risk of identity theft as it can happen to anyone and take place at any time. In regards to family identity theft, make sure you are prepared and know the steps to take if your family member betrays your trust and steals your identity.

If your credit has been damaged by identity theft, learn more about our credit repair services.


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What is Acceptable Collateral for a Loan?

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If you are considering applying for a personal or business loan from a bank, the bank may require some sort of collateral as part of the approval process. Collateral is something of value that you own or control that you agree to hand over to the bank if you default on the loan.

If this sounds foreign to you, it is because this type of credit arrangement is not nearly as common as it was many years ago. Since ancient times, if you wanted to borrow money or something else of value, you were expected to leave the lender with something else of value (such as an animal or a costly garment) in expectation of taking the item back when you repay your loan. These days, however, it is far more common for loans to be secured directly by the asset being financed (like a house or vehicle), or by revolving, unsecured credit (like a credit card).

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However, collateral is still very much a part of the lending world for those circumstances when the loan you are seeking cannot be directly secured by what you are purchasing. Repayment depends on what happens in the future. A sizeable personal loan for the purpose of debt consolidation, or a business loan to fund expansion are examples of this arrangement.

Understanding how collateral works and what sorts of assets qualify to serve as collateral can help you better decide whether a loan secured in this way is the right choice for you.

How is the value of collateral calculated?

Because collateral serves as risk reduction for the lender, it follows that no lender is going to allow you to borrow every penny that the collateral could possibly be worth. Most lenders will not even consider collateral that is not worth significantly more than the loan principal.

The calculation banks use to determine how much collateral they require is called the loan-to-value (LTV) ratio. In most cases, lenders prefer to lend an amount no more than 70 or 80 percent of the collateral value. For instance, if you have a collection of vintage Star Wars merchandise valued at $100,000, you may be able to use it as collateral to borrow as much as $80,000 in cash. (Note: if your bank’s loan officer is not a Star Wars fan, this option may not work.)

In that respect, this type of collateral works exactly the same as other secured loans, like an auto loan or a mortgage. In that case, the bank is only going to approve a mortgage up to a certain percentage of the value of the property being purchased. They are careful to do so because if you stop paying your mortgage payments and desert the house, the bank wants to ensure they can recover the full value of their loan by selling the house you have left them with.

What assets can be considered as collateral to secure a loan?

The following items are most commonly accepted as collateral for loans that require something beyond the asset being financed. It is important to note, however, that every bank (and every banker) is a little different, and they will all have their own requirements and/or preferences when it comes to what they will accept as collateral.

  • Real Property: Land, buildings, vehicles, and land rights that you already own (not that you owe money on) is one of the most effective forms of collateral because it is relatively easy to sell and rarely depreciates significantly in value.
  • Valuables: For similar reasons, valuable personal belongings (like art, antiques, gold, or jewelry) can serve as collateral as well. These items can generally be appraised by experts to determine their current and likely future worth with a fair amount of confidence.
  • Cash: Perhaps the most popular form of collateral is cash itself, usually in the form of an existing savings account or easily liquidated investment account. While it may seem strange to borrow money if you have adequate cash on hand to serve as collateral, in the case of large investments, the dividends and interest income you lose by withdrawing that much cash can end up costing more than the interest on the loan.
  • Future Income: Now we are moving into the realm of potential income, so lenders will view this sort of collateral as far more risky than the items above. However, if you are seeking a business loan and you have a high-quality business plan mapping out exactly what you intend to use the money for (and what the return on investment will be), you can convince a bank to lend you the money based on that alone. Or, they may accept future earnings as a portion of the collateral and require less in the way of real property or cash.
  • Inventory and Equipment: For businesses that stock inventory (primarily retailers) and that own specialized equipment (such as manufacturers), these business assets can serve as legitimate collateral for a business loan. They may not be quite as fast to liquidate if the bank needs to seize them, but they are of value and of immediate use to your competition (if no one else).
  • Invoices and Accounts Receivable: If your business has a strong history of collecting payment from customers and/or the customers who currently owe you for services rendered have a solid payment history, a lender may accept proof of the money you are owed as collateral. This form of collateral is usually used by businesses to get through a brief, temporary cash crunch so they can cover payroll and operating expenses while waiting for all their money to come in.
  • Stocks, Bonds, and Other Investments: Most investments are treated similar to cash as long as the market is strong. Lenders accepting investment portfolios as collateral may even offer as much as 100 percent LTV if they are very confident in the market’s stability. In less certain economic times, however, those same lenders may remove this option from the table completely because of the risk. It is important to note that some investments, including personal retirement accounts and 401k plans, cannot legally be pledged as collateral to secure a loan.
  • A Blanket Lien: As the name implies, a blanket lien covers basically all assets under your control, personal or business. Lenders are more likely to jump at this opportunity because it means that if you default on your loan they can go after anything and everything you have to get their money back. Doing so is very dangerous for the consumer. It should only be considered if all other options fail and securing your desired loan is crucial.

For more interesting and valuable financial insight, check out some of these past articles on financial success.

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7 Reasons You’re Ready to Downsize Your Home

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Late in 2017, reported an interesting conflict in popular opinion regarding the preferable size of a home:

“A 2017 Trulia survey found that 46 percent of people between the ages of 18 and 34 want extra square footage in their homes. But bigger isn’t always better. According to the same survey, nearly 61 percent of respondents who live in homes larger than 2,000 square feet said they would choose a smaller home if moving this year.”

So, what gives? Do we want bigger or smaller homes?

Interestingly, the Trulia survey seems to indicate that, while we think a bigger home is better, once we’re actually in one, most of us recognize the value of downsizing. And, as it turns out, there are a lot of practical reasons to do just that.

Why consider downsizing your home?

There are many reasons to consider downsizing your home but they all fall into one of two buckets: financial, and personal.

Financial Reasons

  • Paying off debt: With a smaller home comes a smaller house payment. If you were to downsize and apply every dollar you save to paying down debt, you would surely make faster progress on paying it off and you’d save an impressive amount on interest in the long run. This applies to the mortgage on a smaller home, too: if you apply your former “big house” payment to your smaller mortgage, you’ll pay it off and gain equity faster, which improves its resale value dramatically.
  • Saving for retirement: Americans are notoriously unprepared for retirement, with just $5,000 being the median savings for all working families in the nation. In many cases, this is because we all tend to live up to our means rather than scaling back and saving what we don’t need to spend. Downsizing can free up money that would be better invested in a retirement fund.
  • Lower utility bills: Living in a smaller space means less energy needed for heating and cooling, fewer lights that can be left on, fewer dripping faucets, and the list goes on. Additionally, less room usually translates to less “stuff,” most of which has to be plugged in or charged routinely. According to Than Merrill from A&E’s Flip This House, “on average, the electric bill for a 1,000-square-foot home is approximately $200 per month less than the electric bill for a 3,000-square-foot home.”
  • Money for other things: Let’s face it, it’s fun and smart to have more cash available than you used to. If you’re not spending as much on your home, it means you have more money available for things like building up that emergency savings fund, putting money away for the kids’ educations, funding that family vacation, or just occasionally having fun without stressing about it.

Personal Reasons

  • Retire sooner: If you’ve been putting off retirement because you need to pay off a large mortgage, downsizing could help you retire sooner. This is especially true if you’re an “empty nester” who’s still paying for far more house than you need. Some people keep working past retirement age simply because their retirement income won’t be enough to support their current lifestyle.
  • Work less: Are you drowning in overtime? Trying to juggle two or three jobs? Barely getting a chance to be with the spouse and children you’re supposedly working so hard to care for? It’s not just bad for you, it’s bad for them too. And, it’s just not sustainable. Downsizing could be your ticket to a saner schedule and an opportunity to rebuild those relationships that make all the hard work worth it.
  • Play more: A smaller home means less space, which we’ve already established means less expense and, therefore, less time at work needed to pay for it. But, it also means less time, stress and money spent on cleaning maintaining it. Home maintenance is inevitable, and keeping the house clean shouldn’t be optional. However, the smaller the home, the less there is to get dirty or go wrong. Downsizing reduces regular maintenance and cleaning, leaving more time for fun and relaxation.

So, what do you think? Are you ready to downsize your home?

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What credit score should you have for a mortgage?

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When you apply for a mortgage, your credit score is one of the fundamental factors a lender will consider before making you an offer. For new and first-time homebuyers, it can be unsettling to learn that the future of your homeownership relies heavily on your past credit history.

What is the minimum score accepted by lenders? How will my credit score affect my loan interest rate?

Keep reading for a better sense of the role your credit score plays in applying for a mortgage.

Minimum Score Requirements

When you apply for a home loan, one thing is clear: There are a lot of mortgage types to choose from. Here are the minimum credit requirements for most major programs.

Type of Home Loan Minimum Credit Score
VA No minimum (comprehensive profile review)
FHA 500
USDA 580
Conventional 620

Depending on how severe your credit actually is, a score of 580 may be enough to buy a house. Credit scores between 580 and 620 are generally considered poor but could be enough for a lender to consider your approval for a mortgage.

Getting the Best Interest Rates

While different types of mortgages and various lenders are going to have  individual credit score requirements, it’s important to understand that merely having a good enough score to get approved for a home loan doesn’t mean you’re going to be offered a great deal.

Your credit score has the greatest impact on the types of interest rates you are offered. Poor credit scores may often lead to high loan rates, raised closing costs, and higher monthly payment. Typically, the higher your credit score, the lower these numbers will be.

While it is up to your bank or lending agency to determine what type of score a borrower needs to gain access to their lowest interest rates, a variation of a few points can affect your monthly payment by as much as hundreds of dollars.

For example, a $200,000 30-year loan at a 4% interest rate (foregoing other fees) would translate to a monthly payment around $950. However, take out the same loan at an interest rate of 5%, and your monthly payments will rise to just below $1,075. Raise the same loan to 8%, and you are looking to pay almost $1,500 every month.

Looking at More than Just Your Credit Score

It’s no secret that your credit score is a big deal when it comes to getting approved for a mortgage, but buyers with a less than perfect credit history are not out of luck entirely.

When considering your application for approval, lenders will look at more than just your credit score. Being able to show re-established credit, that there was a specific economic event that caused the lapse in excellent credit, and that you have since recovered from this financial hardship can be the difference between an approval and denial.

Lenders will also take a close look into your debt. Having little to no current debt is a healthy compensating factor for less than favorable credit. Compensating factors are elements that lenders consider to reduce the borrower’s risk, allowing for the approval or low and poor credit scores.

Mortgage agencies will want to see a solid and recent payment history with no collection accounts and late payments within the past 12-months, a low debt-to-income ratio, and a consistent and reliable employment history.

Compensating Factors for Poor Credit:

  • Down payment of 10%+
  • Significant money in savings
  • High Income and long employment history with current employer
  • Low debt-to-income ratio
  • Positive credit history of 12+ months

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How Federal Reserve Interest Rates Affect Your Credit

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The Federal Reserve raised interest rates in March to their highest level in a decade, and more increases are on the way.

Higher interest rates will affect consumers in many ways — including car and home loans, though most borrowers who have those loans are at set rates that don’t change for years, if at all. Where most consumers will see a change is on their credit cards, where interest rates can change daily.

For a U.S. household with the average credit card debt of $10,995, a 0.25 percent hike in interest rates — which is how much the Fed raised its key interest rate on March 21 — could make carrying a credit card balance more costly.

The Fed raised its benchmark rate from 1.5 percent to 1.75 percent, the highest level since 2008. It raised rates three times in 2017 and has signaled that it anticipates raising rates three times in total in 2018, possibly four times.

The benchmark rate has risen a full percentage point in the past year, and further hikes this year will make credit cards at least twice as expensive to carry a balance on than they have been for about a decade.

Technically called the federal funds rate, the interest rate the Fed sets is the rate banks trade federal funds with each other overnight. It is almost exactly correlated with the prime rate, which is what credit card companies typically charge their largest, most creditworthy corporate clients.

From there, a change in the prime rate follows with credit card interest rate changes that consumers see. Their credit card interest rate will usually increase with a day of the federal funds rate increase, and usually at the same amount. So a 0.25 percent increase in the federal funds rate equates to a 0.25 percent increase in a credit card interest rate.

After holding steady at an average interest rate of 13.5 percent in 2016, and around that rate or lower since 2013, the average interest rate on credit card accounts that assess interest has risen almost two percentage points in less than two years, according to data from the Federal Reserve. In 2017 it averaged 14.44 percent, and as of February 2018 it was 15.32 percent.

If the Fed raises rates 1 point by the end of the year, credit card users could see their average interest rate at about 16.3 percent.

Carrying a credit card balance, also known as revolving credit, is where credit card users will feel the pain of a Fed interest rate hike. An estimated 40 percent of credit card users carry a balance from month to month, and should see their costs climb immediately after a Fed rate hike.

Most credit cards have variable interest rates. As banks see their borrowing costs rise, they raise rates on credit cards.

If the Fed increases interest rates during the middle of a credit card billing cycle, for instance, customers may not see the increase until their next statement is due. But their rate may rise on new purchases immediately.

Lenders are typically more likely to raise interest rates faster than they would lower them if rates were dropping elsewhere.

As we said earlier, any rate hike by the Fed should be almost immediately mirrored in a credit card rate hike. With that, the minimum due on a credit card balance will rise.

Credit card minimum payments are typically set at 1-2 percent of the principal balance, plus any interest accrued during the billing period. Rising interest rates will increase the accrued interest and minimum due, though not dramatically.

For example, with a credit card debt of about $8,600 at an interest rate of 15 percent, the minim due is $101 when a 1 percent rate of the principal balance plus accrued interest is factored. Add a rate increase of 0.25 percent and the minimum due goes up to $102.

A 0.25 percent increase in interest rates causes the minimum due on a credit card to jump by $2 for every $10,000 of credit card debt.

That’s not a lot of money, but two or three more Fed rate jumps this year and it can add up. Credit card interest rates are already about 2 points higher than they were two years ago, so adding another point means a $24 increase on the same debt from 2016 — each month.

The best thing credit card users can do to avoid the pain of rate hikes is an obvious and sometimes difficult one — don’t carry a balance. Pay off your credit card each month and pay it on time to avoid fees.

If you have a good credit score, you can apply for a credit card with a lower rate and transfer your balance to the new card. At the very least, work to improve your credit score so that you qualify for the best rates.

You can also try to get a personal loan at a low interest rate to pay off a higher credit card balance. Getting your spending under control can help ensure you don’t go into more debt.

About Author

Aaron Crowe

Aaron Crowe

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

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How to Use a Credit Card for a Vacation in Another Country

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Foreign travel can be an exciting journey, full of new sites, sounds, people, and cultures. But as exciting as those new things can be, they can also be difficult to navigate — particularly if you don’t speak the language. Even something so simple as making a purchase can be a dog and pony show, particularly if you’re stuck carrying around stacks of the local currency and trying to stay on budget.

The popularization of credit cards has certainly made at least one aspect of traveling abroad easier by reducing the need to worry about confusing currency conversions for every purchase. As with many aspects of travel, however, you’ll get the most out of your credit cards — and your vacation — when you plan to ensure you don’t hit any snags along the way. In fact, you can start seeing the rewards of using a credit card before you even set off on your trip.

Earn Rewards When You Book

Unless you’re a “where the wind takes me” type of traveler, chances are you’re going to want to book your adventure long before you, well, adventure. By choosing the right credit card to pay for your travel and accommodations, you can potentially turn one vacation into two by earning enough points or miles for free travel down the line.

Travel rewards credit cards tend to come in two styles: flexible and co-branded. Flexible travel cards will offer general points or miles that can be redeemed for a variety of travel-related expenses. Co-branded travel cards, on the other hand, are usually specific to a single airline or hotel brand, meaning points or miles earned will only be good for specific purchases with that brand.

While the flexible rewards can offer more options for redemption, co-branded cards tend to come with additional perks, like free checked bags or room upgrades. As a result, selecting the best air miles card for your trip will depend on whether you have specific brands with which you regularly fly/stay. You can see a list of recommended travel cards on

Know Your Benefits

If rewards aren’t enough incentive to book with your credit card, consider the additional benefits. Thanks to the internet and digital payments, booking hotels and flights has never been easier, and most it can be done online — which is where credit cards truly thrive. Overall, credit cards are one of the safest ways to make online purchases, thanks to the strong purchase and fraud protections built into most credit cards.

Furthermore, many premium credit cards will come with extra travel protections that may save you a bundle if things go sideways. Things like travel delay or cancellation insurance can net you a refund if illness or weather interfere with your trip. And lost luggage reimbursement can turn an airline faux pas into an excuse to upgrade that old suitcase. Some cards even offer concierge services that can help you with recommendations while you’re abroad.

Avoid Foreign Transaction Fees

After you’ve booked your travel and accommodations, you’ll need to decide which cards to take on your trip. Depending on where you’re headed, network acceptance might be a concern. In general, Visa and Mastercard have the most acceptance worldwide, with Discover and American Express less frequently accepted by foreign merchants.

Besides acceptance, the other major factor you should consider is whether your card charges foreign transaction fees. These fees are intended to cover the cost of converting currency from/to US dollars on purchases made in a non-US currency and can range from 2% to 4% of your purchase amount. You can significantly cut the cost of your trip by selecting a card that doesn’t charge foreign transaction fees.

Alert Your Issuer

Once you know which cards you’ll take with you, you’ll need to alert your issuers that you’ll be leaving the country (well, not right away, but certainly not at the last minute, either). This is to prevent your foreign purchases from raising a fraud alert with your issuer that results in your credit card account being frozen. Calling your credit card company to inform them of your plans will let them know the strange charges from other countries are you and not a credit card thief.

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Does it Make Sense to Get a 30-year Mortgage at Age 65?

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There’s no question that anyone at any age is allowed to get a mortgage loan. The Equal Credit Opportunity Act is clear on that point: “individuals cannot be discriminated upon via factors that are not directly related to their creditworthiness,” including their age.

However, as we all learned from Jurassic Park’s Dr. Ian Malcolm, “You were so preoccupied with whether you could, you never stopped to think if you should.” And, that’s where disaster began.

While financial planners and experts will often recommend buying a house rather than renting, it’s interesting to note that their recommendations change as the buyer gets older. At the same time, there are good reasons why seniors should consider applying for a mortgage later in life. So, let’s consider both the pros and the cons of getting a mortgage as a senior citizen.

Will you qualify?

To begin with, it’s important to note that, although no bank can deny a mortgage loan based on age, everyone needs to meet the same financial qualifications in order to be approved. Generally, these include a high enough credit score, appropriate debt-to-income ratio, and proof of adequate income.

Related: How to Fix Your Credit to Buy a Home

For seniors who are no longer working, or who are living primarily on a fixed income, this can be tougher than it is for younger buyers who enjoy greater future earning potential.

The banks are not only looking at a buyer’s current economic situation, but also what they reasonable expect will happen down the road: If their financial history shows a steady increase in wages during a long tenure at their current job, it’s reasonable to expect that trend to continue. However, if the financial history shows several years of identical social security payments and little else, it’s reasonable to expect that to continue as well.

The trouble is, the economy doesn’t stay still. Inflation, energy costs, and many other cost-of-living factors are constantly changing, often becoming more expensive over time. As a result, it’s quite possible a long-term loan like a mortgage could make sense on paper today, but be completely unaffordable five or ten years in the future.

As a result, seniors on fixed incomes are generally less likely to qualify for standard mortgage financing from most lenders. This isn’t because of their age, but rather because of their current and future financial situation.

Of course, many seniors have more favorable financial circumstances including investments, savings, and pensions with cost-of-living increases built in. In those cases, lenders are unlikely to think twice about approving a mortgage.

Why seniors should probably avoid getting a mortgage

There are other things seniors should consider, though, even if they’re approved for a mortgage based on their financial situation:

Cash flow

Cash flow is a problem for seniors on a fixed income, or whose wealth is wrapped up in non-liquid investments. While they’re able to qualify for a mortgage based on the big picture, if they’re not actually bringing in enough cash each month to cover the mortgage payment along with all the other necessary living expenses, they’re going to run into trouble.

Adding to this challenge is the fact that many necessary expenses change regularly and unexpected situations such as medical emergencies or car repairs can quickly put a strain on an otherwise healthy budget.

Rising expenses

Costs that are inherent to homeownership tend to rise over time, sometimes unexpectedly. Beyond the basic mortgage payment, which should stay the same (unless it’s a variable-rate loan), owning a home requires the payment of utility bills, property taxes, repairs and maintenance, and insurance, at the very least. All of these costs can (and probably will) rise over time.

Since most seniors have a cap on their earning potential — even if they’re in a good financial position at the start of the mortgage — these costs could eventually make the home unaffordable before it’s paid off.

Estate concerns

It’s not pleasant to think about, but it’s important for seniors considering such a large financial commitment to recognize that there’s a very good chance they’re not going to outlive the term of the loan. This is important for a few reasons:

For married couples, income is often based on both spouses being alive. Should one pass away, it could result in the household income dropping by a significant amount, while the mortgage payment remains the same. Likewise, even if the spouse is not affected, a relatively new mortgage in which little equity has been built up can become a burden for children or grandchildren.

Why seniors should consider getting a mortgage

All that being said, there are some situations where a new mortgage may be the best option for someone over 65.

One example is obtaining a refinanced mortgage on a current residence, which results in lower monthly payments and/or a shorter term. As long as the initial fees and down payment required are affordable at the time of the application, this can be a wise way to make retirement more manageable and speed up debt reduction for estate planning purposes.

To conclude, there are no hard-and-fast rules regarding whether a senior citizen should apply for a mortgage. As with any potential homebuyer, seniors do well to seriously consider whether they can reasonably afford the cost, and if they’re willing to make the commitment. With the help of a trusted financial planner, and a solid grasp of the pros and cons involved, they can come to the best decision for their situation.

If you’re looking into a mortgage, but are concerned about your credit, learn more about our credit repair services.


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How to Overcome Credit Card Anxiety

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Guest post by Alayna Pehrson – Content Management Specialist at

You can use credit cards as tools to build your credit, right? Unfortunately, many people fail to see credit cards in that way. Credit cards can have a poor reputation that some people simply can’t overlook. Although credit cards will only cause damage when used irresponsibly, many people still get anxious when they think of using a credit card. Here are a few tips to help you overcome your credit card anxiety:

Do Your Research

One of the best things you can do to lessen your credit card anxiety is independent research. Reading blogs, books, and seeking out other resources can help you understand how to use credit cards wisely. Countless, easy-to-access articles and websites focus specifically on credit cards and how you should use them to your advantage. It’s important to keep your personal spending and financial habits in mind as you do your research. For example, if you know that you often spend over your budget and you are prone to making irrational purchases, then research credit card articles and blogs that relate to your situation. Millions of people use credit cards daily, so there is bound to be at least one person out there who has faced similar situations and who can provide helpful advice about credit cards.

Learn From Others

Another thing you should do is learn from others’ mistakes. Almost everyone has made a credit card mistake at least once since they started using a credit card. If you observe their credit card usage as well as their mistakes, you will be able to understand the best and worst ways to use a credit card. You can learn from parents, relatives, friends, bloggers, etc. Learning from other people’s credit card mistakes can help you avoid making those mistakes in the future. After all, why should you suffer the same fate when you know how to avoid it? Observing both those who have good credit and those who have poor credit will teach you to recognize the difference between good and bad credit habits.

Check Your Credit Report

Not only can you learn from others, but you can also learn from yourself. Regularly checking your credit report can show you what areas you need to improve on when it comes to your credit. Staying in tune with your credit report is also one of the best habits you can develop. Those who check their credit reports on a regular basis are also more likely to catch identity theft before any real damage happens. For example, people who regularly check their report will have a better chance at noticing when any type of fraudulent activity (like unwarranted purchases and accumulated debt) is present. Overall, your credit report can show you how well you are handling credit.

Conduct a Self-Audit

In addition to regularly checking your credit report, conducting a financial self-audit could also help you with your credit card anxiety. Sitting down once a month and going over your credit history, your credit habits, and your debts can confirm that you are in control of your finances or highlight areas for improvement. You may think that a credit card will overrun your life and automatically condemn you to a lifetime of debt, but hopefully, your self-audit will show you otherwise. This self-audit should also be a learning process. You may not have great results after one audit, but that can be seen as an opportunity for personal financial growth. Again, you need to be willing to learn from both your mistakes and successes.

Have Confidence

Handling credit cards and finances with confidence can be a challenge. After all, if it were easy, everyone would have good credit and zero debt. Fortunately, there are ways to become confident with your credit card usage. If you develop and maintain good credit habits, do your research, and learn from both yourself and others, you will see your anxiety and fears disappear over time. You should remember that you are in charge of your financial future. Obviously, life can be difficult and throw challenges your way, but in the end, you are the one who uses the credit card; it doesn’t use you. Although having bad credit can be scary, you should keep in mind that it can be fixed. Fixing your bad credit does take time and money, but will definitely prove worthwhile.

If you’re concerned about your credit, learn about your options. Contact us today to learn more.

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Understanding How A Reverse Mortgage Could Benefit You

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Have you ever heard of a reverse mortgage and wondered what it is? If you’re retired, or nearing retirement age and you own your home, it’s important to understand how a reverse mortgage can benefit you.

A reverse mortgage can be a useful option for supplementing retirement income. In contrast to a traditional mortgage where a borrower pays the lienholder to make progress on the loan and establish equity, a reverse mortgage is essentially a financial agreement in which a homeowner relinquishes the equity in their home and receives payments from their mortgage lienholder. In addition to supplementing retirement income, a reverse mortgage can be tapped to eliminate mortgage payments, by letting the equity in a home satisfy the remainder of the loan payments.

Requirements for a reverse mortgage

In order to qualify for a reverse mortgage, you must be at least 62 years old and have sufficient equity in your home. The size of a reverse mortgage loan depends on the value of the home, the age of the youngest borrower, and the amount of the outstanding loan on the property. As with a traditional mortgage, the owner must continue to pay property taxes and insurance on the home.

Repayment of a reverse mortgage is also very different from that of a traditional mortgage. Instead of repaying the loan over time, a reverse mortgage is repaid all at once at loan maturity. This typically occurs when you sell the home or transfer the title. Maturity can also be the result of permanently leaving the home. A homeowner is considered to have permanently left their home if they haven’t occupied it as primary residence for more than 12 consecutive months, which occurs when long-term care becomes necessary, or when the homeowner passes away.

The reverse mortgage loan becomes due and payable once any of these circumstances occur. The most common way of paying off a reverse mortgage is by selling the home and using the proceeds of the sale to satisfy the loan in full. Either you as the seller, or your heirs (in the event of your death) would typically assume this responsibility. You, or they, would receive any remaining equity in the home after the loan has been repaid.

What if the house isn’t worth as much as the loan amount?

This is a real consideration for those thinking of a reverse mortgage. The housing market fluctuates, so it’s important to be sure that you don’t borrow so much that you risk having a deficit at the end of the loan.

If you are not in a consistently strong housing economy, there are extra protections that can be put in place to avoid this scenario. A Home Equity Conversion Mortgage is a federally-insured reverse mortgage. An HECM ensures that borrowers are only responsible for repaying the loan up to the sales price of the home, even if the amount due on the loan is larger. Any remaining loan balance is covered by the Federal Housing Administration (FHA).

Why a reverse mortgage is a good option

For those in retirement that do not wish to move or downsize their home, a reverse mortgage is a great option that allows what is referred to as “aging in place.” If you plan to stay in your home until you die, this is a good option to access a significant source of cash. Particularly if your main source of income isn’t sustaining your financial obligations, this can be a good way to get some credit help with other debts or payments on which you may have fallen behind.

There are also tax benefits to a reverse mortgage in that the proceeds are free from federal and state income tax, no matter how the funds are used. The interest that is eventually paid when the loan comes due is also tax deductible.

If you are struggling to meet your financial obligations because of limited income at retirement, a credit repair review can be the first step in getting back on the right track. Contact us  for a free credit report evaluation at 1-833-333-2285.


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Tips for Getting Approved for a Mortgage

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When you start your home buying journey, you’ll notice advertisements of beautiful homes accompanied by happy families that make it seem like there is an abundance of lenders waiting to hand you the keys to your new home.

The truth is, getting approved for a mortgage is not always easy, and getting financed for such large amounts of money can be risky. If your home-buying fantasies have been interrupted by application denials, it’s time to take control of your borrowing power and find out what you can do to turn those “no’s” into a “yes.”

1. Document Your Income

Borrowers mistakenly downplay the importance of a stable income history, especially if they have a high credit score or large bank balance. No matter how favorable your credit and financial status may seem, you will be subject to income scrutiny. Be prepared to prove your income by providing tax documents for the last two and three years and paycheck stubs from the past few months. You may also be asked to provide a list of all your debts, including auto loans, credit cards, alimony, and student loans, and a list of your assets, including investment accounts, auto titles, real estate, and bank statements.

In addition to proving that you have adequate income to cover the loan, lenders will verify that you’ve been working in the same field for at least two years – the longer you’ve been working for the same employer, the better.

2. Shine Up Your Credit History

Maintaining a positive history while you apply for home loans is especially important. Lenders want to see that you have a good record of paying your bills on time. Before you apply for a mortgage, review your credit report. Give your credit a boost by keeping your credit card utilization below 30%. If you have any past debts, pay them. Lenders want to see a flawless credit history for the past 12+ months – the longer you go without a negative mark on your report, the better.

Keep in mind that lenders may re-check your credit score during the application process, so make sure all your accounts are on-time and current and avoid any other large purchases that could affect your score until after you receive an approval.

For credit repair assistance, contact Credit Absolute.

3. Two is Better than One

If you don’t have income high enough to qualify for type of loan you need, a cosigner with an adequate amount of disposable income to be considered on your mortgage may help your approval rating – regardless of whether this person will be helping you make your payments or living with you. In some cases, a cosigner with a positive credit history can help someone with less-than-perfect credit. However, he/she should keep in mind that they are guaranteeing to your lender that the mortgage payments will be paid in full and on-time.

4. Offer a Larger Down Payment

If you can pay for a percentage of the home on your own, your application for the rest of your home financing just may tilt in your favor. The larger personal investment you have in the house, the less likely you will walk away from the property and let it go into foreclosure.

Having a significant amount of cash is also a strong indicator of how you handle your finances. Banks don’t just want to hand anyone a loan; they want to provide financing to people that are guaranteed to pay them back.

5. Consider a Smaller Loan

While your pre-approval may indicate that you qualify for a loan up to $250,000, you want to tread carefully in asking for the highest loan amount. In fact, the closer you get to your limit, the more difficult it is to get approved.

If you don’t qualify for the mortgage that you want and you aren’t willing to wait, try setting your sights on a less-expensive property. Consider a townhouse instead of a house, accept fewer bathrooms and bedrooms, or move to a neighborhood further away to give you more options. For a more drastic approach, consider a different area of the country where homes are more affordable until you can trade up or build your financial history.

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