Category

Credit Repair

How Home Buyers Can Use Their Credit Score (and More) to Reduce Their Monthly Mortgage Payment

By | Credit Repair, Home Buying, Homeowner

lower-mortgage-with-credit-scoreSo you’re looking to purchase a home, but cash flow is an issue, and you want to make sure that your monthly mortgage payment is as low as possible. Here are eight great strategies for shrinking your prospective monthly mortgage payment as you prepare to purchase your home.

Make a large down payment. The more cash you can put down at closing time, the less you will have to borrow. This decreases not only your mortgage principal, but also the amount of interest you’ll be paying. Higher down payments can also get you better interest rates.

Make a large enough down payment to avoid private mortgage insurance, or PMI. PMI is third-party insurance that most lenders will insist you get if you put down less than a 20 percent down payment. It’s their way of making sure they’ll get enough money back if you default on the loan. If you can’t put down at least 20 percent, then shop around for a loan at one of those few banks or credit unions that doesn’t require PMI. If you have no choice but to pay for it, remember to cancel your PMI (or refinance your entire loan) once the equity in your home reaches 20 percent.

Shop for a good deal on mortgage lenders and insurance the same way you would for any other item. Every lender and insurance company works differently, which means that each company will likely come up with a different package for you. Taking the time to shop your loan to at least three or four lenders and insurance companies will make sure that you’re getting the best packages possible — and don’t forget to bundle your auto and home insurance to get a further discount.

Check each town’s real estate tax rates. Most likely you’ll be looking for a home in an area with a few different towns or suburbs. The same way that you want to shop for towns with good schools, check out their real estate tax rates as well. A home bought in an area with lower real estate taxes can save you significantly on your payments—for every year that you own the home, not just while you have a mortgage.

Consider points. Points are the fees that you have to pay when buying a house, and it’s possible to purchase points that will lower your interest rates. Take the time to do the math and figure out how long it would take you to break even—simply divide the cost of the points by the amount you save per month ($5,000 / $50, for example, would require 100 payments, or roughly 8.3 years, to break even)—and whether that aligns with how long you plan to own the home.

Talk terms. Long-term mortgages divide the payments over a longer period of time, so the monthly cost is less, but it will take you longer to pay off the mortgage. Short-term mortgages pay off the debt more quickly and accrue less interest, but the monthly bills are higher. Figure out which method works best for you.

Think smaller. When shopping for a new home, ask yourself whether you really need all that space, inside and out. If you can find a smaller home on a smaller plot of land, you’ll pay less.

Don’t forget to bump up your credit score.Credit scores are a major factor lenders look at when determining interest rates, with the better scores resulting in rates that are much more favorable. In fact, a good credit score can reduce one’s mortgage rate by as much as 1.5%, which would translate to a savings of roughly $190 per month for a $200,000 loan. Anything you can do to fix errors in your credit score or improve your payment performance will help improve your mortgage interest rate and lower your payments.

So when you start looking for a home, keep these handy tools in mind. They will help you find the lowest mortgage payments possible. And along the way, should you need any assistance with credit repair, Ovation is here to help.

Paying for College

By | Credit Repair, Save Money

For most families, paying for college is an extreme challenge given the rising cost of tuition at both public and private institutions. With rising tuition rates, the majority of students are left searching for ways to cut the cost of attending college. Many people consider education to be the most important investment you can make, but there are risks involved with borrowing a large amount of money without a secure return on investment in sight.

That being said, a majority of high school graduates will want to go on to college. Below are a few of the more popular ways to secure college funds, as well as some of the inherent dangers you should look out for.

Credit cards. Credit cards can play an essential role in helping families manage the flow of expenses during the college years. However, using credit cards to help with college funding is only a good idea if you are able to pay off the bill when it comes due. If you start to accrue debt from credit cards it becomes less effective, since credit card interest rates are typically higher than those of student loans, and many colleges apply surcharges when bills are paid with charge cards. In addition, if you fall behind on your payments, you could accrue compounding debt, additional fees, and a damaged credit score.

Home equity. In some cases, a home equity loan makes sense to cover the costs of tuition. You are likely to get a better rate than you would with a student loan, for example, plus this type of funding is tax deductible.

But as with any financial decision, there are risks. If you choose this route and take on additional debt, it lowers the amount of money you can save for retirement or investing. In addition, with a variable-rate loan, you are likely to lose those low interest rates as soon as they inevitably climb back to normal.

If you’re a parent considering this type of funding for your child’s education, you should think long and hard about the possible consequences for you. Depending on your overall financial outlook and age, it could be risky placing your financial future in the hands of your child, as this might take you off track from focusing on your own long-term financial goals.

Retirement funds. Most people look to their retirement accounts to draw funds for the cost of college. Traditional and Roth IRAs both allow for qualified withdrawals to pay for education costs, with varying penalties or tax breaks depending on age and type of account. However, most financial experts would agree this should be your last resort. Going this route could leave you with penalties and additional taxes upon distribution, not to mention dramatically reduce your ability to grow your wealth through compound interest.

Private student loans. Loans are, of course, the inevitable route to take when needing to cover the cost of college. Interest rates are usually at a decent level and lending guidelines are fair. Because private student loans generally require a co-signer, they leave both parties—students and parents—partly responsible. However, not all private student loans are created equal. There can be a wide variety in rates, fees and rules, so it can pay to shop around.

Financial aid/government student loans. These are the most common college funding options, as well as the most beneficial. Government funding tools can include grants, work-study programs and federal student loans. But not all students qualify for the same programs. It’s important to understand which programs you qualify for and identify how much of the money is free, how much is considered a loan, and whether any of the funding is associated with a work-study arrangement. Regarding the latter, if you’re depending on funds from a federal work-study program or grant, they can be subject to performance and personal finances. What’s more, qualification for this funding can change from year to year.

Altogether, paying for college can be a true burden for most families. However, a college education can also lead to a rewarding career path and high long-term earning potential. It’s important to assess the risks and rewards involved before taking on any additional financial responsibilities. If you’re already struggling to pay off debt and your credit is suffering as a result, you may be a good candidate for credit repair. Let us at Ovation help you. We offer a wide range of credit repair solutions to help meet your individual needs.

Contact us today to see how we can help.

6 Credit-Score-Ruining Car Loan Traps You Can Avoid

By | Credit Repair, Credit Scores, Loan

car-loan-trapsSometimes there seems to be a science to getting a car loan that won’t leave you in need of credit repair. One key is to be prepared! Here are six common pitfalls the American consumer falls into when taking out a car loan.

1. Not looking past the monthly payment

Reframe the question from “Can I scrounge up this amount every month?” to “Should I?” Think bigger-picture here. If you view buying a less-expensive car in terms of how much you could be saving every month, it starts to look a whole lot shinier! And doing this will help you stand strong in your priorities when negotiating the overall price tag.

2. Not considering other financing options

Patiently researching before you pull the trigger is always good practice, but especially when you’re about to commit to a car loan. Don’t assume the dealer has the best financing option; sometimes you are paying for convenience. Check out what banks or credit unions have to offer before you step on the lot.

3. Not knowing to negotiate the interest rate

Did you know that you can haggle over the interest rate as well as the price tag? Be willing to ask the lender or dealer for a lower interest rate; this is one way you can save money over the life of the auto loan.

4. Taking a longer-term loan to reduce monthly payments

You already know to think “bigger picture” when it comes to the monthly payment. Now think about how long you could be tied to this loan, as well as the interest (that you negotiated). The longer the term of the loan, the higher the interest expense. Even if it means you need to downgrade your car options, consider getting a loan with a shorter term — it could be worth it in terms of money saved and credit preserved.

5. Not paying enough up front

The preparation you put into taking out an auto loan should include determining, and saving for, your down payment. A higher down payment means a shorter-term loan, lower monthly payments, and a lower interest rate. Experts recommend paying 20 percent up front.

6. Not knowing one’s credit score

The last surprise you need on the lot is to discover that your credit score is too low for a good interest rate. You can be prepared against all of the other traps listed above, but if your credit score is lower, your interest rate will be higher. Make sure you check yourself out before they do!

Not happy with that credit score and concerned you’re going to wind up with a higher interest rate on top of a car loan? If you don’t know how to improve your credit, contact Ovation for a free consultation. Our credit repair programs are customizable and our customer service is always available!

How Millennials Can Retire Tax Free

By | Credit Repair, Save Money

retire-tax-freeIf you’re a millennial, the idea of retirement is far away and it doesn’t consume your time or energy thinking about or planning for it. However, with President Obama’s newest myRA account, there is now an easy savings option that may appeal to the millennial.

Roth IRA Lite

In many respects, the myRA is like a Roth IRA account. You can contribute up to $5,500 a year and you can only participate if your income is less than $191,000 (married) or $129,000 (single). In addition, the minimum opening balance for the account is $25. Like a Roth IRA, contributions don’t reduce your taxable income. However, the truth is that a myRA is more like a Roth IRA with training wheels because it has limited investment options. The ideal savings plan for a millennial that is comfortable exploring different investment options is a true Roth IRA, which will help you retire tax-free and give you more choices to grow your contributions.

Better than myRA?

The Roth IRA has two significant advantages for young people. First, unlike a traditional, pre-tax IRA or 401k, withdrawals in retirement aren’t taxed at high-income rates. As a matter of fact, with Roth IRAs, although you get no tax breaks for your contribution, withdrawals are tax-free.

When you do withdraw your funds from your Roth IRA, your income is likely going to be higher, and therefore your tax rate will likely be higher too. This makes waiting until retirement for your tax break more valuable than receiving one now, as with a 401k. The Roth option also provides a shield from tax and benefit penalties for higher-income retirees.

The second advantage of a Roth IRA for millennials is flexibility. As young adults, you might have unexpected expenses, such as graduate school, starting a business, or just making ends meet. If you withdraw funds from a traditional IRA, you will get hit with a 10 percent early-withdrawal fee. With a Roth IRA, meanwhile, you can get your money back without paying a stringent penalty.

What about 401k’s?

Most individuals believe that a 401k is the best instrument for creating retirement savings, and yes, it is a good place to start — but it is most beneficial when used in tandem with a Roth IRA. A 401k allows you to save generally up to 6 percent of your salary with an employer’s match. However, if you’re planning a decent retirement and have other savings goals, it’s important to save more than 6 percent a year. That’s where a Roth IRA can make up the difference.

Get Going!

If you are ready to start your Roth IRA, remember that in 2014 you are able to contribute $5,500 per person, provided that your adjusted gross income isn’t more than $114,000 for a single person or $181,000 for a couple.

If you’re already saving in a 401k and fully funding a Roth IRA and can still save more, then it’s important to build an emergency account of three to six months’ worth of expenses outside the Roth IRA, so you can leave the Roth account untouched and growing tax-free. Once your emergency account is established, consider maxing out your 401k to maximize your finances and set yourself up for the most success upon retirement.

Help is Available

If planning for retirement scares you, you aren’t alone. For most millennials, it seems so far off that it isn’t worth planning now. But the truth is, the earlier you start, the better and easier it will be for you in the future. If you’re struggling to save or to make ends meet, it’s likely your credit is also suffering. Let us at Ovation help you. We offer a wide range of credit repair solutions customized to meet your unique needs.

Contact us today to see how we can help.

Student Loan Refinancing and Credit Repair: Facts You Should Know

By | Credit Repair

student-loan-refinancingThey don’t really tuck a student loan payment book into the folder with the diploma you receive at college graduation—it only seems that way. That loan is often the first major financial obligation a graduate faces, and it can last for many, many years. Like all other borrowing, it affects your credit score, so be smart about how you pay it back. And when (or if) a good option for refinancing becomes available, be sure to grab it and save yourself some money.

When Is Refinancing Student Loans Right for You?

If you have a good credit score and you’re financially better off than you were when you took out your student loan, refinancing may be right for you. It’s also right when the interest rate you will get from a refinance is lower than the rate you’re paying now.

The goal is to pay less in the long run, not just to lower the monthly payment. So a lower rate is great, but if the term stretches too many months into the future, you may end up paying more when it’s all added up. Do the math to figure the total amount you will pay over the life of the loan, or ask your lender to do it for you, so you can see the numbers for yourself.

Before you refinance, take note of whether your loans are public or private. Student loans that come from federal programs can sometimes be partially forgiven if you go into some kind of public service work, and they sometimes have income-based repayment options, which can be helpful if you run into financial trouble. If you don’t need either of these provisions, consider refinancing. But if they are attractive or necessary to you, be careful about giving them up.

Refinance or Consolidate?

Refinancing means getting a new interest rate on a loan. Consolidation means lumping together several different student loans (which many people have) into a single loan. This can be convenient—better to write one check than several—but it may not save you money. Pay attention to the interest rates on each loan you already have. It may be better to keep the ones with the lower rates, refinance only the higher-interest loans, and not consolidate at all. But if consolidation will save you money in the long run, go for it.

A Refinance Can Help Your Credit Score

Every financial obligation you have contributes to your credit score, so keeping your student loan payments affordable enough to pay regularly is important to the health of that score. If your credit score isn’t quite as healthy as you’d like it to be, consider a credit-repair service such as Ovation. We can give you advice for managing your financial obligations, so you can control your credit rather than have it control you.

Your Credit Score: 3 Things You Probably Don’t Know

By | Credit Repair, Credit Scores

credit-score-three-things-you-dont-knowWhen it comes to managing your credit, there are a lot of elements to take into account. While you probably know the basics, like how late payments drag down your credit score, there are some nuances in the process that are less well-known but can still affect your financial picture. Here are some issues that you will want to know about, especially if you are trying to repair your credit or about to make a major purchase and need your credit to be in tip-top shape.

The Reporting Cycle

The first has to do with making payments in full. Because you use your credit card throughout a monthly cycle, your actual credit balance with any particular card will likely never be $0. And it’s the balance on your account (on whatever day the credit card company chooses to make its report) that is sent to the credit bureaus. So while you might be paying off your full balance every month, that doesn’t mean your credit score is going to reflect a zero balance.

What this means in real terms is that you need to avoid using too much credit, so that the balance you have at any point in the month looks reasonable to the bureaus. If there’s a particular time coming up when you want to make sure your credit looks good, contact the card companies to ask when they send data to the bureaus, or sign up for credit monitoring, which will show you what information is being sent each month. It might also be in your best interest to dial back your spending for a couple of months in preparation for your big purchase.

Why Credit Reports Differ

The second issue has to do with the different credit reports available. Those reports are not likely to be identical, because lenders are not required to report to all three credit bureaus that produce them. In fact, they aren’t required to report to any of the bureaus. Additionally, those bureaus tend to use different algorithms (a fancy word for computer programs) to compute your credit score, meaning that each report may be slightly different.

This is why it’s important to keep tabs on all three credit reports. If one is particularly low in comparison with the others, see if there is data that could be missing, and dispute any information that needs to be updated.

Your Credit Score Is Dependent on the Weakest Report

It’s also important to keep tabs on all three reports because lenders know about the differences in credit reports, too. This means that, for a major loan, they are probably going to pull all three reports—and their internal policies could require that two or even all three reports match a certain cutoff point in order for you to be approved.

Also remember that if you’re taking out a loan with a co-applicant, such as a spouse or other family member, their own credit scores are also going to be factored into the lender’s equation. If the other person’s report is weaker than yours, it could derail your entire application. This means that it’s a good idea to make sure they are doing whatever is needed to repair their own credit prior to approaching the lender.

The good news is that if you or your co-applicant needs assistance with credit repair, there are credit agencies such as Ovation that can help ensure your credit passes muster when it’s time to apply for that loan. Contact us today to see how we can help.

Smart Ways to Pay Your Credit Card Bill

By | Credit Cards, Credit Repair, Credit Reports, Credit Scores

paying-off-credit-cardsDoes it matter much when you pay your credit card bill? As long as the lender gets some money sometime, it doesn’t make any difference to them – does it? Lenders are big companies and after all you’re just one person.

The reality is that it does matter. And it does make a difference, not just to the lender, but to you too, because when you pay your bill affects your all-important credit score, and could make it more likely that you’ll need credit repair.

To learn about the importance of making payments on or before the dates that affect your credit, read on.

Credit Card Dates to Know

Every month your account has a closing date. It’s not necessarily the first or last day of the month—it can be any day. Let’s say it’s the 15th, and imagine that we’re in the month of August. Any charge you made from July 16th—the day after last month’s closing date—through August 15th will show up on the next bill the lender sends you. The period from the 16th of one month through the 15th of the next month is called your billing period.

The other date to know is your payment due date. This falls after the close of your billing period, usually 30 days. For our hypothetical July 16-August 15 billing period, the payment due date would likely be September 15th. If you pay off the entire balance by that date, you will not be charged any interest. It’s only when you carry over a balance that you’re charged interest.

Pay Your Balance, Help Your Credit Score

Credit card companies use the date at the end of the billing period to calculate your credit utilization rate (the amount of your credit limit that you’re using), expressed as a percentage. For the health of your credit score, the lower the better is the rule. So, if you’ve run up a high balance on a credit card with a low limit, it’s wise to pay it down a little before the end of the billing period to keep the credit utilization rate low on the day it’s calculated.

How Much of Your Credit Card Balance to Pay

All of it, if you can.

Paying the bill each month, in full, is the only way to avoid interest charges. It might cost you less in the long run to write a big check for the whole amount than to pay just part of it. You’ll have to pay interest on the rest for as long as it takes to pay it off.

Most people do carry over a balance. If you do, be sure to pay at least the minimum payment requested by the due date. If you don’t, you’re subject to late fees and worse, damage to your credit report that could require credit repair.

Like any other tool that gets regular use, your credit card and credit score stay in better shape with a little regular maintenance, like paying on time and keeping balances low. But if you need a bit more help, contact a credit repair agency such as Ovation. We can provide the fix you need to get your credit humming again.

6 Social Security Pitfalls

By | Budgeting, Credit Repair

social-security-pitfallsAre you looking forward to retirement? If you plan to rely on social security to carry you through your retirement, you may be caught off guard to learn about many of the rules and stipulations surrounding this government program. Some of the rules can be frighteningly complex and given social security will likely represent a large portion of your retirement income, it’s important to fully understand the program’s rules and policies. Read below for six traps to avoid.

  1. Taxes – If your total income exceeds a certain level, up to 85 percent of social security benefits may be taxable. When computing social security, you must include income sources that are normally tax-exempt to determine tax on social security benefits.
  2. Minimum distributions – If you have other retirement accounts, such as a traditional IRA, you must accept a required minimum distribution after a certain age. Since this distribution is treated as ordinary income, it may require you to pay taxes on your social security benefits given your new income level.
  3. Unavailability – Many people assume that social security is available to all seniors, but unfortunately, not all employers pay into the system, which means not everyone can benefit from the program. However, if your employer does not participate in social security, then you should be covered under another program. It’s important to check with your employer to ensure where your retirement benefits will be coming from and that you understand them fully.
  4. Early bird – Many people choose to take their benefits as soon as they come available. However, this could be a huge mistake. For example, if you delay taking your benefits until age 70, you could increase your amount received as much as eight percent. In addition, the cost of living adjustment will be based on a higher number increasing your benefits. Delaying benefits is not for everyone; it’s important to talk with your family and decide what’s right for you. However, if you are able to delay, you should consider it.
  5. Elimination provision – Many people work for multiple employers throughout their career. If you work for an employer that does not withhold social security taxes, your final payout is based on the non-covered work and may reduce your total overall benefits if you are entitled to a pension from a non-covered employer.
  6. Limits – If you continue to work after reaching the age in which you can begin collecting benefits, then you will encounter restrictions on the amount you can earn without being penalized. If your wages exceed $15,480 in 2014, your Social Security benefits will be reduced by $1 for every $2 you earn above that level. During the year in which you reach full retirement age, you can can earn up to $41,400 before $1 of your Social Security benefits will be deducted for every $3 you earn above that limit. Once you reach full retirement age, no restrictions apply.

Social security can be confusing and difficult to navigate. Therefore, It’s important to be prepared so that you fully benefit from the funds you receive. The best way to prepare for retirement is to ensure that your finances are in order. Your current financial health is dictated most by your credit.  If you are experiencing difficulty with improving your credit and ensuring a secure financial future, you might consider credit repair solutions.  Let us at Ovation help you. We offer a wide range of credit repair solutions, customized to meet your unique needs.
Contact us today to see how we can help.

New Info on Your Credit Report Could Hurt Your Credit Score

By | Credit Repair, Credit Reports, Credit Scores

new-credit-report-informationPerhaps you haven’t seen your credit report lately (if not, we highly recommend that you do), but if you have, you may be confused by the new item on the report indicating your amounts paid on your credit card each month.

This little line is called Time Series Payment Data. It’s fairly new and is tracking your status as a credit risk in a whole new way. It’s not yet being considered as a factor in your credit score, but representatives from all the major credit bureaus say it’s just a matter of time.

Time Series Payment Data in Plain English

Also called historical payment data, Time Series Payment Data reflects the exact amount you paid on your credit card each month. This wasn’t always the case. If you looked at your credit report a few years ago, all it said was the balance on your credit card bill each month, and whether you had any payments past due. So what more could a creditor want to know?

The problem is—and this has probably occurred to you when looking at your statement a few times—your statement isn’t usually up-to-date when you get it. You might have already charged something new, returned something, had interest or fees kick in, or any number of other things indicating that the amount you look at on your statement isn’t really accurate. How could someone looking at your credit report really tell if you paid your card off in full each month, or carried a balance from the prior month? Answer: they couldn’t. Solution: record exactly how much you paid each month.

Learning Your Type to Assess Your Level of Credit Risk

Creditors looking at your credit score can use the historical payment data to tell if you’re a “revolver” or a “transactor.” Transactors use their credit cards plenty, but pay their bill in full each month before the due date. Revolvers are credit score daredevils, paying less than the full amount of the bill, and carrying a balance month after month.

While historical payment data isn’t yet being used to calculate your credit score, anytime you get a credit check, that information will still be available to whoever is looking at your credit score.

Is This Making You Nervous? Ovation Credit Can Help

If from reading this article you’re getting a sense that you need to start working on credit repair, call Ovation Credit today and speak to your personal credit repair specialist. Ovation Credit will work with you to repair your credit score and make you into a coveted transactor creditors will be happy to help out.

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