Start planning now for success in 2020! Whether you are looking to become a first time homeowner or wondering if you should refinance your current mortgage, checking on your financial health should be on your list of New Year’s resolutions right beside “losing weight” and “joining a gym.” Let us help you achieve your resolution of improving your financial health with a few helpful tips.
How important are credit scores?
Having a healthy credit score will help you with pre-approvals, lower interest rates, and decreased insurance premiums. Did you know that your insurance premiums you pay on your home or autos are partially based on your credit score? Although you may be able to qualify for a home loan with a credit score in the low 600’s, you will have more options for mortgage products with a credit score of 640, 660, or above.
We are happy to help you learn the differences between conventional and government guaranteed mortgages. These different loan products will determine the amount of your down payment, your mortgage insurance, and your interest rate. The higher your credit score, the more options you will have when determining what type of mortgage loan to choose.
Look over your credit report.
To get your credit report, go to www.annualcreditreport.com to obtain a copy from one of the three credit reporting agencies.
You are entitled to one free copy of your credit report every 12 months. This credit report will not give you your current credit score, but it will let you know the items on your credit report and who is looking at your information each month. Look for any collections, judgments, public records, and past due items. Immediately contact every creditor who has reported an adverse item, whether you are disputing it or working to have it removed from your active and open accounts. You cannot remove past due payments as they are a part of your credit history, but with each current monthly payment you make, these adverse payments will become less damaging.
Many savvy consumers are actually following a plan to become debt free. Although this is a healthy goal to have, it might be a good idea to keep a couple of items open and active on your credit report by maintaining reasonable balances and keeping your payments current. If you do not have any active items on your credit report you may actually lose your credit scores. Without a credit score you may not be able to purchase a home, auto, or even a cell phone, and you’ll have to start over like a teenager establishing credit.
Have a financial plan as the correct first step.
If you don’t follow a budget currently, start following a structured plan now with the new year.
By writing down your current monthly income and current monthly expenses, you can develop a plan to decrease your unwanted consumer debt and start planning for that new home, auto, or career. Our new online app has a terrific Money Management section to help with creating a realistic budget based on your actual spending. Be honest with yourself when tracking your monthly expenses. If you purchase a latte four days each week, write it down; If you belong to a gym, write down the cost of your membership; if you want to go on vacation this year, research the cost and start saving.
If the expenses are more than your income at the end of the month, you need to make some changes. Most of us can’t increase our income, so that means we will need to take a hard look at the monthly expenses and make the changes necessary to bring our budget into balance. And if you can’t decrease your expenses enough to match your income, then perhaps a second job is needed to make the change you need to become financially responsible.
My most important message for you this year is to BE SAFE! Please only deal with people you know and trust. Don’t give out your personal information, and watch your accounts and monthly statements closely for accurate transactions. From all of us, we wish you a happy, healthy, and prosperous 2020!