What Do New FICO Changes Mean for Me?

Have you ever applied for a credit card, car loan or mortgage? If so, then one of the first things the lender looked at was your FICO score. It has a major impact not only on getting approved in the first place, but also on the interest rate you will receive after approval.

On August 7, FICO announced some pretty major changes in how they will be calculating that ever-important number. Before you can understand how the changes will or won’t impact you, you need to have a firm grasp of the basics.

What is my FICO score?

Your FICO score, or credit score, is a number ranging from 300-850 that shows lenders how reliable you will be in repaying your debts. A bad score is anything below 560, not very good is 560-659, good is 660-724, very good is 725-759, and anything above 760 is classified as great. While it is best to be in the great range, you can sometimes qualify for the best available interest rates with 720 or above.

In order to calculate your credit score, FICO pulls information from your credit reports from the three major reporting agencies: Experian, TransUnion, and Equifax. When banks and other lending institutions consider your application, they look at several factors. The first is usually your FICO score, which will either get you in the door or get it slammed in your face, but after that they consider other aspects of your finances, such as income and the detailed history on the credit report itself.

What are the changes, and how will they affect me?

There will be four notable changes to how FICO evaluates your credit score once the announced new model is released. Some of them will be very good for some people, some of them will be bad for others, and some of them may prove to show negligible changes.

The first, and biggest, is that medical debts will no longer be considered when calculating your score. This is a huge relief. Many otherwise fiscally responsible people go into massive debt when a medical emergency happens. Others don’t even know they owe money on medical bills in the first place, as they thought their insurance was going to cover their costs. When they realize they owe money, the responsible consumers pay it back, but it still leaves a scar on their credit report and, therefore, their FICO score.

With this new change, your FICO score will not be impacted. In fact, if you have no other negatives on your credit report (which would mean you most likely have a halfway decent score), you can expect to see your FICO score increase by up to 25 points.

Changes will also be made in considering debts that you have paid off. Currently, after you’ve paid off a debt, it stays on your credit report for seven years. That will continue to be the case after FICO’s updates go into effect, but FICO will no longer look at those debts, even though they show up on your credit report. If you have consumer debts that you have paid off, and they’re the only thing holding you back, you may see your score improve, as well.

There will also be an update to consider the creditworthiness of people who do not have an extensive report, taking into consideration things beyond just paying your month-to-month bills on time. (A lot of times, the people you are paying those bills to don’t even report that anyways.) Depending on how this is done, it could be a boon for those who are unable to get credit not because they are irresponsible, but simply because they have never chosen to borrow money before.

The final update is not good news for those who hold consumer debt. If you owe money and it isn’t paid in full, you can expect to see your credit score take a hit.

Hold your horses – and your enthusiasm.

While FICO has announced that it will make these changes, the new model has not gone into effect. It will not be ready to release to lenders until late 2014 or early 2015. Even then, banks have to choose to adopt it. Thismodel will be FICO 9. FICO 8 was introduced in 2009, and some lending institutions still have not updated since FICO 7. Just because they are releasing a new model doesn’t mean that your lending institution will apply it to their evaluation process.

Another thing to remember is that while your FICO score gets you in the door, banks will look at your credit report. All of those things FICO ignores will still show up. If your medical debts are deemed too oppressive for you to possibly be able to pay for a mortgage on top of them, you may still be denied. And while FICO will ignore debt that has been paid off and closed, it will still stay on that pesky credit report for seven years for all of your potential lenders to see.

While these changes could be a great way to get your foot in the door with lenders, they’re not a holy grail to your credit problems. The same tried and true wisdom will still apply: Spend responsibly, make sure the information on your credit report is accurate and pay off any debts as quickly as possible.

Femme Frugality is a personal finance blogger and freelance writer. You can find more of her writing on her blog, where she shares both factual articles and esoteric ruminations on money.

The post What Do New FICO Changes Mean for Me? appeared first on MintLife Blog.

Source: mint.intuit.com

6 Damaging Side Effects of Having a Bad Credit Score

Side effects of a bad credit score

As you make another large purchase against your credit card, inching closer towards maxing out, you might not realize the negative ramifications this activity will have on your credit score. The same goes for making the odd late payment on your hydro bill or car loan payment. Mounting debt that is not paid off in time or in full can have a major impact on your credit score.

A bad credit score can have more negative consequences than you may think

So what’s the big deal about having a low credit score? These days many institutions – from loan officers, to businesses, to insurance companies – look to your credit history before making a move. You could find your low credit score putting you in a position where you can’t get approved for a loan, get a job, or even find a place to live. Here are 6 damaging side effects of having bad credit.

1. Your Loan Applications Might Not Be Approved

Lenders and creditors see borrowers with poor credit as high risk, which means they’ll be less inclined to lend you the money you need. Whether you’re looking for a mortgage to buy a home, or a loan to finance a new car, you might find your loan applications being denied.

2. You’ll Be Subject to High Interest Rates

If you do get approved for a loan, you’ll most likely end up being stuck with a really high interest rate. Since lenders see people with a poor credit score as risky business, they’ll make you pay for it by attaching your loan with a sky-high interest rate. The higher your interest rate on your loan, the more you’ll be paying towards interest rather than the principle over the long run of your loan period.

3. You’ll Be Subject to Higher Insurance Premiums

Even insurance companies check background credit scores. Their claim is that poorer credit scores are associated with an increased number of claims filed. This theory prompts insurance providers to check a person’s credit background. If they find that you’ve got a credit score that’s less-than-par, you’ll most likely be charged a higher premium, no matter how many claims you’ve actually filed.

Do you know the ramifications of having a bad credit report?

Fixing a bad credit score

4. You Might Have a Tougher Time Landing a Job

Many jobs – especially ones in upper management or in the financial industry – have specific criteria that potential employees need to meet, including having a strong credit score. You might find it a lot more challenging to land the job you want because of your bad credit history, particularly if you’ve got exorbitant debts amounts outstanding, or even a history of bankruptcy.

5. Starting Your Own Business Might Be a Challenge

Not only will finding a job be more difficult with a low credit score, but even starting your own business might be a challenge. Many new businesses need the assistance of a bank loan to get started. With a low credit score, banks will be less likely to approve your loan application, even if your business idea is a great one.

6. You’ll Have a Harder Time Getting Approved for an Apartment

Even landlords check the credit history of potential tenants. If you’ve got bad credit, the landlord might be less inclined to approve a lease, and will sign it over to a tenant with good credit instead. Landlords, much like insurance companies and banks, make the assumption that those with poorer credit are more likely to be delinquent on monthly payments, which puts them at a greater financial risk.

The consequences of having poor credit may be a lot more extensive than you may have thought. Your best bet is to do everything you can to get your credit back into shape, which can be done a lot more easily with effective tools like those at Mint.com.

You can quickly and easily put your finances in order, with Mint doing all the organizing and categorizing of your spending on your behalf. By being able to see where all of your spending is going, you’ll be better able to make better spending decisions, which will only have a positive impact on your credit.

Click here for a free trial.

The post 6 Damaging Side Effects of Having a Bad Credit Score appeared first on MintLife Blog.

Source: mint.intuit.com

Credit Card Payoff Calculator: When Could You Reach Financial Freedom?

.calculator-wrap{margin-top:40px;margin-bottom:40px;width:100%;font-family:Avenir,sans-serif;border:2px solid #ebebeb;border-radius:8px;border-top:0;border-top-left-radius:0;border-top-right-radius:0;box-sizing:border-box}.calculator-wrap p:empty{display:none}.calculator-wrap footer,.calculator-wrap main{padding:30px}.calculator-wrap main{padding-bottom:0}.calculator-top{padding-bottom:20px}.calculator-top::after{content:”*Disclaimer: This calculator uses an amortization method to estimate your credit card payoff plan. Each credit card may vary in results and payoff dates may be longer than projected.”;position:relative;bottom:0;width:100%;margin-left:auto;margin-right:auto;font-style:italic;font-size:12px;text-align:center}.calculator-top p{font-weight:700}.calculator-top>p{text-align:center;font-weight:500;font-size:18px;margin-top:10px;margin-bottom:40px;color:#2e2f30}.calculator-top .calc-row:last-of-type{margin-top:15px;margin-bottom:20px}.calculator-wrap .calc-row>p,.calculator-wrap label{position:relative;font-weight:500;font-size:18px;margin-bottom:0;color:#75767b}.calculator-wrap input[type=date],.calculator-wrap input[type=number]{display:block;width:100%;min-height:43px;padding:8px;line-height:1.5;position:relative;margin-top:5px;font-weight:400;font-size:16px}.calculator-wrap p.invalid input[type=date],.calculator-wrap p.invalid input[type=number]{border:1.5px solid red}.calculator-wrap p.invalid-message{display:none;position:absolute;color:red;font-size:10px!important;margin-top:-7px;font-weight:500!important}.calculator-wrap p.invalid+p.invalid-message{display:block}::placeholder{font-weight:400;font-size:16px}::-webkit-datetime-edit-day-field:focus,::-webkit-datetime-edit-month-field:focus,::-webkit-datetime-edit-year-field:focus{background:#00a6a4;font-weight:400}.calculator-wrap .tooltip-icon{position:relative;right:-5px;bottom:2px;width:13px;height:13px}.calculator-wrap .tooltip-text{background-color:#75767b;color:#fff!important;font-family:Avenir,sans-serif;font-size:14px!important;padding:8px;position:absolute!important;border-radius:12px;width:150px;display:none;left:106px;top:34px;z-index:1;text-transform:none;font-weight:400;text-align:left;white-space:normal}.calculator-wrap .tooltip-icon:focus+p+.tooltip-text,.calculator-wrap .tooltip-icon:hover+p+.tooltip-text,.calculator-wrap p.tooltip-text-p:focus+p+.tooltip-text,.calculator-wrap p.tooltip-text-p:hover+p+.tooltip-text{display:block}.calculator-wrap .col-wrap{display:flex;justify-content:space-between;flex-wrap:wrap}.calculator-top .col-wrap .col{display:flex;justify-content:space-between;flex-direction:column;width:260px;max-width:100%}@media(min-width:651px) and (max-width:767px){.calculator-top .col-wrap .col+.col{margin-left:20px}}@media(min-width:768px) and (max-width:975px){.calculator-top .calc-row,.calculator-top .calc-row:last-of-type{margin-top:10px;margin-bottom:30px}}@media(max-width:650px){.calculator-top .calc-row,.calculator-top .calc-row:last-of-type{margin-top:10px;margin-bottom:30px}}.calculator-top .col-right input[type=radio]+label{margin-bottom:5px;margin-left:20px;font-size:16px;color:#393a3d}.calculator-top input[type=radio]{position:absolute;opacity:0}.calculator-top label{position:relative;width:100%}.calculator-top label>span{display:flex;width:14px;height:14px;border:1px solid #333;background-color:#fff;position:absolute;top:5px;left:-20px;border-radius:50%;justify-content:center;align-items:center}.calculator-top input:focus+label>span,.calculator-top label:focus-within>span{border:1.5px solid #333}.calculator-top label>span>span{display:block;width:10px;height:10px;background-color:transparent;border-radius:50%;transition:all .25s ease-in-out}.calculator-top input:checked+label>span>span{background-color:#00a6a4}.cc-monthly-wrap{display:none}.calculator-header h2{font-family:Avenir,sans-serif;font-size:35px;color:#fff;font-weight:700;width:100%;background-color:#00a6a4;padding:40px 0 40px 0;text-align:center;box-sizing:border-box;margin:0;border-top-left-radius:8px;border-top-right-radius:8px}.calculator-wrap .btn-wrap{margin-top:20px}.calculator-wrap button{background-color:#00a6a4;border:1.5px solid #00a6a4;border-radius:3px;color:#fff;font-size:16px;font-weight:600;padding:12px 38px;min-width:147px;min-height:49px;margin-right:20px;margin-bottom:20px;transition:all .25s ease-in-out}.calculator-wrap button#calculateBtn{border-width:1.5px}.calculator-wrap button#calculateBtn:focus,.calculator-wrap button#calculateBtn:hover{background:#fff;color:#00a6a4}.calculator-wrap button#resetBtn{background-color:#fff;color:#00a6a4}.calculator-wrap button#resetBtn:focus,.calculator-wrap button#resetBtn:hover{background-color:#00a6a4;color:#fff}.calculator-wrap a.signup-calc{font-size:16px;font-weight:700;color:#fff;border:1.5px solid #ff9331;background-color:#ff9331;text-align:center;height:48px;width:158px;border-radius:5px;cursor:pointer;display:inline-block;margin:30px auto 0;display:flex;align-items:center;justify-content:center;transition:all .25s ease-in-out}.calculator-wrap a.signup-calc:focus,.calculator-wrap a.signup-calc:hover{background-color:#fff;color:#ff9331}.calculator-wrap footer{padding-top:40px;border-top:1.5px solid #333}.calculator-wrap footer>p{font-size:16px;text-align:center;font-weight:700}.calculator-bottom,.calculator-middle{width:calc(100% + 62px);margin:0 -31px;padding:30px 0;background-color:#f8f8f8;border-bottom:1.5px solid #333;text-align:center}.calculator-bottom{border-bottom:0}.calculator-middle{position:relative;border-top:1.5px solid #333}.calculator-middle:after{content:”;width:1.5px;height:100%;background-color:#333;display:block;position:absolute;top:0;left:50%}.calculator-middle .col-wrap .col{width:50%}.calculator-bottom>p:first-of-type,.calculator-middle .col>p:first-of-type{text-transform:uppercase;font-weight:800;color:#77777c}.calculator-bottom>p:last-of-type,.calculator-middle .col>p:last-of-type{color:#333;font-weight:800;font-size:34px}@media(max-width:440px){.calculator-bottom>p:first-of-type,.calculator-middle .col>p:first-of-type{font-size:14px}.calculator-bottom>p:last-of-type,.calculator-middle .col>p:last-of-type{font-size:20px}}.calculator-bottom>p:last-of-type{font-size:24px}.calculator-bottom .chart{display:flex}@media(max-width:530px){.calculator-bottom .chart{flex-wrap:wrap}}.calculator-bottom .chart>div{position:relative}.calculator-bottom .chart>div:first-of-type{width:62%}.calculator-bottom .chart>div:last-of-type{width:38%;margin-left:70px}.calculator-bottom .chart div:last-of-type{text-align:left}.calculator-bottom .chart>div:last-of-type{padding-top:70px}.calculator-bottom .chart div p:first-of-type{font-size:18px;font-weight:500;line-height:.87;color:#75767b;position:relative}.calculator-bottom .chart div p:last-of-type{font-size:28px;font-weight:800;line-height:1.43;letter-spacing:normal;text-align:left;color:#2e2f30}.chart .total-principal{margin-bottom:30px}.chart .total-interest p.main-p:before,.chart .total-principal p.main-p:before{content:”;display:block;width:20px;height:20px;border-radius:2px;background-color:#00a6a4;position:absolute;left:-32px;top:-2px}.chart .total-interest p.main-p:before{background-color:#ff9331}.chart-left{margin-top:-60px}@media(max-width:530px){.calculator-bottom .chart>div{width:100%!important}.calculator-bottom .chart>div:last-of-type{margin-left:0!important}.calculator-bottom .chart div p{text-align:center!important}.chart .total-principal{text-align:center}.calculator-bottom .chart div:last-of-type{text-align:center}.calculator-bottom .chart div p:first-of-type{display:inline-block;min-width:120px;text-align:left!important;margin-left:30px!important}.chart .total-interest p.main-p:before,.chart .total-principal p.main-p:before{position:relative;left:-30px;top:16px}.calculator-bottom .chart div p:last-of-type{margin-left:-6px}}.svg-wrap{width:100%;font-size:16px;margin:0 auto}.svg-wrap svg{width:250px;margin:80px auto 0;display:block}@keyframes donutfade{0%{opacity:.2}100%{opacity:1}}.donut-ring{stroke:#ff9331}.donut-segment{transform-origin:center;stroke:#ff6200}.donut-segment-2{stroke:#00a6a4;stroke-dasharray:50px,50px;transition:all 1s ease-in-out}.donut-segment-3{stroke:#d9e021;animation:donut2 3s}.donut-segment-4{stroke:#ed1e79;animation:donut3 3s}.segment-1{fill:#ccc}.segment-2{fill:#00a6a4}.segment-3{fill:#d9e021}.segment-4{fill:#ed1e79}.donut-label{font-size:.28em;font-weight:700;line-height:1;fill:#000;transform:translateY(.25em)}.donut-percent{font-size:.5em;line-height:1;transform:translateY(.5em);font-weight:700}.donut-data{font-size:.12em;line-height:1;transform:translateY(.5em);text-align:center;text-anchor:middle;color:#666;fill:#666;animation:donutfadelong 1s}svg .heavy{font:bold 2.5px Avenir,sans-serif;text-transform:uppercase;fill:#75767b}svg .total-paid{font:bold 4.5px Avenir,sans-serif;fill:#2e2f30}

Have credit card debt? You’re not the only one. It’s reported that 43 percent of households carry credit card debt month after month. While credit cards can be a great tool to build your credit score, they can easily impact your budget. If you’ve detoured from your financial goals and racked up a hefty bill, now is the perfect time to create a payoff plan. Use our credit card payoff calculator to see when you could be financially free.

Credit Card Payoff Calculator

Enter your card details to calculate your payoff timeline.

Choose One

Please enter your desired payoff date.

Please enter your monthly payment.

Time to Payoff

30 Months

Debt-Free Date

Apr 2023

Monthly Payment

$250.00

Total Paid$7,493.77

Total Principal

$5,000.00

Total Interest

$0.00

See where the rest of your budget is going

to pay off debts that have the highest interest rates to save on added expenses. Use our credit card payoff calculator to see which accounts would cost you more in the long-term.

2. See What Payments Work for Your Budget

Once you have an idea of which accounts you’d like to focus on, figure out the right payments for your budget. Keep in mind, you should still make the minimum payments on debts to keep your credit score in good shape. To calculate how comfortable you are with these payments, download our app and evaluate your budget.

3. Negotiate Your Credit Card Terms

If you have a strong credit score and loyalty to your credit card company, you may be able to negotiate your terms. For example, if you’d like your payment to be due on the 25th instead of the 10th of every month, call a representative and see what they can do. You may not always get what you ask for, but you won’t get what you don’t ask for!

4. Reprioritize Your Budget

After you get a better idea of what your budget looks like, prioritize your expenses. As your wants and needs change, adjust your budget accordingly.

Paying off credit card debt may not be as appealing as buying a new car, but it can be a more responsible financial choice depending on your situation. To ensure you’re staying on track with your biggest financial goals, always keep track of your budget using our app.

The post Credit Card Payoff Calculator: When Could You Reach Financial Freedom? appeared first on MintLife Blog.

Source: mint.intuit.com

National Get Smart About Credit Day

Depending on the time period in which you were raised, many young children and adolescents had differing opinions (and ideals) about what credit was and how it should or shouldn’t be utilized. While some were privileged enough to understand the complexities and importance of credit, others had to learn at the expense of their own mistakes along the way. No matter where you were or where you are currently, luckily there are always actionable steps that can be taken to clean up, improve, and get smart about your credit – let’s explore. 

Become familiar with what can impact your credit 

There are five key components that are factored into your credit score. 

Payment history 

Your ability to make timely payments plays a huge role in your credit score. Lenders want to have the confidence that you as the borrower are capable of paying back any debts on time. If there is ever a situation that can impact your payment history, it’s best to notify your lender as soon as possible to avoid any negative remarks on your credit report.  

Credit utilization 

In order to determine your credit utilization rate, divide the amount of credit currently in use by the amount of credit you have available. For the best possible scores, keep this percentage under 30%. This shows creditors you have the ability to manage debt wisely. To optimize and improve your score, make it a goal to utilize less than 10% if possible.   

Length of credit history  

Lenders will take an account of all creditors and the length of time each account has been open. In order to improve this average, try your best not to close any accounts as this can have the potential to decrease your overall credit score.  

Credit mix  

Car, student loan debt, mortgage, and credit cards are all varying types of revolving and installment loans. Lenders view this as favorable when you’re able to manage different types of credit. A good rule of thumb for using a credit card is charging a small amount each month and paying it off in full to avoid any interest payments. Not only does this impact your score positively, but it also creates good habits that don’t require you to solely rely on credit cards for purchases.  

New credit 

Any time you apply for credit, you’re giving lenders the right to obtain copies of your credit report from a credit bureau. Soft inquiries do not have an impact on your score, such as pulling your own credit report or a potential employer pulling your report as a part of the screening process. Applying for a new credit card, requesting a credit limit increase, financing a car, or purchasing a home are all examples of hard inquiries. For processes such as auto purchases, student loans, or mortgages these are typically treated as a single inquiry if done within a short scope of time such as thirty days. Be mindful of the number of inquiries outside of these scenarios – this mainly relates to retail store credit cards. Inquiries have a greater impact if you have a short credit history or a limited amount of active credit accounts.   

Review your credit reports and dispute errors if necessary 

Carve out some time to obtain a free credit report from one of the three credit bureaus (Experian, TransUnion or Equifax) to review. Familiarize yourself with everything that is listed. In the instance something doesn’t appear correct, follow the proper protocols to dispute errors. Completing this exercise at least once a year after initially cleaning up any errors can help correct any mistakes, but also ensures accuracy. The credit reporting agency and the lender must be contacted in order to jumpstart the process of resolution. Even in the instance, there are no issues found, you’ll have peace of mind knowing the due diligence has been done.  

Communicate and be honest with all creditors 

If you are experiencing any type of financial hardships due to unforeseen circumstances, make it a priority to communicate upfront with all creditors. Explaining your personal situation while proposing reasonable solutions may work in your favor. Refrain from avoiding creditors due to emotional reasons or negative thoughts; your pride cannot overshadow your personal needs. When discussing finances, most of us don’t want to disclose any personal information – however, if this can result in bettering your personal finance journey and credit score simultaneously; there’s no way to lose. Make your requests known and be proactive so the best solutions can be provided.  

Create a plan and remain completely committed 

Commit to at least three goals that relate to improving your credit. This could simply start with paying all of your bills on time and regularly checking in with creditors to ensure good standing. If credit card spending is a challenge for you, commit to limiting your credit card usage while paying more than the minimum balance. Rally the assistance of your family and friends to serve as your accountability partners to make sure you achieve your goals. No matter the personal goals you decide to set, commit to staying the course. Often times our personal lack of patience leads us to believe that the hard work that’s being put forth is in vain. If nothing else, commit to improving your credit for you and your families’ wellbeing.  

Protect your hard work (and your credit) 

Once your new credit score emerges and is here to stay, the first order of business is to celebrate – congratulations! Your hard work and dedication have indeed paid off. In order to make sure your credit score stays in tip-top shape, don’t be too quick to take your foot off of the gas just yet! Be sure to stay informed about any tactics or strategies to keep your credit score in the best shape possible. We’re all on our phones throughout the day, so make it a regular occurrence to do a quick internet search on ways to improve your credit score. Continually staying educated about various credit improvement opportunities  

The post National Get Smart About Credit Day appeared first on MintLife Blog.

Source: mint.intuit.com