Author Archives: Courtney

Five Steps to Check Your Credit Situation Mid-Year

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Three generations of a family on holiday walking along the dock of a luxury marina.It can be easy to lose sight of your New Years financial resolutions by mid–year. When summer comes and all you want to do is relax, many people relax with their finances as well. If you’ve gotten off track or are not even sure where you stand, the finance experts at Equifax recommend that you do a mid-year evaluation of your credit situation.

To get back on track with your financial goals and eliminate wasteful spending, consider taking the following steps recommended in the recent Equifax blog, “Five Mid-year Credit Moves to Make Right Now.”

  • Step One: Check your credit report.

o   When you evaluate your credit report, check how much debt you have outstanding on your credit cards versus the total of your credit limits. This is what finance experts refer to as the credit utilization rate, or credit utilization ratio. It’s ideal that your credit utilization rate be between 30 and 35 percent or less, as this indicates you have not over-borrowed on your credit cards.

  • Step Two: Look for errors and address any issues with your report.

o   Once you get your credit reports, look over them carefully to make sure there is no inaccurate information or that you are not the victim of identity fraud. If you discover any errors, you can dispute them for free. If you need assistance to discover any errors, a credit monitoring service can help.

  • Step Three: Set up reminders to pay bills on time.

o   Once you evaluate your credit report, you can now focus on your credit score. Your payment history is the most heavily weighted factor in determining your credit score (typically about 35 percent), so paying all of your bills on time is crucial.  For some bills, you may be able to set up automatic payments. If you don’t like the idea of that, you can set up a reminder on your phone or computer calendar to remind you to pay your bills.

  • Step Four: Pay down debt.

o   Most debt can impact your credit score, both from a credit utilization and a credit utilization ratio perspective. And of course, debt typically costs money—you pay interest as long as the debt isn’t paid off at the end of the billing cycle. Many experts advise paying down debt with the highest interest rate first, as this typically saves the most money in the long run.

  • Step Five: Assess your accounts.

o   Lenders can positively impact your credit score, and having several active and current credit accounts shows them that you’re a responsible borrower. And if you’ve had a long-standing account, it can help demonstrate a longer credit history, which is why it is not a good idea to close every account once you have paid off your credit card balance.

Taking a break from the financial stress of everyday life can help you unwind, but don’t relax your vigilance regarding your credit. Making these five moves will help you stay on top of your credit situation.

Loans for Home Renovation: Do or Don’t?

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Hammer on Stack of MoneyMany homeowners that need to complete a home renovation debate taking out a loan or using their savings to cover renovation expenses. Two popular options for those not wanting to tap into their savings are a home equity loan or a home equity line of credit (HELOC).

What’s the difference? A home equity loan is similar to a mortgage in that you are given a specific amount that you must repay over time in fixed monthly payments. A HELOC is a line of credit that you can use when needed as long as you don’t exceed the credit limit. There are monthly payments with a HELOC, but you may be able to make interest-only payments for a period of time.

A home equity loan or HELOC can be a good route for some people, but first you should ask yourself the following five questions that the finance experts at Equifax discuss in the recent article, “Paying for Home Renovations: Tapping Home Equity vs. Using Savings,” to find out if you are in a situation where taking out a home equity loan or a HELOC would be a smart financial move for you.

  1. How much debt do you already have?

If you already have a great deal of debt, especially debt that has a high interest rate, you should evaluate whether you can take on any additional debt at this time.

  1. How much equity do you have in your home?

If you have less than 20 percent equity in your home, it might not be a great idea to borrow against it for three reasons. First, if you are paying private mortgage insurance, it is good to eliminate that payment first. Second, many lenders want you to have some stake in your home and will not let you borrow if you have less than 20 percent equity in your home. Third, you could potentially lose a significant amount of money if you put yourself in a financially unstable situation and your home value drops.

  1. How much are you thinking about borrowing?

Getting a home equity loan is similar to getting a mortgage and involves similar start-up costs such as an appraisal, an application fee and closing costs. Be prepared to pay these costs and also be aware that home equity loans can carry adjustable rates and your monthly payments could go up over time.

  1. How much cash do you have?

If you don’t have enough in savings and do have a significant amount of equity in your home, a loan or HELOC would be a good option for you, especially since interest rates are so low right now. If you have a lot of cash in savings, it is probably not worth borrowing money that you will have to pay back with interest, unless the home renovation would eat up all of your savings and leave you with no emergency funds.

  1. How long do you plan to stay in the house?

Keep in mind, if you are doing a home renovation with the intent of selling before you have a chance to pay off the loan, you should consider having another means of paying off the loan. This is because when you choose to tap into your home equity, you are using your home as collateral, and if you sell your home, that collateral disappears.

In the end, whether you decide to use savings or borrow money with an equity loan or HELOC for your home renovation, keep your return on investment in mind and make sure the investment is worthwhile.

For more tips, visit the Equifax Personal Finance blog.

 

 

What is a Home Warranty and What Does it Cover?

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warranty for a new home in the CarolinasIf you’re in the market for a new home or just purchased one, chances are you’ve heard your real estate agent mention the words “home warranty” a time or two. Though the name may suggest that every inch of your home will be covered by the warranty, that’s not exactly true. If this sounds confusing, you’re not alone. Many homeowners feel lost when it comes to understanding home warranties. However, a recent Equifax Finance Blog article, What Does a Home Warranty Cover?, provides all the answers by explaining what a home warrant is, what it covers and if you should purchase one.

When you think of a home warranty, you may think it is synonymous with home insurance. However, there are some major differences between the two. Home insurance covers the house itself, as well as personal possessions, in the event of a catastrophic event such as a fire, theft or damage from another major event.

A home warranty, on the other hand, acts as a contract between homeowners and their warranty companies. It does not protect homeowners if there is something wrong with the actual structure of a home. It will, however, help cover the costs if something major in a home fails by offering discounts on repairs to or the replacement of a home’s major appliances including the furnace, electrical systems and air conditioning units. A warranty may even cover smaller items such as washers and dryers, garbage disposals or refrigerators, depending on the plan.

The cost of a home warranty can range from $400 to $600 each year and will cover a home for as little as three months or as long as a year. In addition, homeowners are responsible for paying the deductible on repairs.

So, should you buy a home warranty? Many times, when you purchase a new home the builder will offer a one-year home warranty. However, when you buy an older home the seller may not offer a warranty.  So, buying one may give you some peace of mind. Just remember, you don’t get to pick the brand if you need a replacement appliance.

These are just some of the things to keep in mind when determining if you should purchase a warranty. To learn more about home warranties, visit the Equifax Finance Blog.