As Summer winds down and yields to Fall, there are debates about a stock market bubble, deploying more defense assets in the Middle East, but none of it seems at all under our control. Rather, here are two matters that you have full control over that you can do right now: 1) go to annualcreditreport.com and check at least one of your three credit reports (it's free!) and make sure there aren't any unknown accounts or incorrect information being reported. 2) think about what your Christmas budget should be and divide that number by 16. Whatever you get is how much you should stash away each week until Christmas so you have it all paid for without going into debt. Those are two easy actions you can take to keep control in a world that sometimes seems out of control.
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Mortgage Market: Cost Of Borrowing Drops for Many Consumers
As mentioned in last month's newsletter, the international turmoil that we see on our nightly news is helping keep interest rates suppressed here at home. In addition, some lenders are slightly loosening their underwriting guidelines to stimulate more business. On top of that, credit score formulas have been adjusted recently to no longer include certain sent-to-collection-but-now-paid off accounts. This will boost the credit scores of many consumers and result in a lower cost of borrowing.
For example, according to HSH.com, "a borrower today with a 679 FICO and a 10 percent down payment would see a fee of 2.25 percent to get access to today's best rates (about 4.125 percent for a conforming 30-year FRM, give or take a little). Since that fee might be hard to cover out of pocket, many borrowers instead choose to incorporate those costs into the interest rate, which would then climb to perhaps 4.625% with no fee. Ratchet up this borrower's credit score through a change in the FICO model, and that same borrower with a FICO above 680 (but below 699) would see a fee of only 1.25% -- and a corresponding fee-included rate or maybe 4.375% or so."
The bottom line is that interest rates are at historical lows and have very little room to move down barring some major unforeseen trauma to the American economy.
Personal Credit: 1 Out Of 20 Consumers Are At Least 30 Days Late
If you are more than thirty days past due on a credit card, student loan or auto loan, you are not alone. Data from credit bureau TransUnion analyzed by Consumer Credit Research Institute and Urban Institute revealed that about one out of 20 consumers are at least 30 days late on some kind of non-mortgage credit account.
The research went on to show that of the people with past due debt, the average amount they need to pay to become current is almost $2,300. Another interesting factoid from this data is that almost half of the past due debtors are concentrated in only 13 states: Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, New Mexico, North Carolina, South Carolina, Texas, West Virginia and District of Columbia.
McAllen, Texas, Las Vegas, Nevada and Lakeland, Florida represent the top three cities that have at least 45 percent of people with collections debt reported in their credit files.
If you are facing collections and are past due on debt, there are solutions to define a path to resolve the situation. Reach out to me to schedule a confidential conversation if you ever need advice.
Ask Me Your Credit Score Questions
Have you been given credit score advice that you are not sure about or read an article that has conflicting credit score information from what you believe to be true? I am here to help. Submit your question and I will be happy to respond. For more free and easy to read credit score tips visit the DailyDollar and click on the Credit Score and Credit Monitoring sections. Remember, to get a truly free approximation of your credit score, read my article about Credit Sesame and try them out.
Economy & Financial Insights: Positive News Continues
The past four weeks of economic data have delivered a steady stream of positive trends on several fronts. For example, inflation remains in check which gives the Federal Reserve the cushion it needs to feel confident about keeping interest rates where they are. Also, the jobs picture continues to improve. Layoffs are down and hiring is up. Builders are constructing more homes and factories are manufacturing more goods. Consumers are keeping their debt under control, paying with cash more often and avoiding credit card debt. Borrowing is up but it's mainly for productive things like car loans and student loans. "If it ain't broke, don't fix it" will be the plan of attack for the Federal Reserve in the short term.
Question of the Month: Should I Pay A Credit Repair Company To Fix My Credit?
Always, always, always be cautious when considering a credit repair company. There have been so many horror stories about consumers paying big bucks in hopes of "fixing" their credit only to be let down. There are definitely some legitimate services that can help you but remember this - anything they do is something you can do yourself.
You can prepare your own income tax return, but you may choose to hire a professional tax preparer. You can paint your own house or hire a professional to do it for you. Similarly, you can pay your hard earned money to a credit repair company but you can do that yourself too.
And no matter what, if you have "bad stuff" on your credit report (late payments, etc) but they are accurate, you can't and should not attempt to remove those items. And by no means should you pay a company to try to do it either.
I have worked with people to help them get on the proper path to improve their credit. But they have to be willing participants in the process. If this sounds like an option you wish to explore, contact me to schedule a confidential consultation.
Giving Back: Larry Mitchelson Scholarship Foundation Names 2014 Award Winner
Fulton, New York high school graduate Abigail Shatrau has earned the 2014 Fine Arts Award from the Larry Mitchelson Scholarship Foundation. Abigail will be pursuing her dream of a career in fashion design. She will attend the State University of New York at Oneonta and then plans on completing her schooling at the Fashion Institute of Technology.
The award includes a $1,000 scholarship and is given in honor of our Dad, Larry Mitchelson, a retired teacher and artist who taught elementary art for 34 years. The foundation relies upon tax-deductible donations to make the scholarship available to an aspiring artist each year. Learn more at www.mitchelsonartscholarship.org.
Need volunteers? Do you have a fundraising event upcoming? Do you have a personal web site where you are raising donations for your cause? Submit the information to firstname.lastname@example.org by the 5th day of each month and we will do our best to include your information in the next issue.
In August, I finally had the opportunity to visit Kennedy Space Center in Cape Canaveral, Florida. Yet another special treasure we have in Florida. I fully expect that within my lifetime, ordinary people will have the opportunity to experience space travel and it's on my bucket list. Who's joining me?
Mortgage by Randy newsletter, Copyright 2008-2014 Randy Mitchelson. All Rights Reserved.
Randy Mitchelson is a licensed mortgage professional. All material presented herein is believed to be reliable but we cannot attest to its accuracy. All material represents the opinions of Randy Mitchelson. Recommendations may change and readers are urged to check with their financial advisers before making any decisions. Opinions expressed in these reports may change without prior notice. Mitchelson can be reached at 239-851-6738.
You have permission to publish this article electronically or in print as long as the following is included:
Randy Mitchelson is an entrepreneur, author and community activist with 20 years experience in financial services. Mitchelson has served in leadership roles for Fortune 500 firms Bank of America, KeyBank and CIBC.
As a licensed mortgage professional and member of National Association of Mortgage Brokers, Mitchelson educates both individuals and groups about credit scoring by conducting personalized credit report reviews, action plans and one on one consultations. He is author of the free monthly newsletter, Mortgage by Randy.
He is an online marketing expert and Vice President at iPartnerMedia.com. He founded Estero, Florida based National Web Leads, LLC, (NWL) in 2005 which helped advertisers drive new customer acquisition through email, web display, social media, keyword search strategies, mobile devices and more.
Mitchelson also writes the DailyDollar™ personal finance newsletter. U.S. News and World Report named DailyDollar to its list of 8 Savvy Personal Financial Podcasts.
Mitchelson earned his BS and MBA at Rensselaer Polytechnic Institute in Troy, NY. He is a founding member of the Southwest Florida Regional Technology Partnership Inc. and the Michelle’s Angels Foundation Inc. He is married to Susan, a Pharmacy Supervisor in the Lee Memorial Health System in Fort Myers, Florida.