The Long-term Effects of Your Short-term Loan

When the financial status in the United States started to turn for the worse, three million sensible Americans went out to get a payday loan, and now because of that they cannot avail mortgage loans.

The status of the economy has gotten harder for the citizens that they would look for any way to get their hands on a loan when they need it. Mortgage loans are the most sought for by the masses, however the lenders are starting to become tight fisted when it comes to loaning to people who had availed payday loans, even if they had settled the accounts.

If you are planning to buy land or own any establishment, it just means you have to think it through before you get a loan. Though short-term loans or payday loans as many would call them are commonly availed by many, banks still refuse to approve loans from those who engage in the business.

Payday loan stores have been supplying their data to banks since the start of the year. The financial institutions will then refuse to give mortgages to the people whose names appear in the list. Employees are just expected to reject a customer even if he or she has good credentials.

According to Marc Gander, the founder of the Consumer Action Group; consumers are being kept in the dark by the institutions because they are not informed that getting a payday loan would ruin their hopes in purchasing a house.

Meanwhile, according to Keith Osborne, it is important to think really well if you need a mortgage loan in the future before you decide on taking on a payday loan for this will make you most unlikely to get one.

The spokesman of Consumer Finance Association, Mr. Richard Griffiths says that it is a unwise decision to base a costumer’s ability to handle a mortgage loan through his decision to apply for a payday loan.

Subprime Auto Lending Growing Once Again

Subprime lending is becoming popular once again, even though lenders are still staying away from subprime mortgages, which is the one of the triggers of the nation’s housing breakdown.

There has been an increase in subprime credit cards and auto loans and a few bank risk managers expect increases in the existing $600 billion US auto loan market.

Based on a recent survey of risk managers at banks and other financial institutions published in the previous week, although only 25 percent of risk managers expect a 25 percent increase in the subprime lending during the next six months, one half of those who expect an increase believe that it would fall on auto loans.

FICO, the credit analytics firm, together with Professional Risk Managers’ International Association, conducts a survey of risk managers every three months regarding their prospects for the coming six months. However, this was the first time the subprime lending was included in the questions.

In general, subprime loans are intended for borrowers with credit scores less than 680. Based on the data of Experian, 44 percent of all US auto loans in quarter one were given to borrowers with scores less than 680, which is an increase from 42 percent in the previous year.

Subprime auto loans that were packaged and sold to investors in the secondary market did favorably. Even though subprime loans are smaller than mortgages, cars are frequently considered as important to households. In fact, Andrew Jennings, chief analytics officer at Fair Isaac Corp., said that the public is struggling to pay back their auto loans more than they do in paying back their mortgages.

The increase in the subprime auto lending has been a surprise to Guy Cecala, publisher of Inside Mortgage Finance. Cecala believes that it was brought about by securitization. People have higher security about subprime auto loans compared to subprime mortgages.

Five Steps on How to Keep a Good Credit Score

One of the advantages of having a good credit score is that you can get good rate on a mortgage or any other type of loan. However, lending firms are not the only ones who uses your credit score but also some insurers, cell phone providers, landlords, and employers. Here are five tips on how you can build and keep a good credit score.

First, make timely payments because 35 percent of your credit score is derived from your history of paying your debts on time. Sign up for free email alerts that the majority of credit card companies send to the consumers. These will remind you more or less a week before so that you won’t forget paying.

Second, be cautious about how much of your available credit you are going to use because 30 percent of your credit score is affected by the amount you owe. It is good if you use 30 percent of it but it would be best if you use only 10 percent or less.

Third, do not close your old accounts because it will decrease your overall available credit. As a result, it might increase your utilization as well which, in turn, could more likely have a negative effect on your credit score.

Fourth, consider applying for different kinds of credit such as installment loans, those with a fixed payoff period, and revolving loans, those loans that are open-ended. Some examples of installment loans are auto and student loans, and an example of revolving loan is credit card. According to the credit agencies, it is best to have a few of each kind of credit.

Fifth, check for errors in your credit report. You can get a free copy of your credit report once every year from the big three credit reporting agencies – Equifax, Experian and TransUnion. If there are errors on your credit summary, account information or personal information, contact the creditor immediately.

Six Tips in Repairing Poor Credit

Having a good credit score is important because it is something that landlords, employers and lenders check to know whether or not you are trustworthy. Moreover, your credit score reflects your financial status so if you have a poor credit score, creditors will consider you a high risk and have small chances of getting a loan or opening new accounts. If you have a bad credit, the following are some tips on how you can fix your credit score.

First, pay your bills on time because this will be the biggest factor that has an effect on your credit score. Make sure that you have a budget or enough money to pay your loans or credit cards on time.

Second, consider taking on an installment loan. This will show creditors that you can manage having the two major kinds of credit, which are revolving and installment. If handled responsibly, this can help increase your credit score.

Third, consider getting a secured credit card, which limits your credit to the amount equivalent to your down payments. Use it responsibly and it will certainly improve your bad credit score.

Fourth, don’t throw away your old credit cards. If you already paid off the account, just leave it open because closed accounts usually have a negative impact on your credit score.

Fifth, check for errors in your credit report. You can get a free copy of your credit report once every year from the three credit reporting bureaus, which are Equifax, Experian, and TransUnion. Check for erroneous information that could potentially lower your credit score and if there are errors, take corrective actions.

Sixth, ask for help from a professional. Debt problems can be a little overwhelming so if you feel that you cannot manage it on your own, ask help from a credit counseling agency. They will assist in you in looking at options and also on how you can fix your credit.

CFPB Will Manage Credit Bureaus Starting September 30

On Monday, the Consumer Financial Protection Bureau will declare that it will start managing the top credit agencies, which are companies that gather financial information of every person.

Besides banks, credit agencies, together with mortgage brokers, payday lenders and credit card companies, will be one of the financial institutions that the CFPB supervises. The bureau was brought about by the Dodd-Frank financial reform law in the year 2010.

CFPB will manage and make regulations encompassing more or less 30 credit reporting firms, which is 94 percent of the $4 billion credit reporting market. Some institutions included are Equifax, Experian and TransUnion, and others with over $7 million worth of revenue every year.

According to Richard Cordray, director of CFPB, handling the credit reporting market will guarantee that it will operates appropriately for the consumers, lenders and economy.

Since the past, credit reporting firms are already under the Fair Credit Reporting Act and have been managed by the Congress. Now, they also have a federal supervisor.

On Monday, a field hearing will be held in Detroit to gather information from experts, industry groups and community groups concerning credit reports. CFPB will publish in its website, consumerfinance.gov, the regulation stating its administration over credit bureaus.

Credit reports are significant to the life of every consumer. For instance, it is used as basis in approving loans and it can help companies evaluate a potential employee.

However, there some reports that discovered between 1 percent and 25 percent of credit reports have erroneous information that could have a negative impact on the ability of the consumer to apply for loans. A few of the most common errors in credit reports include inaccurate credit limits on accounts, loan and credit cards that a person never opened, overdue dates, and Social Security numbers.

On September 30, the administration of the CFPB over credit reporting bureaus will begin. After that date, on-site assessments will be conducted by the bureau immediately. As present, CFPB is managing loan originators, mortgage servicing companies and payday lenders.