9 Quick Ways to Improve Your Credit Scores

There are plenty of people out there just like you who are looking for quick and effective ways to improve their credit scores. Tens of millions of people in the United States have credit inquiries severe enough to make getting loans and credit cards with reasonable terms and interest rates incredible difficult. You may also be one of those where your credit is good, but you want to make it excellent! Why wouldn’t you after all, because the better your credit score the less you will have to pay in interest and insurance. Yes, even insurance companies may take a look at your score in determining your premium.

So if you’ve had a few problems paying your bills lately, and you’re wondering what you can do to repair the damage to your credit. Join the club!

Ready to quickly make a boost to your credit score?

To improve your credit score you must know where you are currently standing. You are entitled to a free credit report once a year, but you typically have to pay a fee to see your FICO scores. If your score is above 760, you are most likely already getting the best rates. If you are anywhere below that, you will want to look into making some improvements.

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1. Simply, Get a Credit Card If You Don’t Have One

I know a lot of people that assume they are establishing credit with their ATM debit card that has a Visa or Mastercard logo, however this is not the case. You need to apply for a real credit card With your ATM debit card you can pretty much only spend what you have in your account. So, this isn’t an accurate measure of how you’re able to manage money in the form of credit… which is what a score is representing… the ability to pay back borrowed money. However, don’t fall for the myth that you have to carry a balance to have good scores. I have personally never carried a balance on any of my cards and my score is excellent. Having a using a credit card or two can really build your credit score.

If you are a student, look into credit cards that have a low limit available to first time card holders just like you. My first card was a Visa card with a $400 limit. I still have that card today and keep it in my car as a backup for emergencies. If you can’t qualify for a regular credit card then you’ll have to get a secured credit card. There cards will give you a credit line that’s equivalent to the deposit you make. The most important part here is that the card reports to all three credit bureaus.

2. Add an Installments Loan to the Mix

There are two major types of credit to consider; revolving and installment. You’ll get the fastest improvements to your credit score by showing that you are responsible in both categories. Revolving credit you’ll be establishing though your credit cards. Installment you’ll establish through auto loans, student loans, mortgages, and personal loans. If you currently do not have an installment loan on your credit reports, consider adding a small personal loan that you can pay back over time. Again, be sure that the loan is being reported to all three credit bureaus. Check with a community bank or a credit union, as you’ll probably get the best deal from one of these places.

3. Pay Down Your Credit Cards

Lenders like to see a significant difference between the amount of credit you’re using and your available limit. It’s always best to keep your balances below 30% of the credit limit on each card. Getting balances below 10% is ideal. The only downfall to doing this in when you want to request an increase to your credit limit and they look at your account, although it’s in good standing, they say something like… “you’re not even using what you have so why do you need an increase?” This becomes a problematic situation for which the only solution is denied by a circumstance inherent in the problem itself. This gets into a more advanced topic that we’ll discuss in a later post.

Most credit improvement services will recommend paying off the highest-rate card first, which is surely the best strategy to save more money. However, in the context of this article we’ll stay true to the goal of quickly improving your score… which will be to pay down the cards that are closest to their limits.

4. Use Your Credit Cards Lightly

This gets a little tricky, especially since I use my credit cards for everything… so I get points! Let’s just say my debit card I had in my wallet expired almost two years from when I finally replaced it with the new one. Racking up big balances can hurt your scores, regardless of whether you pay your card off in full each month. This is where getting the highest credit limit possible becomes advantageous, because what’s typically reported to the credit bureaus for calculating out your scores are the balances reported on your last statements.

If you have trouble keeping track of your spending, don’t be ashamed… that’s why you’re probably here in the first place. Just setup an email or text alert with your credit card company to let you know when you’re approaching a limit that you have set (either the 10% or 30%). If you commonly use more than half of your limit on a specific card, consider using another card that has a lower balance. What I do from time to time if I’m putting large purchases on a card, is to make a payment before the statement closing date to reduce the balance that’s reported to the bureaus. It’s a simply trick that one should keep in mind when needed. Also, don’t forget to make that second payment between the closing date and due date. You surely don’t want to get reported as being late, because that’s defeating the whole purpose of all of this. What may happen if you make a payment after the closing date is that it will satisfy the minimum payment, therefore stating you don’t have a payment to be made. This is their sneaky way to get you to carry that balance over so they can charge you interest. Always pay off the statement balance, even when you are making small early payments to bring the balance down.

5. Check Your Limits

If your issuer has a policy that does not require them to report consumers’ limits, the bureaus may use your highest balance as a proxy for your credit limit. Your scores may end up being artificially depressed if your lender is showing a lower limit than you actually have. Most credit card companies will quickly update this information, but you may have to ask them to do so.

For those who you an American Express charge card, you won’t have to worry too much, because those types of cards in which you have to pay the balance in full each month are typically not included in the credit utilization portion of the FICO formula used to calculate your scores.

6. Start Using an Old Card

I’ll start off by saying, never close an old credit card. Like I mentioned before, I still have my very first credit card and use it from time to time for the strategic reasons as follows. The longer you have had a card with credit history the better. Don’t completely stop using your old credit cards, because what may happen is the company may close the account (which happened to me with my Chevron gas card) or they may just stop updating them to the credit bureaus. They accounts may still appear in your report, but they won’t be given as much weight as they should in the credit-scoring formula as your active accounts. The easiest solution is to charge recurring bills to this card and having it automatically set to pay in full each month. Ideally, you’ll want all your cards eventually to be setup this way.

7. Ask For a Goodwill Adjustment

It never hurts to ask, and you have absolutely nothing to lose. If you’ve been keeping up with your payments, a lender might agree to simply erase that one late payment from your credit history. It happens all the time, so why not let it be you. You’ll usually have to make the request in writing, and if they deny your request the first time keep asking every 6 months with your continued timely payments.

8. Dispute Old Negatives

You can get as creative as you’d like here when disputing anything that has gone to collections. Some consumers may dispute old items with a company that has merged with another company, or had been bought out after the financial crisis. These types of acquisitions leave company’s records in a disarray where they don’t have the ability to dispute it. Anytime an unfair bill has resulted in a collections account you should protest the charge, or try disputing with the credit bureaus that it wasn’t yours. You know… because it was your significant other who was living with you at the time. The smaller the collection amount the better it is for you, because it’s just not worth the time of the collection agency to verify it when the credit bureau investigates the dispute.

9. Correct Significant Errors

Your credit score is calculated based on the information in your credit reports, so certain errors there can really have an adverse effect and cost you in the long run in increased interest charges. Your report is comprised of many types of inquiries, however here are the ones you should spend your time correcting to see the best improvements with the least amount of effort.

  • Late payments, collections, charge-offs, or any negative inquiries not belonging to you
  • Accounts showing as anything but “Current” or “Paid as Agreed”.
  • Credit limits reported as lower than they actually are.
  • Negative items older than seven years that should have automatically been removed.
  • Accounts that are still listed as unpaid that were included in a bankruptcy

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10 Ways Your Home Is Appraised

Though appraisers work off of checklists that measure real values in a property, they also have experience and training in raising or lowering the home price based on what buyers want and on how sellers have cared for or neglected their properties. When it comes time to sell, it would be great to set a price based on what you think your own home is worth, but the bank will likely want something more objective before it’s ready to match that price with a mortgage for a home buyer. That’s where the appraiser comes in to play. They act as a kind of middleman who assesses homes by their condition and by how they compare to other similar homes in the area. You may want to consider making changes to your home so you can get the most out of your appraisal.

1. Curb Appeal

An abundance of lush flora and fauna can add maintenance time for busy families, and while some gardening and yard work enthusiasts are in the market for an Eden of their own, others hope for nothing more than a small plot of neat, easy-to-mow land. While the American Society of Landscape Architects (ASLA) estimates a home value may increase as much as 15 percent if the landscaping gets a professional update, many home buyers don’t want the upkeep that comes with an expensive upgrade [source: ASLA].

Appraisers consider “curb appeal”, or how a property looks overall from the street in comparison to other homes in the area, when determining the value a home. Calculations for lot size and views factor in as well, but having usable, clean and attractive land will add to the appraisal value and appeal of the house to buyers. If you aren’t looking to overhaul the entire landscape, window boxes, porch planters and even a new mailbox can add a lot of appeal without much effort or cost.

2. Your Neighborhood

You can’t move your house before putting it up for sale (well, unless you have a mobile home I guess), so where it’s located is where it will be appraised in relation to the other homes and the amenities of your neighborhood. In appraising value, they will consider nearby schools, shopping, and access or transportation to and from the home, as well as comparable prices of homes up for sale or recently sold in your neighborhood. Values in some urban areas can go down based on empty lots or condemned properties in the vicinity, and pricing in rural areas can decline depending on road access and land use nearby.

Even the amount of work your neighbors put into the upkeep of their homes can have a positive or negative effect on your property value. Although you can’t force neighbors to change the color of their exterior paint or tear down the rotting garage adjacent to your side lawn, you can ensure that any code violations, for instance the dilapidated garage next door, are taken care of before your home is appraised. Another preemptive move is to let your real estate agent and appraiser know of home improvements you’ve made. Keeping receipts will surely help with putting a dollar amount on these improvements when it comes time to sell.

3. Structural Integrity

Trained appraisers can spot poor construction and structural issues. A required house inspection should uncover necessary building and infrastructure problems needing correction before selling a house, but an appraiser may go beyond the necessary upgrades to recommend cosmetic fixes on top of these.
Appraisal checklists include materials and wear-and-tear sections, and whether your home is brick or wood-sided figures into valuation. Brick is valued highly for its insulation and long-term wear, but areas of worn inter-brick mortar and gaps between the foundation and outside walls may bring recommendations for patching to improve appearance. Replacing worn wood with siding is another area that can increase value but is certainly not required for safety reasons. Adding insulation between the outer and inner walls of an older home is another update that can add value, as is painting the exterior if siding is weather-worn.
Power-washing the outside of any home is recommended before showing, as it is a relatively low-cost project that can significantly improve the look of a home by clearing accumulated dirt from cracks and crevices. Replacing old windows is highly advisable if seals and framing are worn, but it’s one of the more expensive home improvement projects. However, potential buyers place good window condition high on their lists of wants.

4. Aging of the Home

When buying a new home, many home buyers just expect that it will last, or they know that they won’t stay in the home for more than a set number of years. Some homes that are only 10 years old start getting cracks in the ceilings where drywall was improperly joined. You may also come across sinking foundations because the land was developed too quickly, or any number of building and property issues. Older homes, even those with solid construction or craftsmanship, generally have some dated details or old features that no longer factor into being a selling point.

Whether it’s new or old, home value in comparison to other properties is higher if a property has been well cared for and maintained, and if it hasn’t, there are some fixes a general contractor can address before an appraiser visits. Simple projects like repairing damaged drywall, painting rooms to add an illusion of height or to brighten them up, and polishing or refinishing wood detailing add qualities of care to a home that may factor into valuation. Getting estimates for any areas of a home that look worn or broken down helps narrow the field of contractors and handymen, and word-of-mouth often leads to finding the right person or people for the job.

5. Timeless or Outdated Design

For an appraisal, age and design of a home are less important than how well it measures up to other homes. Appraisers attempt to compare a home to other homes that are as similar as possible in design, size and age, and then other factors come into consideration, including upkeep and upgrades.

While split-level houses have passed their peak of popularity and aren’t selling nearly as well as more modern, open-plan homes, they also won’t be priced against this more contemporary “competition” [source: Ballinger]. So if you own a home with a style that’s outdated, consider making it the cleanest and best cared for on the block. Highlighting and making the most out of quirky features works well with older homes because you can contrast furnishings and borrow ideas from design magazines to make your less popular home style stand out among comparable homes. You can’t change the layout, but you can update the outdated.

6. Beds and Bathrooms

Before adding a bathroom in the $15,000 to $20,000 or more price range, consult a professional to make sure the upgrade will pay off with the appraised value. If a home has depreciated due to location or market values, you might break even adding on a brand new bath addition, but you might not.

Something else you need to consider is your home’s bedrooms. More specifically, when is a bedroom not really a bedroom? Some homes have rooms without closets, and when it comes time to sell, owners find out that a room without a closet can’t be listed as an additional bedroom. It can only be labeled as an office or a “bonus” room. Check local zoning ordinances, and if you do want to add a closet so your home can be valued as a three-bedroom instead of a two-bedroom, for example, research low-cost options and get plenty of estimates within your budget, as well as realistic forecasts of what the addition will do to the appraisal.

7. Appliances and Temperature

Age and condition of appliances, heating ventilating and air conditioning (HVAC) units, and electrical systems, as well as plumbing, are taken into consideration in home appraisals. Replacing older units isn’t always cost effective for many looking to sell their homes, but if everything is in working order, clean, or has a record of maintenance and even warranty papers, appraisal value probably won’t suffer. However, if anything is in very bad shape, or not working properly, it could affect the home’s value negatively. Improvements such as new appliances or replaced supporting fixtures such as ductwork and piping may be recorded positively.

There is a section on home appraisal forms for energy-efficient features, so pointing out energy saving improvements you’ve made to a home is worthwhile. Controls on water heaters, low-flow showerheads and appliances with the ENERGY STAR rating may make your home a stand out in that area. It will also make it more appealing to green, or environmentally conscious, home buyers.

8. Improve or As Is?

The Uniform Residential Appraiser Report (URAR), which is published by U.S. mortgage lenders Fannie Mae and Freddie Mac, provides an overview of what home appraisers look for in preparing their reports. Going beyond or outside of this outline probably won’t impact your home’s value. Building inspection issues will have to be addressed separately, but “wish list” improvements or pet projects in addition to what is measured in inspections and appraisals likely won’t be added into the value. Sometimes leaving areas “as is” is the best value for a home seller. In other words, if they’re not broken, don’t fix them.

If, after an appraisal, you decide not to sell for the appraised price and choose instead to make improvements with the hope of getting a higher sales price in the future, then you might want to reconsider whole house or room-to-room upgrades.

9. How It Compares

All of the factors in a home appraisal come with a calculated dollar amount that will have little to do with the details of your own home and a lot to do with homes like yours. Most real estate appraisers use a Comparative Market Analysis, or CMA, to compare your home to recently sold homes in the area. Size, type of house, number of rooms, garage or no garage, and square footage are some of the elements used for comparison.
If the comparable values fall below what a seller has in mind for price, the factors mentioned previously can be considerations for increasing value. And the quality inside your home and the improvements you’ve made beyond those of comparable homes can also boost value. However, as a matter of ethics and in keeping with regulations such as those in the Interagency Appraisal and Evaluation Guidelines compiled with the Federal Reserve of the United States, it’s a very serious breach of ethics for an appraiser to artificially inflate a home’s value just so a buyer can secure the bank loan at the selling price [source: Bedard].

The Local Market

One of the top factors in your home appraisal will be the local real estate market. Comparables tell the story of how other homes are selling, and they tell the history of purchase price and appreciation or depreciation of home values. As 2010 drew to a close, 23.2 percent of homeowners had homes worth less than their original mortgages [source: Ellis]. In 2009, that percentage was 21.8 percent so it’s likely that your home could be worth less now than a year ago [source: Ellis]. Few areas of the country have seen growth in housing values, but buyers are still buying — it is their market, after all — and sellers still need to sell.

Maybe one of the biggest things to prepare when getting ready for a home appraisal is your heart. Putting both financial equity and sweat equity into your house and having to consider losing value isn’t something to get excited about, but doing all you can to ensure a fair sale in the current market provides closure and the opportunity to settle into a new home with new hopes for seeing growth in years to come.

7 Reasons Why You May Want to Refinance

1. Lower Your Mortgage Rate

The main reason to refinance your mortgage on your home is to simply get a lower mortgage rate. Despite declining rates, a lot of people haven’t refinanced. Rates are still low and it may not be too late to refinance. Many homeowners would like to refinance, but can’t because they have little or no equity due to falling home values. Check your home value here.

2. Convert an ARM

Stability-driven borrowers are leaving behind adjustable-rate mortgages and moving onto refinancing into fixed-rate loans. Since most people’s concerns are regarding inflation, if they have an adjustable loan, that’s the primary reason they’re getting out of them. This isn’t because you can get them at a better rate, but simply because you can get them at a rate that is stable.

Other borrowers may switch from one hybrid ARM to another. This is something for people who are in a five-year ARM that they originated four years ago, that was getting ready to adjust. Even though the rates are about to adjust downward, you have the chance to get a new 5/1 ARMs to extend low rates another five years.

3. Put Cash in Your Pocket

This isn’t quite a refi, per se, but we’re still going to include it. Homeowners without a mortgage sometimes get a mortgage loan to put cash back in their pockets. Believe it or not, there’s plenty of people who don’t have a mortgage. Maybe you want to go to on that dream vacation, buy a second home with cash, or pay for college tuition. You can easily cash out your first home and take the cash and go down there without a need for financing contingency, and you’ll also be in a better position to bargain. Ever consider starting your own business? Depending on the risk involved, you may also take out a mortgage on a paid-off property to start your business or for any other reason.

4. Debt Consolidation

This one is pretty common. When house prices were rising by 10 percent or more a year, millions of borrowers got cash-out refinances. They refinanced for more than they owed, got cash, and spent or invested it. The cash-out refi quickly came to an end when the housing bust began. But there are still a few cash-out refinancing options available.

5. Cash Out to Purchase Property

One thing that’s becoming more of a trend now is that homeowners are taking cash out to purchase another property. Primarily, it’s to buy investment properties. However, by refinancing to buy property you can bring up unexpected tax and mortgage underwriting issues. A lot depends upon how the refinanced house and the new property will be used. For example, which property will be the primary residence? Will the other property be rented out? These are issues for a financial advisor or tax professional to figure out.

6. Life Circumstances

Unexpected life circumstances may lead to a refinance. Unexpected medical expenses or divorces can often lead to refinancing. In the case of divorce, a refi may be used as a means of removing the your former spouse from the note. Situations like this has less to do with rates and is more about timing.

7. Consolidate Two Mortgage into One

Some homeowners may want to use the strategy of combining their first mortgage with a home equity line of credit. There are a lot of people who choose this method, even if their rates on their home equity line of credit is 3 percent, refinancing to get rid of them. You may be curious as to why you would get rid of a loan with such a low rate? Usually if you’re worried that five years from now, that rate jumps up to 12%, 11%, or even 13%?