Does Selling My Home Improve Credit Rating

When you’re trying to maintain a good credit score, it isn’t easy. Making late payments and maxing out credit cards are just a couple of ways you can hurt your credit. Selling your home could potentially impact your credit. If you are making good financial decisions, you can use your home to boost your credit score. With the FICO credit scoring model, 35 percent of your credit score is based on payment history. When making on-time payments every month, over the course of your mortgage, you can expect you credit score to rise.

However, if you tend to miss your mortgage payment or make a late payment, this could prevent you from qualifying for another line of credit. Mortgage loans are installment loans. This means they are paid on a fixed schedule. Credit cards are revolving credit. Missed or late payments on credit cards affect your credit more than mortgage payments.

How does selling my home affect my credit?

sellingSelling your home will not automatically hurt or help your credit score. However, the impact is all dependent on the state of your credit history before you sell. If you have a negative credit score, selling will not help. Black marks can remain on your score for up to seven years. Past mistakes can continue to haunt you for long after you’ve sold. This can hurt you if you’ve sold with the intent of purchasing a new home.

With your FICO score, 10 percent depends on the type of credit accounts you have. If a mortgage is your only installment loan, you should expect your score to drop a bit. However, remember that if even you no longer have your mortgage it can stay on your credit history for up to 10 years after it is paid off. In conclusion, it comes down to how you handle your payments. If you have a negative payment history, you will continue to have negative marks after you’ve sold your home.

Penalty APR, What is it and Why Does it Matter?

Credit cards are useful for managing finances and accruing rewards. If you have credit card debt, you may be wondering if a balance transfer can help with interest. In addition to the interest you’re paying, if you’re behind on payments you could be paying a penalty APR.

penalty aprWhen opening a credit card, you start with a baseline APR that applies to any unpaid balance you carry from one billing cycle to the next. Credit cards have an APR range. The better your score, the lower your APR in that range. If you make the minimum payment, you will stick with the baseline APR. If you are paying your balance in full, you’re just using the credit card for its rewards. You do not have to worry about penalty APR. At any point if you are more than 60 days late on your payment, your lender will move you up to the penalty APR. Any time you are moved to the penalty APR, your lender will notify you.

Why Does Penalty APR Matter?

Most who miss making their minimum payment on their credit card do it from necessity, not choice. If you have room within your budget, it’s a good idea to keep up with the minimum payment at least. This allows you to avoid paying the penalty APR. You want to avoid paying the penalty as this can be twice as high as the normal APR. The penalty does not go away soon as you make your first minimum payment. Instead the lender can continue to impose the penalty for up to six months. Once you make six on time payments in a row, then the lender must review your rate. Until that time, the lender can continue to impose the penalty.

The penalty does not just apply to the balance you had during your delinquency. It also applies to the future balance going forward. Until you are moved to the regular APR any balance you generate will be under the penalty.

Debt Burnout, How to Beat It

Paying off debt quickly is a great way to start getting rid of it. Cutting down to a barebones budget and speeding up debt payments will make great progress. However, most people cannot use such a strict budget for long before they begin to experience debt burnout. What is debt burnout? It is feeling exhausted with your day-to-day routine and the lack of flexibility in your budget. Many get tired of not having extra money in their food budget to out or to buy more of a variety at the store. Others feel tired from not having a budget for entertainment and fun. Burnout is going to leave you feeling tired, frustrated and ready to give up.

How Do I Defeat Debt Burnout?

It’s important to take steps to correct the burnout so you don’t end up undoing what you’ve accomplished.

  • debt burnoutReassess your budget. After you’ve paid down some debt, it’s common to start feeling burnt-out. This is a good time to reassess our budget and give yourself a little more money for the things you enjoy. Increase how much you spend on entertainment, or give yourself some extra to go out to eat occasionally. This will decrease the amount of money going to debt, but will help with feeling burnt-out.
  • Find support. When feeling burnt-out and unmotivated, seek out a partner to keep you accountable. People benefit from having someone to confide in and bounce ideas off of. Having someone to speak with can help you stay accountable and focus on your financial goals.
  • Plan a fun event. When paying off debt its common to give up vacationing, trips, and events. When you start feeling burnt-out planning one of these is a good way to stay motivated. It will give you and your family something to look forward to. It does not have to be an expensive ordeal. A short day or weekend trip, it is enough to look forward to while giving you some relief and relaxation.

Credit Mistakes to Avoid When Buying a Home

So, you decided that this is the year you’re going to buy a home. The first thing you need to do is check to see if your credit is in good standing. Since mortgage rates have risen, having an excellent credit score can work in your favor. Having bad credit, can keep you from buying a home. As you go through the home buying process, there are common credit mistakes you should avoid.

Common Credit Mistakes

  • Paying your bills late. Mortgage lenders always look at your credit score. Your score is based off the information in your credit report. This provides them with a snapshot of how responsible you are financially. While different scoring models use different factors to calculate credit scores, payment history does carry a lot of weight. Making a late payment can suggest you are unable to keep up with your bills. Making automatic payments each month will help avoid negative remarks.
  • credit mistakesNot checking your credit reports. When applying or getting pre-approved for a loan a lender is going to look at your reports. It is best to know what is going on before sitting down with a loan officer or broker. The best thing to do is to pull your credit reports from each of the three major credit bureaus (Equifax, Experian, and TransUnion). You can review your report to be sure all information is accurate and up-to-date. If there is a mistake, dispute it. While disputing won’t hurt your credit score, it can raise a red flag. You want to give yourself plenty of time to get the issue resolved before applying for a mortgage.
  • Co-signing on a loan. While co-signing a loan may not seem like a big deal, it does show on your report. If you sign with someone who pays their bill late or doesn’t pay at all, your score can fall.
  • Closing old credit cards. Don’t rush to close old credit cards you don’t use. Part of your score is based off the average age of credit accounts. Closing old accounts can make your credit history shorter. Wait to close accounts until after you have secured a mortgage.

Expenses to Avoid Using a Credit Card For

Using a credit card for day to day expenses is convenient. It’s only ok if you’re smart about how you use them. If you’re able to pay off the balance each month you may be able to take advantage of the perks credit cards can provide. While it can be better to pay some expenses with credit, you must use caution before doing so. Stop and think before you use your credit card to pay for all expenses.

What expenses to avoid paying with credit.

  • Medical Bills. Not having health insurance can make paying for medical care outexpenses of pocket a challenge. More so if you’ve been treated for a serious injury or illness. When you have bills piling up it can be tempting to pay with credit. This will only ease the burden temporarily. It can lead to a bigger headache in the future. Rather than paying the interest rate to your credit card company, you should try working out a payment plan with the medical provider. You’re likely to pay less in interest and they may provide a discount if you’re trying to get rid of the debt.
  • Mortgage Payments. If you can pay the bill of each month, making your mortgage payment on a credit card is not a bad idea. However, if you can’t you’re setting yourself up for a disaster. Charging the card with your payment once can be a quick fix, but it can lead to a bigger problem in the long run. The rate you’re getting from your mortgage is more likely to be lower than what you pay for your credit card.
  • Taxes. Having a big tax bill can be stressful. Using your card to pay the bill may seem like a good idea. While, owning the IRS money may make you nervous, you’re better off paying them directly rather than a credit card. When you pay using a card you typically pay a 2-3% convenience fee. Add that to the regular interest rate of your card and you’re going to end up paying more than your tax debt. The IRS offers several different payment plans. Even though you pay interest, it’s usually a much better rate than a credit card.