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What to think about before applying for a loan
(StatePoint) Whether you’re applying for a new credit card, refinancing a loan or buying a house, lenders consider many factors when making their decision. One of those many factors is your credit score, which helps paint a picture of your credit usage and behaviors over time.
Take control of your credit health to put yourself in the best position when thinking about a loan. To get started, consider the following:
What Lenders Look For
• Payment history: Lenders want to understand how reliable you are at paying your bills. Your recent payment history may have the most impact, but lenders will likely look at your entire payment history.
• Proof of income: Having a steady income is something most lending institutions look for when making a decision. Before they extend a loan, lenders want assurances that you can afford to pay back what you borrow. Your pay stubs or bank statements may be enough proof, but each lending institution maintains its own criteria regarding acceptable documentation.
• Age of open accounts: Older credit accounts show how much experience you have managing credit, so a longer history works in your favor. Some lenders look at the average age of all your credit accounts, and others look at how old your oldest open account is. It’s a good idea to avoid opening or closing any credit accounts before you apply for a loan, as new accounts can shorten the average age of your credit history, and that old account may be extending your average.
What You Can Do
• Use less available credit: Show lenders you’re responsible with the credit you’ve already been given by lowering how much of your total available credit you’re using. This is called your credit utilization rate. For example, if you have a credit limit of $5,000 and you have a balance of $2,500, your credit utilization rate is 50 percent. Try to keep a utilization rate of 30 percent or lower -- usually, the lower, the better.
• Own your path to better credit: Products are available to help you better understand the steps you need to take to achieve your credit health goals. For example, the new CreditCompass, included in a TransUnion Credit Monitoring subscription, gives you clear recommendations to achieve your target credit score. These recommendations are based on proven examples from millions of real credit experiences of people who successfully improved their credit health in similar situations over a 24-month period. For more information, visit TransUnion.com/compass. Note that the credit score you receive and the one used for CreditCompass is based on the VantageScore 3.0 model and may not be the credit score model used by your lender.
When you’re thinking about getting a loan, take control of your credit health. New products can help you get on the path to your credit goals.
Tips to get control of your spending and budget wisely
(StatePoint) Finances can be a significant source of stress in your life, especially if you do not have a clear picture of your income and expenses.
In a recent survey conducted by CFP Board, 77 percent of Americans said they find it easy to spend money, but nearly 60 percent do not track their spending. More than one-third of those surveyed acknowledge that they spend more than they save.
A well-crafted budget provides financial clarity, and is an essential tool for managing your finances. Outlining your spending for specific household needs over a period of time can give you more control over your money and better position you to meet financial goals.
In order to create an effective budget, you must first gain an accurate understanding of your cash flow, or the amount of money that flows in and out of your household. Start by determining your monthly income, then calculate the amount you spend on essential expenses every month. Any income remaining after your expenses are paid can be allocated for saving, investing or recreational spending. A Certified Financial Planner (CFP) professional can help you make these calculations and provide guidance on how to use leftover income.
Here are four recommendations for evaluating cash flow and getting started on your budget:
1. Think about your “money rules.” Do your spending and savings decisions vary based on the source of income? You might use income from a work bonus differently than your regular work pay, for example. If there is a difference, how does each decision support your monthly budget needs and long-range financial priorities?
2. Be sure to account for all payment methods: checks, cash, credit and debit cards, automatic payroll deposits and deductions, online payments and other payment accounts such as PayPal, Zelle or Venmo. Taking the time to collect all the statements necessary to create a true picture of existing money flows is imperative to taking financial control.
3. Reconsider automated purchases. Keeping credit card information on file with online retailers such as Amazon and iTunes makes shopping quick and painless, but it also makes it easier to overspend. Taking the time to enter payment information manually means more time to consider a purchase before completing your order.
4. Think of your budget as a “spending and saving” plan. Consider including a line item for regular savings as a cash expense.
Budgeting can be tricky, and it is only one piece of the financial puzzle. Consider partnering with a financial planner to create a comprehensive and personalized financial plan that includes a household budget.