What You Didn’t Know About Home Loans

If you’re in the market for a new house, learn all you can about home loans before going too far into the process.

Here are some things you may not know about home loans:

Rates fluctuate daily

If you’re looking for a new home, you may be checking mortgage rates as often as some people check their Twitter feeds, but rates fluctuate daily. Know that the rate you see today may be different than the one you actually get when you get approved for your loan.

The cheapest interest rate does not guarantee the cheapest loan

An adjustable-rate mortgages (ARM), which can be the loan boasting the lowest interest rate, may not have the lowest rate a few years down the line after it adjusts. Understanding the terms of when you are subject to an interest rate change and what the limitations to those changes is important.

A fixed-interest rate mortgage can ultimately cost you more

A fixed-rate mortgage can have a higher interest rate, however it would not be subject to a future change later in your term. If rates drop further throughout your loan’s term though, you won’t be able to take advantage of the new rates unless you refinance. In the event that you wished to refinance, you may be subject to another set of closing costs.

A lower credit score will cost the borrower

A high credit score can translate into tens of thousands of dollars in interest payments saved over the life of a home loan. A credit score difference of 100 points can increase a monthly mortgage payment by $150 or more.

The housing market impacts rates

Lenders need to turn a profit from their loans, which means the higher the volume of loans they process, the less they need to earn from each one to remain profitable. When the housing market is booming, and lenders are granting loans on a frequent basis, they will be more inclined to offer lower interest rates to borrowers.

You can have your mortgage payments automated

Missing a mortgage payment or paying it late can have serious consequences. Avoid that by signing up to have your monthly mortgage payments automatically deducted from your checking account.

If you apply for a home loan through Olean Area Federal Credit Union, and have a checking account with us, you can set up autopay for your monthly payment. Explore our mortgage loan options today!

How to Build Up Your Credit from Scratch

Q: I’ve never had a credit card and my credit history is non-existent. I’m ready to build up my credit from scratch. Where do I start?

A: Building a credit history from the bottom up can be tricky business. It may take a while until you see results. But, with time, effort and responsible financial choices, you can build an excellent credit history, which will positively impact your financial health for years to come.

Here are 5 steps you can take to get the ball rolling on your credit file.

1. Visit Olean Area Federal Credit Union

Stop by Olean Area Federal Credit Union to speak to a Lender about opening your first credit card right here. We offer most of our members secured credit cards even when they don’t have a substantial credit history.

2. Open a secured credit card

Secured credit cards are starter cards requiring you to make a deposit of several hundred dollars before you can open a credit line in that same amount. The card issuer will hold this deposit as collateral in case of a missed payment. After eight or 12 months, you will get your deposit back if there is no outstanding balance on your card. You can then close your account and open an unsecured credit card. Secured credit cards are not long-term solutions, but they are great first credit cards since almost anyone can qualify.

3. Open one or several low-balance cards

There are several credit card companies, including Capital One and Credit One, offering cards specifically geared to the new credit card owner. These cards do not require a credit history to qualify, though you may need to prove that you lead a financially responsible life.

4. Use your cards responsibly

It’s not enough to have credit cards open in your name; you need to use them, too. With a starting balance of $200 or so, you’ll have to be careful to spend just a bit each month and keep your credit utilization at less than 30%. You’ll also have to be vigilant about paying your bill in full and on time each month. You can set up an automatic payment, so you never miss a bill.

5. Become an authorized user

If you have a family member or partner who has an excellent credit score and a credit card that they’ve had for a while, ask them about making you an authorized user on their card. This will add the card’s payment history to your growing credit file and can increase your score. Keep in mind, though, that any time you use the card, the primary account holder will be responsible for paying the bill. Also, find out whether the card issuer reports authorized user activity to the credit bureaus, so this step isn’t wasted.

How to Spot A Credit Repair Scam

Credit repair scammers tell you they can make credit repair quick and easy. Unfortunately, when they’re done, your score may still be low, you’ll have lost a nice chunk of change and may even be facing criminal charges.

Here are the warning signs of a credit repair scam:

1. Upfront payment

Under the Credit Repair Organizations Act (CROA), credit repair companies are forbidden to request or receive payment until they’ve completed the services they’ve promised.

2. Big promises

Scammers may claim they can remove negative information from your credit report, even information that is accurate and current. Don’t believe them; no one can do this. They might also promise to boost your score in just a few weeks. This, too, isn’t true. It takes at least 30 days for changes to be evident on your credit report.

3. Offers a “new credit identity”

In these scams, companies promise to create a new credit identity for a fee. After you pay, the company will provide you with a nine-digit number. They may refer to this number as a CPN – a credit profile number or a credit privacy number. Alternatively, they may direct you to apply for an EIN – an Employer Identification Number.

The company instructs you to use this form of ID to apply for credit, telling you it is legal. However, it’s not — and you’ve just been scammed. These companies are selling you a stolen SSN. They walk away with your money and leave you in hot water because you’ve just committed multiple federal crimes.

Falling for a credit identity scam could mean facing fines or prison time.

4. Tells you to dispute accurate information on your credit report

Disputing accurate information on your credit report is illegal.

5. Evasive when questioned

The Credit Repair Organizations Act made it illegal for credit repair companies to lie about your rights and their services. These companies must explain:

A written contract detailing your legal rights
Your three-day right to cancel the contract without charge
The anticipated time it will take until results are evident
The total cost you will pay for their services
Their guarantee

If you’ve hired a credit repair company that hasn’t lived up to its promise, you can choose to sue the company for your losses in federal court. Along with other victims, you can file a class action lawsuit against the company.

Finally, it’s best to report the scam to your local consumer affairs office or to your state attorney general. You can also file a complaint with the Federal Trade Commission (FTC). File your complaint online at ftc.gov/complaint.

Why Does My Credit Score Matter?

Your credit score is an indicator of your financial wellness and responsibility. We have outlined how credit scores are calculated, why it matters and steps to take to improve your score.

How is my credit score calculated?

The three major credit bureaus in the U.S. collect and share information on a person’s credit usage with potential lenders and financial institutions. Most lenders use this information and the FICO scoring model to calculate credit worthiness. Some use the VantageScore model instead. Both scoring models look at the following factors when calculating credit scores:

The age of your credit. A longer history of credit usage boosts your score.
The timeliness of your bill payments. Chronic late payments can drastically reduce a score.
The ratio of outstanding debt to available credit. The VantageScore formula views having a lot of available credit as a liability, while the FICO formula considers this a favorable point.
The diversity of your credit. Lenders want to see that you have several kinds of open credit.
The trajectory of your debt. Are you constantly accumulating new debt, or working toward paying down your existing debt?
Your credit card usage. Financial experts recommend having several open and active credit cards to boost your score.

How does my credit score affect my life?

Here are some ways your credit can affect your life:

Loan eligibility. Lenders check scores to determine whether you will be eligible for a loan. A poor credit score can keep you from buying a house or car or getting other types of loans.
Interest rates on loans. A higher score can get you a lower interest rate on a loan, and a poor score can mean paying thousands of extra dollars in interest over the life of the loan.
Employment. Many employers look at the credit scores of potential employees as part of the hiring process.
Renting. Lots of landlords will run credit checks on new tenants before signing a lease agreement.
Insurance coverage. Most insurers will check your credit before agreeing to provide you with coverage.

How to improve your credit score

Pay your bills on time. If you find timeliness to be a challenge, consider automatic payments.
Pay more than the minimum payment on your credit cards. This shows you’re working on paying down your debt and can help improve your score.
Pay your credit card bills before they’re due. This way, more of your money will go toward your outstanding balance instead of toward interest.
Settle outstanding medical bills. These can significantly drag down your credit score.
Consider debt consolidation. If you’re paying interest on multiple debts each month, you may benefit from transferring your debt to a single credit card that offers an introductory interest-free period or from taking out an unsecured loan.