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The Reinhart Blog

How the Equifax Security Breach Affects You

Close up of a credit or debit card with padlock. Card security concept. Card account number changed for security purposes.

You have probably heard about the Equifax security breach potentially affecting 143 million consumers. The cyber breach is potentially affecting nearly half of the nation’s population and is of the largest electronic data compromises in U.S. history. For further information about the security breach, please refer to reporting from the New York Times and Market Watch.

What Should I Do?
Equifax has created a website to help consumers determine whether their data was at risk. If you haven’t already done so, you can click here to see if your information was compromised and enroll in the free (1 year) credit monitoring. If you check Equifax’s site to see if your data was stolen, you waive your rights to sue Equifax or be part of a class action suit.

If you enroll in the free credit monitoring, you will receive a date on the web page. Put this date on your calendar. On or after that date, you will have to click here to continue the enrollment process. Your monitoring will cease unless you return to the site and renew the enrollment.

Additional Protection
The credit monitoring is just the one step in protecting yourself, only notifying you of suspicious activity. It does not protect you in any other way.

Because credit card information and bank account information were part of the breach, you should monitor your accounts for any suspect transactions. If you see anything questionable, you should immediately contact your bank or credit card company.

Make a habit of checking your bank and credit card information routinely.  Even if things looks good now, hackers are patient and bide their time before exploiting stolen information.

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You Can Buy a Home With Less Than 20% Down Payment

A survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.

1.Down Payment

The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less.  Call us to discuss loan options with no down payment.

2.FICO Scores

FICO Score

The survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower. The average conventional loan closed in March had a credit score of 753, while FHA mortgages closed with a 685 score. The averageacross all loans closed in March was 722. The chart below shows the distribution of FICO Scores for loans approved in March.

Source: EllieMae

 

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Maintaining Good Credit Throughout the Holidays

The holidays can be a hectic time.  In store sales, coupons, and credit card offers make it is easy to spend extra on family, friends, or loved ones. But, the more you charge of your available credit, the more you could be diminishing an otherwise healthy credit score.  The following guidelines will assist you in beginning the New Year with a strong credit score.

GiftDON’T

Be tempted to open new credit cards (no matter how good the deal is)
In the spirit of Black Friday and the holiday shopping season, credit card companies and merchants alike will be offering “special deals,” such as cash-back bonuses, reward points and exclusive discounts for opening new credit cards. Don’t let these offers tempt you to open new lines of credit, especially if you plan on purchasing a home in the near future.
Credit CardsOpen a new credit card and close it right away
Even if you open a new account and close it immediately, the original credit inquiry will remain on your report for at least six months. Because the length of your credit history also has an impact on your credit score, you want to avoid closing credit cards–even ones you don’t plan on using.

Charge too much on your credit card
Be aware of how much you’re charging to your credit card and keep the balance low. During the holiday season, you want to keep the balance on your credit card below 50% of the total available credit limit. In other words, don’t max out your credit card. After the holidays, try to get your balance back down to 5-9% of your limit to get the best credit score possible.

 

DO

Budget

Budget for your holiday spending ahead of time
By budgeting for holiday expenses ahead of time, you’ll be able to keep your holiday spending on track and keep your credit card balances well below the allotted credit amount.
Use cash whenever possible
Set aside a “holiday” fund and use cash from that account to pay for gifts. By using cash instead of credit, you’ll be more likely to stay within budget and avoid falling into the habit of swiping your credit card at the checkout line.

Money

Spread your credit card debt over multiple credit cards
Spread your purchases across three to five credit cards, as opposed to putting every purchase on one card. This will help keep your balance for each card below 50% and minimize the impact on your credit score.

Follow these tips to maintain healthy credit over the holiday season and into the New Year.

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Five Components of Your Credit Score – New Credit

We continue to discuss the five factors that impact your credit score. This week, the discussion is about new credit.

New credit determines 10% of your credit score
Research shows that opening several new credit accounts in a short period of time represents greater risk – especially for people who don’t have a long credit history.

unsplash - man writing 2It’s okay to request and check your own credit report
Your credit scores will not be affected as long as you order your report directly from the credit reporting agency or through an organization authorized to provide credit reports to consumers, such as myFICO.

stop watch

Don’t open new accounts too rapidly
If you have been managing credit for a short time, don’t open a lot of new accounts too rapidly. New accounts will lower your average account age, which will have a larger effect on your credit scores if you don’t have a lot of other credit information. Even if you have used credit for a longtime, opening a new account can still lower your scores.

Source: myfico.com

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Five Components of Your Credit Score – Payment History

Your credit score is composed of five factors: types of credit, payment history, amounts owed, length of credit history, and new credit. To help you better understand the components we will cover one each week. To start we will be covering payment history.
Piggy Bank
Payment history is the most important component as 35% of your credit score is made up of your payment history. It is rather encompassing as it includes all of your current on-time payments as well as Late Pays, Collections, Charge-Offs, Repossessions, Foreclosures, Tax Liens, Bankruptcies and Judgments.

Two examples; a recent 30-day late can cost 50+ points and paying a collection that is more than 2 years old can hurt a score.

Next week we’ll cover Amounts Owed and how they can affect your credit score.

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Your Top 3 Burning Credit Questions Answered

Working in the mortgage and real estate industry for thirty years, I have been asked about every kind of credit problem you can imagine.  Today I will answer three of the more common questions I get asked.

 credit question 2b

Will my credit score drop if I apply for new credit?
If it does, it probably won’t drop much. If you apply for several credit cards within a short period of time, multiple inquiries will appear on your report. Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto, mortgage or student loan lenders within a short period of time. Typically, these are treated as a single inquiry and will have little impact on the credit score.

 

How long will a foreclosure affect my credit score?

A foreclosure remains on your credit report for seven years, but its impact to your credit score will lessen over time. While a foreclosure is considered a very negative event on your credit score, it’s a common misconception that it will ruin your score for a very long time. In fact, if you keep all of your other credit obligations in good standing, your credit score can begin to rebound in as little as two years.

The important thing to keep in mind is that a foreclosure is a single negative item, and if you keep this item isolated, it will be much less damaging to your credit score than if you had a foreclosure in addition to defaulting on other credit obligations.

 

How many points will I lose from a credit inquiry?

Recently, data was released stating the true impact an inquiry has on your score and it showed that 57% of people’s scores are not affected at all. In fact, only 4% of consumers lose more than 20 points in their FICO scores because of a creditor pulling their reports, according to Frederic Huynh, one the scientists at FICO.

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