November 2010 NO MORE Mortgage Newsletter
Welcome to the NO MORE Mortgage Newsletter
Your credit score is an important number…
1. Paying late: Thirty-five percent of your credit score is your payment history. Consistently being late on your credit card payments will hurt your credit score. Pay your credit card bills on time to preserve your credit score.
2. Having a balance charged off: When creditors think you’re not going to pay your credit card bills at all, they charge off your account. This account status is one of the worst things for your credit score.
3. Having an account sent to collections: Creditors often use third-party debt collectors to try to collect payment from you. Creditors might send your account to collections before or after charging it off. A collection status shows that the creditor gave up trying to get payment from you and hired someone else to do it.
4. Defaulting on a loan: Loan defaults are similar to credit card charge-offs. Defaults show you have not fulfilled your end of the contract.
5. Having your home foreclosed: Getting behind on your mortgage payments will lead your lender to foreclose on your home. In turn, the late payments will hurt your credit score and make it harder to get approved for future mortgage loans. Late mortgage payments are worse than late credit card payments.
6. Getting a judgment: A judgment shows you not only avoided your bills, the court had to get involved to make you pay the debt. While they both hurt your credit score, a paid judgment is better than an unpaid one.
7. High credit card balances: The second most important part of your credit score is level of debt, measured by credit utilization. Having high credit card balances (relative to your credit limit) increases credit utilization and decreases credit score. A maxed out card is the worst.
8. Closing credit cards that still have balances: When you close a credit card that still has a balance, your available credit drops to $0 but your balance remains. This makes it look like you’ve maxed out your credit card, causing your score to drop.
9. Closing old credit cards, especially those with available credit: Another component of your credit score, 15%, is length of credit history – longer credit histories are better. Closing old credit cards, especially old cards, makes your credit history seem shorter. Also if you have several credit cards some with balances and some without, closing those credit cards without balances increases credit utilization.
10. Applying for several credit cards or loans: Credit inquiries account for 10% of your credit score. Making several credit or loan applications within a short period of time will cause your credit score to drop. Keep applications to a minimum.
11. Having only credit cards or only loans: Mix of credit is 10% of your score. When you have only one type of credit account, either loans or credit cards, your credit score could be affected. This factor mostly comes into play when you don’t have much other credit information in your credit history.
NO MORE Mortgage Tax Update
IRS STOPS MAILING OUT FORMS…
The Internal Revenue Service says it will no longer mail out tax packages with forms and instructions for filing a paper return. The change comes as an increasing number of taxpayers are filing their returns electronically. In early October, taxpayers who filed paper returns last year should have gotten a postcard from the IRS with instructions on where and how to get the forms needed for filing 2010 returns. In short, the forms will be available in January from the IRS website or at select libraries and post offices.
The IRS says people who file electronically can get refunds deposited directly into their bank accounts in as little as 10 days. Otherwise it can take up to six weeks to get a refund check in the mail.
The IRS says the move will reduce mailing costs. But the change also reflects changing habits; the majority of individual filers now file electronically. Just 8 percent of individual taxpayers got paper forms and instructions in the mail last year. The rest either filed electronically or used a paid tax preparer or software. Taxpayers can file returns electronically for free on the IRS website, www.irs.gov . The agency also gives free electronic filing help to those who earn $58,000 or less through a program that walks taxpayers through their returns by asking a series of questions about income, expenses and other financial transactions.
Signs You’re Headed Toward Accumulating Credit Card Debt…
How do you know if you’re using your cards unwisely? NO MORE Mortgage presents some ways to tell you’re on the path that will create more and more credit card debt. Here are 10 signs that you are headed toward accumulating credit card debt from NO MORE Mortgage.
1. You use credit to meet basic needs: Your income should be used to buy everyday items like food, clothing, and gas. Having to use credit cards to cover these types of purchases is a big sign of financial trouble.
2. You transfer balances to avoid credit card payments: There are times when a credit card balance transfer makes sense, like to consolidate credit card balances or to get a lower interest rate. However, frequently transferring balances instead of making credit card payments is a red flag. The fees to make these transfers are often higher than the monthly payment you might be trying to avoid.
3. You skip one credit card bill to pay another: Prioritizing credit card payments is wise. But skipping payments is always unwise. If you consistently find yourself too strapped for cash to make your credit card payments, you are already in credit card trouble.
4. You avoid or ignore credit card statements: If only wishing away credit cards actually made them go away. Pretending your credit card debt doesn’t exist only gives it time to grow. Facing credit card debt sooner gives you the opportunity to tackle debt before it gets out of control.
5. You charge more than you pay: Imagine trying to fill a hole while someone shoveled out more dirt than you put in. Your hole would never get filled would it? It’s the same with debt. If you’re charging more than you’re paying, your credit card debt will always continue to increase.
6. You don’t have an emergency fund: If you don’t have an emergency fund, you’ll feel forced to use your credit card for every little item that is out of the ordinary. Credit card debt created because of unexpected expenses can be hard to pay off, especially if your budget is already stretched.
7. You don’t have a plan to pay off your credit card debt: You know what they say, “Failing to plan is planning to fail.” If you’re not actively working to pay off your credit card balances, you could end up unnecessarily paying on the cards for years to come. Whether you have excessive credit card debt or not, you should always have a plan to pay off your balances.
8. You use credit to “afford” expensive items: The allure of credit is that it tricks us into thinking we can afford to buy more than we really can. Truth is, only extra income or lower expenses (or both) enables you to afford more expensive items. Incurring credit card debt to maintain a lifestyle you really can’t afford isn’t a losers game.
9. You have past due accounts: If you have credit cards that are currently past due, you’ve probably run into unfortunate financial trouble that’s keeping your from making payments. Remember, the more in arrears your accounts become, the harder it will be to bring them current again. Take a look at your monthly budget for money you could find to get your credit accounts back on track.
10. You have maxed out credit cards: If your credit cards are all maxed out, you’re not headed for credit card debt, you’re already in deep. What now? Make a decision to pay off your credit card debt or take more severe steps to get rid of them, even if it hurts your credit. You must learn to make wiser choices about credit card use in the future.
STRETCHING YOUR BUDGET PAST AGE 55…
Of the 14.9 million unemployed, more than 2.2 million are 55 or older, according to the U.S. Labor Department. And almost half of those have been unemployed six months or longer. The unemployment rate in that age group is a record high 7.3%. NO MORE Mortgage shares how you can make every dollar count.
1. Retirement Accounts: If you have no choice but to dig into your retirement account, there are ways to minimize the tax hit and penalties. Most people know that if you withdraw money from an individual retirement account or 401(k) before age 59 ½, you’ll pay federal income taxes on the withdrawals AND you will get hit with a 10% penalty. But the tax code has a provision, 72(t), that allows someone younger than 59 1/2 to withdraw a set amount of money at least five times until age 59 1/2 or for five years, whichever is longer. You won’t pay a penalty, but the money is still taxed. The caveat: Once you start taking out the money, you’re locked into making withdrawals, says Jerod Wurm, a certified financial planner in Sacramento. Jonathan Pond, a financial adviser for AARP, says that if you were laid off this year, you might want to delay tapping your retirement money until next year, when you might be in a lower tax bracket. If you need a chunk of money for a short period of time, consider the 60-day rollover requirement. This rule allows you to take money out of a qualifying retirement account, tax- and penalty-free, once a year, regardless of your age — but the full amount must be deposited back into the account within 60 days.
2. Health Insurance: Most states have programs that offer low-cost coverage, typically if one earns less than $30,000 a year. The MassHealth program in Massachusetts, for example, covers adults and children under age 19 if they live with the parents. Short-term insurance policies, which typically cover unexpected illnesses and accidents, can run as low as $30 per person for a month. Catastrophic insurance typically starts as low as $30 a month depending on a person’s age and health. Have you been denied coverage or been quoted an exorbitant rate because of a pre-existing condition? You can enroll in the federal Pre-existing Condition Insurance Plan, a part of the new health-care law. Premiums range from $320 to $570 a month per person depending on the state.
3. Real Estate: The typical advice is to downsize to a cheaper home in a cheaper locale. But today’s real-estate market is anything but typical. And for people who are hunting for work or have a spouse with a much-needed job, moving to a state with a lower cost of living may not be feasible. So use your home to make some extra cash. If you live near a college or university, for instance, rent an extra room to a student or recent graduate. You can easily get a few hundred dollars a month. Contact a school’s student-housing department or put up fliers on campus. For homeowners who are 62 and over and still have equity, another option is a reverse mortgage, which allows older homeowners to tap their home’s equity while they remain in the house. The loan typically doesn’t come due until the homeowner sells the house or dies. And upfront fees have come down some recently.
4. College Expenses: Still on the hook for college tuition for your kids or yourself? Try renegotiating loan and aid terms. Jerome Chester, a 51-year-old from Bethesda, Md., who has been unemployed since June, went to student-loan provider Sallie Mae to renegotiate his tuition loan. He was able to defer payments, about $1,000 a month, for six months. And a school’s aid package isn’t always set in stone. Go back to the school and ask for more aid given your financial troubles. Results will vary by school and a family’s financial status.
NO MORE Mortgage helps with homeowners insurance
EXPERIENCED AN INCREASE IN YOUR MORTGAGE PAYMENT?…
Homeowner’s insurance rates have been increasing in almost every state, which has caused many NO MORE Mortgage clients to see an increase in their mortgage payment because their escrow amount increases. This overall increase in homeowner insurance rates is caused by a variety of factors, but it appears that this trend is not going to reverse in the near future. We have asked Heritage Insurance, Inc. to work with NO MORE Mortgage customers that would like to reduce their homeowner’s insurance premium. They will not be able to save every customer on their homeowner’s policy, but it appears that the vast majority will be able to realize some savings, and some could see very significant savings.
For those of you that are interested, Heritage will review your current policy and then offer quotes from other insurance companies. This is a free service. They are a national broker that sells for 127 different insurance companies. Some of these companies are large nationwide companies (Traveler’s, Safeco, The Hartford, Progressive, etc.) and some are smaller, regional companies. This review will allow you to see a variety of prices and determine if you can reduce your insurance premium by switching to another carrier.
For those of you that are interested in trying this service using the resources of Heritage, we have pasted a link to The Better Business Bureau’s report on their company at http://www.bbb.org/louisville/business-reviews/insurance-services/heritage-insurance-service-inc-in-louisville-ky-3067. They have been an accredited BBB business since 1979.