Don’t Let Student Loans Keep You From Buying a Home

student loans and home buying

For many people, buying a home feels like “the next step” on the checklist of life goals. But it can be an intimidating project — especially if you feel held back by your student loans. About 37 percent of Americans between the ages of 18 and 29 report having outstanding student loan debt.

But student loans don’t have to stand in the way of your homeownership dreams. Here is how you can work around them to get approved for a mortgage you can afford:

Establish strong credit history

More and more people these days are wary of credit cards, which is not surprising since Americans hold more than $1 trillion in credit card debt. . But the truth is, not having a credit card could negatively impact your credit. The longer and more stable your credit history, the better you look to lenders — and credit cards are one of the easiest ways to establish credit history. It’s also good for your credit to diversify your debt between revolving credit (like credit cards) and loans.

Consider getting a credit card and only using it for a few necessities, like groceries or gas. And make sure to pay off the balance every month so that you don’t get caught in a cycle of credit card debt.

Improve your credit score

A strong credit score is one of the most important factors when applying for a mortgage. A 690 credit score or higher is generally considered good. Anything less than 560 is considered poor.

If you need to fix your credit score, here are a few tips:

  • Pay all your bills on time and consistently.
  • If you have a lot of credit card debt, make higher payments to lower your balances and get your credit utilization rate below 30 percent.
  • Check your credit reports to make sure everything is accurate. If anything appears fraudulent, it’s important to initiate a credit dispute immediately.

Lower your debt-to-income ratio

Your debt-to-income ratio (DTI) is also an important factor in whether you are approved for a mortgage. A debt-to-income ratio of 43 percent is usually the highest that will be approved (lower is better.) If you are one of the twenty-five percent of student loan borrowers with $43,000 or more in loans, and you are on the standard 10-year plan with a 5.7 percent interest rate, your monthly payments are probably about $471. Depending on your income and other debt, this could be eating up quite a bit of your DTI.

You can lower your DTI by paying down your debts. You may also consider consolidating or refinancing your student loans. You will probably need to extend the terms of your student loans, but you could secure a lower monthly rate in the process.

Save!

One of the best things you can do to prepare for the home buying process is to save money for a down payment. If you have a down payment of at least 20 percent of the purchase price, you are more likely to get approved for the mortgage and get a lower interest rate. You will also pay a lower monthly payment, and you won’t have as many fees (like mortgage insurance). A 20 percent down payment isn’t the end-all and be-all, but it is a good goal to strive towards.

Is it the right time to buy?

Depending on your financial situation, you may want to consider delaying your home-buying dreams until you have time to plan, save and improve your credit. Consider contacting a credit repair company to learn more about how to improve your credit score. The housing market will still be there when you are ready.

 

If you want help assessing your credit, or if there are negative items you would like to see removed from your credit reports, contact the legal credit repair experts at Lexington Law Firm today.

Learn how you can start repairing your credit here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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5-Step Recipe for Financial Success

Financial Success

Everyone has different definitions of financial success. For some, it may mean fancy cars and a three-car garage. For others, it could simply mean lowering their debt, paying their bills on time, and improving their credit score. Across the board, it generally means a sense of security and peace of mind.

But the question is, how do you get there? Whatever your specific financial goals, the best way to achieve them is with a plan. So if your goal is financial success, try this simple “recipe” to reach it:

1.   Create a budget

You can’t improve your finances without knowing where you currently stand. From there, you can start setting realistic goals and create a roadmap on how to reach them.

Start your budget by taking a hard look at the numbers, including your income, your debt, and your other expenses. Figure out where you can start cutting down.

Then, determine your goals; what do you hope to achieve and by when? Map out the specific steps you’ll take to get there.

The end result of any budget should be living within your means—not spending more than you’re earning. But a good longer-term goal would be to save up to 20 percent of your income each month.

2.   Stay on top of your bills

Falling behind on your bills is the fast track to credit disaster. If you’re making late payments on any of your bills—credit cards, utilities, your mortgage and so on—you could be penalized with high late fees. Worse, you could be dramatically harming your credit score. If you have a 680 credit score, even a single late payment could drop your score up to 80 points. If your score is 780, that could be as many as 110 points. That’s not anyone’s definition of financial success.

3.   Lower your debt

If you’re only paying the minimum each month on your credit card debt, you’re throwing away money on high interest rates that could otherwise be put towards your financial goals. If your credit utilization rate consistently exceeds 30%, you’re doing harm to your credit. Paying down your debt is one of the simplest ways to lower your credit utilization. Additionally, paying down your debt looks good to lenders, so if your version of financial success looks like owning a home or a car, you’re more likely to be approved for those loans.

4.   Start saving

According to a 2016 GoBankingRates survey, 69 percent of Americans have less than $1,000 saved in case of an emergency. A 2015 brief from Pew Charitable Trusts found that 60 percent of U.S. households dealt with a “financial shock” (median cost: $2,000) over the course of a year. Half of families struggled to “make ends meet” following these crises.

Take all of that into consideration and you get a good sense of why an emergency fund is so important to financial success. Make your emergency fund a priority and start saving today.

5.   Make plans for “Future You”

Plans for today are important, but so are plans for tomorrow. If you’re not planning for your retirement, you’re not setting yourself up for success. If you have the option, you should contribute to your employer-sponsored 401(k). But even if you work for yourself, or your company doesn’t offer that benefit, consider starting an IRA. Financial success is about the long game. Your future self will thank you.

Whatever financial success means to you, it’s important to have a plan to get there. If you’re not sure where to start, a credit repair company can help. Contact Lexington Law today to find out how we can assist you in reaching your financial goals.

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Avoid Rip-offs by Hackers In 2018

avoid scams

For hackers, the start of a new year is the most wonderful time — which means for the rest of us, it’s one of the riskiest.

Millions of Internet users engage in risky online behavior year-round without even realizing it. But this increases tenfold during the beginning of the year — something that shrewd hackers take advantage of in order to get their hands on your personal information, rip you off, and potentially destroy your credit in the process.

Don’t get hacked in 2018! Follow these dos and don’ts to keep yourself — and your credit — safe so you can get a great start into the new year:

Don’t: Fall for black hat websites.

In other words, be wary of shopping on unfamiliar sites, even (or especially) if they are boasting incredible bargains and discounts. Fake websites are simple to create, and hackers use them to acquire your personal data and credit card information, or even infiltrate your computer with spyware.

Do: Stick to shopping on sites you are familiar with. Look for sites that start with HTTPS; the S indicates that the site is secure. Installing a script-blocking plug-in will also go a long way to protect your privacy. And when you do decide to make purchases online, use your credit card or a service like PayPal rather than debit (and never wire money); your credit card offers a bit more fraud security.

Don’t: Trust your social media.

Your friends are not the only people who can see what you post on social media. Hackers may be lurking and can take advantage of this information in a lot of ways..

First, if you constantly post your whereabouts, using “check-in” features, and sharing travel or event plans, you are basically advertising an empty home, which opens you up to burglary.

Secondly, hackers can use your social media preferences and data to create highly detailed phishing schemes, designed specifically to attract you — and defraud you.

Finally, beware of clicking on links shared by your friends that advertise too-good-to-be-true promotions and giveaways. Your friends could have been hacked unknowingly, and hackers know you are more likely to click on something if you think it came from a trusted source.

Do: Go private. If you haven’t updated your social media pages to the most secure settings, you would be wise to do so. But regardless, be wary about posting revealing information about yourself, particularly your whereabouts.

Don’t: Bank from a shared device.

If everyone in your family uses a single device to browse, shop, download music and movies, and check email, then your computer can hardly be considered a safe space. Any one of these activities, conducted by any of your family members, can introduce malware to your computer.

A particularly nefarious type of malware is the banking Trojan. Banking Trojans, once they are on your computer, can steal your bank login information, intercept transactions, and drain your accounts — even if your bank’s website is secure. What makes it particularly dangerous is that antivirus software cannot detect it — which means you need to stay vigilant.

Do: Use best online banking practices, like having a strong password and two-factor authentication. Only use your private device for online banking and stick to your own secure network as well.

Hackers often come up with new, clever ways to infiltrate your online presence, steal your data, and potentially compromise your credit in the process. It’s important to stay on top of all of your accounts to make sure no suspicious activity occurs. If you think you may have been defrauded by a hacker, and your credit was compromised or negatively affected in the process, a credit repair company like Lexington Law Firm can help you fight back. Contact us today for a free credit report summary and consultation.

Learn how you can start repairing your credit here, and carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.

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How Identity Theft Can Affect Your Credit

Identity Theft and Credit

Identity thieves are out there, and they’re often just waiting for the right moment to pounce. So when it comes to your personal information, a lapse in protection can have severe consequences.

Identity theft can wreak havoc on your credit, and once your information is compromised you may struggle to undo the damage. That’s why it’s important to stay proactive, and avoid the pitfalls of fraud. Consider these three ways identity theft harms your credit and how to avoid it.

1.     Existing accounts

One of the most common consequences of identity theft is a compromised existing account, such as your credit card, debit number or your banking information. It’s bad enough if they get your credit card information, where they could easily run up your debt and harm your credit utilization, which accounts for 30 percent of your credit score. If they get your banking information, they could also drain your accounts, and debit card fraud can be harder to fight than credit card fraud.

2.    New accounts

If an identity thief gets the right information, like your name and social security number, they could potentially apply for new accounts in your name. This would result in hard inquiries on your credit report, which represents 10 percent of your credit score and can ding it by several points. While the effects of one hard inquiry are fairly marginal, multiple inquiries can send your score plummeting.

The new lines of credit will also show up on your credit report. Several new accounts could actually shorten the length of your credit history, which accounts for 15 percent of your credit score.

Finally, if the thief gets new cards under your name they could secretly run up substantial debt.

3.    Non-payment

It’s unlikely that an identity thief is going to steal from you and then help you pay back the debt. The debt charged to your account will be attributed to you and you’ll be the one left on the hook. Payment history accounts for 35 percent of your credit score, and any late payments will dramatically harm it. An excellent credit score could drop by up to 100 points as a result of a 30-day late payment.

How to protect yourself from identity theft

While identity theft is a serious concern, the damage isn’t irreparable. Here’s what you should do if you’ve been impacted by identity theft:

  1. Call the police – Identity theft is a serious crime and should be reported. The criminal could be prosecuted, and reporting the crime will help back up your dispute claims.
  2. Initiate a credit dispute – The Fair Credit Reporting Act states that fraudulent credit activities must be blocked from your credit history. Make sure to check your credit report and dispute any fraudulent activities.
  3. Freeze your credit – A credit freeze will prohibit an identity thief from opening new accounts in your name, and it won’t affect your credit score.
  4. Consult a credit lawyer or credit repair expert – If your credit has sustained serious damage as a result of identity theft, don’t try to tackle the issue on your own. Experts at Lexington Law can provide legal and credit repair advice to help you fix your credit in the wake of identity theft.

Still, it’s best to be proactive when it comes to protecting your credit. Keep a close guard over your personal information to help keep identity thieves at bay.

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How to Get Debt Collectors Off Your Back

debt collectors

Guest Article by Neal Frankle CFP® from CreditPilgrim.com

If you are behind on your payments and bill collectors are hounding you they may try to make you feel like you’ve broken the law. Chances are high that you aren’t a criminal – but the bill collectors just may be.

That’s because there are laws and regulations which protect consumers from unfair practices many collection agencies engage in.

They know better than to carry out some of the nastier ploys but they cross the line anyway. That’s because they think most debtors will fall for it.

The purpose of this post is to make sure you do understand what is and what is not allowed so you can protect yourself should some unscrupulous debt collector come knocking.

The way collections work:

In most cases, the company you owe money to doesn’t do the actual collections. They assign your debt to a separate third-party collection agency.

At that point, the original creditor steps out of the story and the collections company takes over. The only way this agency gets paid is if you settle (at least some portion of the debt).

If that happens the agency gets a percentage (from 30% to 50%) of what you ultimately cough up.

As a result, some will take extreme measures and many will do whatever they can get away with in an effort to get you to comply with their demands.

Now that you understand what you up against, let’s take a closer look at the 5 things you need to know in order to protect yourself from overzealous collections agents:

  1. Understand The Laws That Protect You

The most powerful Federal regulation that protects you as a consumer is the Fair Debt Collection Practices Act (FDCPA).   This statute spells out what debt collectors are and are not able to do.

For example, they can’t harass you or threaten you with imprisonment or violence.

They can’t claim they are connected to the government and they must correctly identify themselves when they contact you. That means they can’t lie about being attorneys if they are not.

They can only call you during reasonable times (after 8 am and before 9 pm) and they can’t call your employer or other third party.

If you have a law firm that represents you, they have to call them rather than you.

They can’t call you non-stop and they can’t call you at work if your employer has a policy against it.

They can’t embarrass you publicly and they can’t try to collect more than is owed. That means they can’t tack on interest and penalties.

And that’s not all.   Collectors can’t publish a list of debtors and they can’t send you a demand letter on a postcard.

They can’t threaten to take away your property unless done legally.

Over and above these safeguards, the Fair Debt Collection Practices Act gives you the right to demand “debt validation”.

Validation is simply a written request you make to the debt collector to supply you with proof that you owe the amount in question.   Unless and until they do that, they have to leave you alone.

  1. Know How to Protect Yourself

Make sure to invoke your rights and demand “validation” in writing within 30 days of the first time you are given notice to pay the debt by the collector.   If you fail to do so, you can still fight the charges but the collector won’t have to stay away.

Remember, the validation proof they supply spells out exactly what you owe and to whom.

If you feel you don’t really owe that amount or that you’ve already made arrangements with the creditor to pay the debt back, let the credit know and tell them to steer clear of you.

Even if you haven’t come to terms with the creditor, write to the collector and tell them not to contact you any further.

If you do that, they have to either stay clear of you or they have to inform you (in writing) that they are pursuing other remedies – such as a lawsuit against you.

3. Recognize When Credit Collectors Go Over the Line

If you are forced to deal with a bad actor, contact the Federal Trade Commission and file a complaint.   You can also file a lawsuit against the offending party.

You can also contact the Consumer Financial Protection Bureau and register a complaint. This agency overseas the Fair Debt Collection Practices Act.

You should also consider bringing in an attorney or legal representative who is an expert in credit repair and one who has experience dealing with collections creeps.

4. Understand the Remedies Available to You When the Amount the Collector Seeks is Bogus

Remember that the Fair Debt Collection Practices Act demands that the collectors make true statements.

That means they can’t falsely present the amount you owe. And as I said, that includes fees and interest.   They can’t tack on “penalties” to the amount you owe the original creditor.

If a creditor engages in any of these activities, exert your rights and contact the FTC, the Consumer Financial Protection Bureau and possibly an attorney.

5. Realize that Stopping the Credit Collector Isn’t Always Enough

Even if you are able to put a leash on a wayward debt collector, you still have to deal with the underlying problem – the amount owed.

Don’t sweep this under the carpet and don’t waste time.   Work out a plan and get that debt cleared up in a way that is least detrimental to your credit history.

This is very important because even once you come to terms with the creditor and collections agency, you still might have some rough spots on your credit report.

In other words, even after you work things out, you still could have a damaged credit report.

The bottom line here is to not be complacent.   Stand your ground when it comes to debt collectors.

Once you are done with them and the underlying debt, get to work cleaning up your credit history.

If you don’t take that last step, the aggravation that a bad credit score causes could be far worse than the discomfort of a brutish debt collector.

Having said all this, please always remain calm and respectful.   Getting into an argument, however well deserved, isn’t going to help you at all.

In fact, it can make your situation worse. Of course some collectors will try to egg you on but don’t take the bait. Chill and always be professional and courteous.

I also suggest that you keep a log of all communications the collection agency has with you. That goes for calls, emails and letters. Write down the name of the person you spoke with and their direct number (but don’t record the calls unless your recording complies with State law).

By keeping records of all the interactions between you and the company, you might just put a lid on their behavior. It might also help support any claims you have against the company.

This point can’t be underestimated. If a collection agency breaks federal law it could even lead to having your entire debt dismissed.

 

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