Question: What is a short sale, and is it a good alternative to foreclosure?
Answer: Let’s not mince words. The foreclosure process is a brutally taxing process that will leave you stressed and your credit in tatters. Though it is sometimes the best option to resolve your financial situation, take a moment to make sure you have considered all of your options before foreclosure becomes a reality. Asking the question—What is a short sale, and is it a good alternative to foreclosure?—is a smart place to start. Indeed, short sale might be something to add to our “foreclosure fix” list.
What is a short sale?
Also known as a compromise sale, short sale is the process of selling your distressed property at a lower market value than the balance of your loan. In other words, you will sell the home for less than what you owe on the loan.
The most important consideration for a short sale is finding a qualified real estate agent with experience in today’s market. You should try to find someone who is acutely aware of market fluctuations and who is best able to serve you, whether you are in a buyer’s market or a seller’s market. Many real estate agents are better suited to one market condition or the other.
With the credit crunch affecting many people’s ability to purchase a home, you may find that your home is valued below your mortgage. In this case, you should find an agent who works with short sales. After you receive an offer, your agent can help you work with the bank to determine the terms of the short sale.
When people ask the question “What is a short sale?” they also want to know: “Will it hurt my credit?” Your credit will still be hurt by a short sale, but it will be in much better shape after a short sale compared with a foreclosure. For one, there won’t be a trail of the delinquency notices and late fees associated with a foreclosure.
In a short sale, lenders consent to permit you to accept an offer for an amount that is less than the total you owe on your loan. You will still be charged with making up the deficiency, or the difference between what you can get in the sale and your loan, but because of the sale, this amount is reduced. Not all lenders allow short sales, but the current market has increased the willingness of many banks to negotiate in this regard.
Keep in mind a few things about short sales. Like foreclosures, a short sale can be long and exhausting process. Most lenders will only sign off on a short sale if you have been sent a notice of default. In the case that you declare bankruptcy, it’s highly unlikely that a lender will agree to a short sale. Remember, though, that lenders have never experienced a market like the current one, so many hard-and-fast rules of the past are more flexible now.
If you are wondering—What is a short sale?—you might already know that you are going to lose your home. Though this is, of course, sad, a short sale might be a better alternative to foreclosure because it causes fewer credit woes and increases the likelihood that you will own another home soon.
Category: CREDIT BLOG
Is There a Foreclosure Fix?
Question: I need a foreclosure fix! How can I get my house back once the foreclosure process has started?
Answer: If you have defaulted on your home loan, you may still have an opportunity for a foreclosure fix by finding an opportunity to keep your home and stave off the foreclosure process.
As soon as you receive your first late notice—or preferably before you receive it—consider contacting your lender to work out an alternative payment plan or loan modification. If the foreclosure process has started, though, and you want to hold on to your property, you may have a few options.
The foreclosure process usually begins when you are three to six months behind in your payments. After such a period of delinquency, you will receive a Notice of Default, which formally puts your home into the foreclosure process. However, between the time that you receive a notice and when your home is sold, you may find a way to prevent or nullify the sale.
The first foreclosure fix depends on where you live. Some states offer a redemption period, a foreclosure provision that allows you to recover your home. Foreclosure laws in some states give home owners five days to buy back their house by paying the amount owed on the loan and any related late fees or other penalties. Some lenders might allow you to resume the loan if you can make a single payment that will bring yours back into good standing with your payment schedule.
If your state does not offer a redemption period, it might offer you a similar opportunity if your home is not purchased in the distressed property auction known as a sheriff’s sale. Again, you might have five days to make restitution to the lender or else risk losing your property.
If you cannot afford to pay the amount in full to get your home back, then you can look at other options to begin to halt the process as a temporary foreclosure fix. With foreclosures still a common occurrence through the nation, many lenders might be willing to work with you to prevent a foreclosure, since a foreclosure usually means a loss in their ledgers. Some lenders may offer refinancing or enrolling in a loan modification program. Others might be wiling to allow a short sale. (Read the post, “What Is a Short Sale?”
When it comes down to it, there is no quick fix for the foreclosure program. Your best bet at a foreclosure fix is to learn how to create a budget and trim expenses, then begin the loan modification process.
Can a Loan Modification Save Your Home?
In the wake of the turmoil caused by the global crash of the housing bubble, the government has been advocating loan modification programs, which are designed to encourage banks and other lenders to offer more favorable terms to borrowers with existing loans.
The housing bubble saw many homeowners take advantage of unprecedented loan opportunities. Lenders bent over backwards to hand out a smorgasbord of seemingly lucrative options like adjustable rate mortgages to homeowners. However, as we all know, the roof fell in rather quickly, and homeowners were left in desperate straits with sky-high payments due and on the verge of foreclosure. Many distressed homeowners started looking into bankruptcy facts, wondering whether bankruptcy was the best option.
Loan modification programs are based on the premise that the already-struggling banks may benefit by seeing these borrowers pay back some money rather than face a complete loss. Helping these homeowners avoid bankruptcy and foreclosure means the banks will get something rather than nothing.
Loan modification programs are a bankruptcy and foreclosure fix for many besieged property owners.
Most loan modification programs are based on reducing interest rates or payments for a period of time or even giving borrowers a complete break on interest payments for a few years. In other cases, a bank may renegotiate the terms of your loan; for example, you may be able to switch from an adjustable rate mortgage to a fixed rate mortgage based on your circumstances. Theoretically, loan modification programs can help delinquent homeowners achieve a semblance of stability and pay off the remainder of their loans.
The first step in the loan modification process begins with you picking up the phone and contacting your bank’s hardship department. You will need to divulge your income and explain the circumstances that are preventing you from making regular payments on your loan. Your lender can tell you whether you qualify. Most loan modification programs exist for people who have already defaulted on at least one payment. If you are making timely payments, the banks might be reticent to modify your loan, figuring you can continue to stay current on your loan and they can recoup 100 percent of the loan.
All modifications you might make to your loan will be conducted through your lender and not via the government. And because the loan modification program is only encouraged by the government, not all lenders have chosen to participate. As I mentioned, some loan modifications may be available only if you have been tardy on your payments, though I have heard of a few available for people who have never been late. Keep in mind that some loan modificationprograms may be subject to fees based on the type of alteration requested, so get all the information before you make a decision.
No matter how dismal your financial situation, you might be able to find a way to retain your house and prevent a dreaded foreclosure through a loan modification. This might be a wonderful option for you, but its availability will depend on your lender and its willingness to work with you. Call your bank’s hardship department to see if you are eligible for a loan modificationprogram and if so, what type of program might best benefit you. An important thing to keep in mind when you talk to your bank is that the economic situation is changing faster than we can predict. What might have been valid yesterday may no longer be available tomorrow. If you are turned down for a loan modification, try again in a month or two.
Secured Credit Cards: Avoid ‘em or Embrace ‘em?
In a lot of ways, secured credit cards sound like a raw deal. But if you have poor credit, secured credit cards might be your ticket to a great credit score.
Basically, secured credit cards—typically for people with bad credit—require you to pay a deposit that is equal to or greater than the limit before the card will be activated. Then, you can use the account as you would any other credit card. You would also pay the bill, just like you would any other credit card.
So, let’s imagine that you have a secured credit card with a limit of $500. Just to open the account, you would need to make a deposit of $500. Subsequently, you might charge $200 worth of stuff to the card.
Will the secured credit card company automatically apply the deposit to your balance? Nope—you need to pay the $200 bill, just as you would any other credit card. If you make payments, the balance will incur interest. And if you miss payments, the late payments will be reported to the credit-scoring bureaus, and your credit score will suffer, just as with a traditional (unsecured) credit card.
All the while, the bank holds onto your deposit. If you eventually default, the credit card company will keep your deposit, but only after they have turned you over to a collection agency and attempted to collect payment from you.
In short, secured credit cards require you to pay now, buy later, and then pay again, whereas traditional credit cards allow you to buy now, pay later.
If you make payments on time and learn how to build credit, you can eventually request that the secured credit card be transferred to a traditional credit card, at which point the bank will refund your deposit. The deposit will also be refunded if you close the credit card account, so long as you have no balance at the time.
Though secured credit cards might not seem like that great of a deal, they are necessary for two reasons. First, people with bad credit often cannot qualify for traditional credit cards, so secured credit cards allow them to build their credit scores (in this way, they are much like authorized users). Second, many businesses require that their customers have credit cards. For instance, most cell phone companies won’t give you a phone without a credit card—secured or otherwise.
As I mentioned, if you pay the bill on time and keep your utilization rate (the percentage of the balance held against the limit) under 30 percent, then a secured credit card will help your credit score just like any other credit card would. And as your credit card score begins to improve, you can contact the credit card company and ask if it can switch the card to unsecured.
While secured credit cards have high interest rates and force you to set aside a sizable amount of money as a deposit, they are an attractive way to rebuild your credit. Use them in the right way—with careful purchases and repaying your debt on time—and you’ll soon be back in the good graces of your credit card company.
The Magic of Authorized Users
One of my favorite ways to boost a person’s credit score is to teach them about the magic of authorized users. Authorized users are people who have permission to use other people’s credit cards. For instance, your husband might have a Citi card. His name, and his credit score, was used to apply for the account, but you have permission to use the account.
Becoming an authorized user is a powerful way to boost your credit score because you get to borrow the account holder’s good credit history. If you are an authorized user on a credit card in good standing, your credit score will reflect the credit card’s positive payment history by increasing. Beware, though: If you are an authorized user on a credit card in poor standing, your credit score will reflect the credit card’s negative payment history by dropping.
Keep in mind, however, that you must do three things to benefit from becoming an authorized user:
- Make sure that the credit card company reports your status as an authorized user to the credit bureaus.
- Protect yourself by finding the right account.
- Protect the account holder.
Let’s consider these one at a time.
Make sure that the credit card company reports your status as an authorized user to the credit bureaus.
In the past, people abused the power of authorized users, sometimes going so far as to buy authorized user status on a complete stranger’s account so that their credit scores would increase. The credit-scoring bureaus didn’t take too kindly to this, so they changed the rules. Now, they only consider authorized users if they are legitimately related to the account holder. In a best-case scenario, you would share a last name with the account holder, and you would live at the same address. At a minimum, make sure you are a relative of the account holder. Otherwise, the credit-scoring bureaus will not recognize your status as an authorized user, and your credit score will not improve.
Finally, make sure the account holder asks the credit card company if they report authorized users to the credit bureaus. Some do, but some do not. If the credit card company does not report your information to the bureaus, find another credit card.
Protect yourself by finding the right account.
As I mentioned earlier, your credit score could drop if you become an authorized user on a credit card that is not in good standing. The account to which you are added should have a credit card payment history that is clean. It should also have a credit card balance that never exceeds 30 percent of the credit limit. And if the account holder ever defaults on a payment or causes the balance to exceed the 30 percent threshold, remove your name immediately!
Protect the account holder.
It stands to reason that most authorized users have poor credit, or they would qualify for credit cards on their own. So it also stands to reason that your family members will probably be hesitant about giving you permission to use a credit card. What if you do a little retail therapy and then refuse to repay the debt?
Ensure the account holder that there are ways for you to benefit from authorized user status without actually being able to use the account. For instance, the account holder can shred the credit card that arrives for you, and they can refuse to give you access to the account number. In this way, you will benefit from the credit card’s positive history and create a layer of protection for the account holder.
As well, let the account holder know that your credit histories will not be merged. Your past credit mistakes will remain yours and yours alone. Only accounts that are shared will be reflect on each credit report.
When used correctly, authorized users can see their credit scores jump as many as 50 or 60 points just by being added to the right account. For this reason, we use authorized users to help people with credit repair after bankruptcy, foreclosure, or other financial meltdown.
Pre-Approved Card Credit Offers
If you are like most people, you have received several pre-approved card credit offers in the mail advertising low interest rates, an amazing new credit limit, or other special benefits. You might be wondering how these pre-approved card credit offers will impact your credit score and whether they are a good deal.
Keep in the mind the following points before you send away for these enticing credit offers.
The 1st Thing You Need to Know About Pre-Approved Card Credit Offers
Credit card companies usually obtain your information by paying credit-scoring bureaus (directly or through a marketing firm) to provide a list of consumers with the minimum credit standards for the card. If you are the recipient of one of these pre-approved offers, you may see the words “promotional” and “pre-approved” listed on your credit report. Some people may be swayed by the idea of being pre-approved, but a pre-approved credit card does not mean that you will even be guaranteed to obtain a card. The fine print likely tells you that final approval is determined by your application information.
The 2nd Thing You Need to Know About Pre-Approved Card Credit Offers
A pre-approved card sent to you will not affect your credit score. Credit inquiries made by credit card companies to determine your candidacy for pre-approved offers are considered “soft” and will not be included in your credit score. However, if you decide to sign up for one of these credit cards, you will be subjected to a real credit check, or a “hard” inquiry, and this will cause your credit score to take a slight dip as approximately 10 percent of your credit score consists of the number of hard inquiries you have listed on your credit report.
The 3rd Thing You Need to Know About Pre-Approved Card Credit Offers
Always read the fine print before you choose to open a pre-approved card. Though you may be persuaded by deals such as zero interest for a year on new purchases, the offers are rarely as straightforward as they seem. The language of some of the offers may not really match the reality of the credit card terms. For example, while an offer might boast “interest rates as low as two percent,” you might not fall into the category of people who receive this rate.
The 4th Thing You Need to Know About Pre-Approved Card Credit Offers
If you are considering applying for a loan to make a large purchase—such as a car—within the next year, you should probably avoid signing up for a new credit card. A new credit card can negatively affect your credit score in a few different ways. First, your credit score will decrease when the credit card company checks into your credit score. In addition, 15 percent of your credit score is determined by the age of your credit accounts, and old age means a better credit score. Opening a new credit account will drive down the average age of your credit accounts, reducing your credit score. Lastly, if you have too many credit cards, you may see your credit score drop.
The 5th Thing You Need to Know About Pre-Approved Card Credit Offers
Pre-approved credit cards may also put you at risk for identity theft. A common way for identity thieves to establish a credit account in your name is to intercept your mail and respond to a credit card offer in your name. As a result, your credit might be severely tarnished and worrying about excessive credit scores or too many credit checks will be the least of your troubles.
Because of this threat, the best way to deal with pre-approved credit cards could be to opt out from all offers. You can opt out by sending a letter to one of the three credit scoring bureaus and ask to be removed from their lists, or you can call (888) 567-8688 and ask to be removed from all credit card offers.
Either way, be sure you regularly review your credit report so you can protect yourself from identity theft.
A final note about pre-approved card credit offers: To find the right pre-approved card for your needs, your best bet is to search for a credit card yourself, trying to find the attractive offers on your own and shopping around for the best deal. Avoid signing up for the first offer you; instead, take a look at your other options. Just because something arrives at your door doesn’t mean you should put it in your wallet.
Ready to Transfer Credit Card Balances? Read This First!
Offers to transfer credit card balance to a low-interest card might be seductive. I’ll save money and lower my parents, you might think.
Not so fast! Before you transfer a credit card balance, be sure you understand how the process can benefit you or hurt your credit score. That’s right—it could hurt you.
Let’s take a look at how the process of transferring a balance from one credit card to another works. Traditionally, the process begins with a credit card with a large balance or a high interest rate. Once another card offers you an opportunity to transfer your balance to a new card with a lower rate, you may decide to put part or all of your balance on the new card. By doing this, you can pay off the old credit card, secure a new and better interest rate, and possibly enjoy the rewards, options, and specials associated with the new card. However, you should be mindful of two things before taking advantage of this seemingly smart strategy.
Transfer Credit Card Balances? Consideration #1: Pay attention to your credit card balances. It may seem like a straightforward idea to put all your balances on the card with the lowest interest rate, but keep in mind how credit-scoring bureaus come up with their ratings. Thirty percent of your overall credit score is produced by the balance you carry versus your credit limit, or your utilization rate. To keep a solid credit rating, your utilization rate should never be more than 30 percent of your limit. Many people rack up balances in excess of a 30 percent utilization rate after transferring money to new cards, and as a result, their credit score takes a big hit.
In fact, you should always wait until the card is opened to transfer credit card balance. Do not transfer the entirety of your balance while opening the account. Most creditors will decide your limit depending on the amount that you request to transfer. If you transfer $6,000, for instance, the creditor will determine credit limit to be $6,000, giving you a very dangerous utilization rate of 100 percent. The smarter way to proceed is to act cautiously: open the account first and transfer balances from other credit cards only after you know the limit and calculated the utilization rate. Then, only transfer 30 percent.
Transfer Credit Card Balances? Consideration #2: Never open a card just to transfer the balance. Having a ton of credit cards might lower your credit score as the credit bureaus know that you have the opportunity to dig yourself into massive debt and start missing payments. In a perfect world, you would have between three and five credit cards. If you already have five cards, don’t close them (this could also hurt your score), but don’t open new ones either, even if you think you’ll be saving money by transferring balances and lowering interest payments. In fact, you might end up lowering your credit score so much that you pay extra interest payments on all future loans. You should always make sure that all of your credit cards help with an overall credit-building strategy, so never open a card just so you can take advantage of a low introductory rate.
Once you have dodged these pitfalls, you might be ready to transfer credit card balance. As always, though, be sure to thoroughly read all the related fine-print associated with credit card offers. Some cards may have specific restrictions or fees associated with transfers. Making sure that you understand the extra benefits as well as restrictions of new cards could allow you to shrink your balances and perk up your credit score.
Credit Cards and Credit Scores: The Intimate Relationship
Many people wonder about the relationship between credit cards and credit scores. While credit cards can be great tools in enabling you to purchase goods and services without having the cash on hand, they can also present an almost irresistible temptation to spend money you don’t have and mess up your credit score. What you might not realize is that credit cards can be your secret weapon in obtaining an excellent credit score. By understanding the impact your credit cards have on your credit score, you can take charge of your credit cards and leverage this knowledge into a higher credit score.
Credit cards and credit scores go hand-in-hand in several ways. First, take a look at the number of credit cards you own. Credit-scoring bureaus reward consumers the most if they can manage to responsibly balance between three and five credit cards. Credit card companies want to see that you can manage more than one or two credit cards at the same time, so if you have only a couple of cards, you may get a boost by obtaining an extra card or two.
Warning, if you have more than five credit cards, you shouldn’t immediately cancel a bunch of cards. First, this may damage your credit score by reducing the average age of your credit accounts. The length of your credit accounts determines fifteen percent of your credit score, so closing two or three credit card accounts may cause your credit score to drop. Second, you may be able to maintain and increase your credit score even with more five credit cards if you can pay down your balances to as close to zero as possible on any credit cards you rarely use.
Another important part of understanding credit cards and credit scores is the utilization rate. To get the best credit score, you should maintain a utilization rate of 30 percent or less. Your utilization rate is the ratio of your credit card balances against your credit card limits, expressed as a percentage. Therefore, if you have $600 worth of debt and your credit limit stands at $1,000, your utilization rate is 60 percent. Credit-scoring companies will award you a higher credit score with a sub-30 percent utilization rate, so if you can pay down your debt below this threshold, you will likely see a quick boost to your score.
Another way to strengthen the relationship between your credit cards and credit scores is review your credit report. Make sure you are regularly reviewing your credit report to keep track of whether your credit limits have been accurately reported.
If your credit card company reports your limit as $2,000 instead of $4,000, the $1000 balance on your card goes from being an attractive utilization rate to a negative factor that will drag down your credit score. In other words, rather than showing a 25 percent utilization rate, your credit card will show a 50 percent utilization rate. Unfortunately, credit limits are frequently misreported, so this should a mandatory item for you to double-check when you are reviewing your credit report.
One of the advantages of keeping on top of your credit cards and credit scores is being able to save money. Once you’ve built your credit score by using your credit cards wisely, you can flex your financial muscles. Call your credit card companies, point to your steady and responsible behavior, and ask for a lower interest rate.
A Dirty Little Secret that Hurts Credit
People already know that bankruptcies, foreclosures, repossessions, and collections will hurt credit. And it’s no big secret that late payments are one of the causes of bad credit.
But I bet you don’t know about some of the things that hurt credit! Today’s blog is about the the dirty little secret that will hurt your credit score.
HURT CREDIT SECRET #1: Credit card companies often omit or inaccurately report credit card limits, and this causes your score to drop. About half of all consumers are missing at least one credit limit on their credit reports. And in other instances, credit card companies intentionally report a lower limit than you have.
Why does this hurt credit?
The credit-scoring systems place a lot of weight on something called a utilization rate. The utilization rate represents your credit card balance as a percentage of your limit. If your limit is $1000 and your balance is $300, you have a 30 percent utilization rate. If your balance increases to $500, your utilization rate would increase to 50 percent. In other words, you would be utilizing 50 percent of your available limit.
The credit-scoring formula responds more favorably to people who have a utilization rate that is no higher than 30 percent.
Now let’s imagine that you have a $300 balance on a credit card with a limit of $1000. Your utilization rate is 30 percent. Good news for your credit score, right?
Not so fast. If the credit card company is only reporting a $500 limit, you will appear to be carrying a 60 percent utilization rate. And this hurts your credit score.
There are a lot of theories as to why the credit card companies do this. One is that credit card companies buy lists of borrowers whose limits are, for example, more than $10,000. The companies then send credit card offers with enticing interest rates to the people on these lists. Their goal is to encourage borrowers to switch cards.
Your credit card company does not want your name on that list. They want to make sure that you remain a loyal customer. In an effort to keep you as a client, some experts say credit card companies report a lower credit limit than you actually have, or they do not report your limit at all.
This makes you less appealing to other credit card companies.
This might be good news for their client list, but it causes hurt credit.
Are you a victim of this scam? If so, take the following steps:
1. Pull your credit report from www.720ficoscore.com.
2. If the credit card companies are inaccurately reporting any credit limit of yours, immediately begin the process of correcting this mistake.
Student Loans and Credit: 9 Things You Must Know!
What’s the relationship between student loans and credit scores? You might be surprised! In this article, we take a look at the nine things you should know about student loans so that you can build a great credit score.
Nine Things You Should Know About Student Loans and Credit
First a little background. Student loans are unsecured loans (without any collateral backing them) issued to help with the costs of tuition, books, board, and other school-related expenses. As with any other loan, your credit score is deeply impacted by your student loan. When you make your student loan payments on time, your credit score will improve. If your payments are late or if you skip a payment, your score will drop.
Student loans are a great way for young adults to begin the all-important task of showing lenders that they can handle debt. If lenders see that you can make payments on time and in full, your credit score will go up and you will be more likely to get larger loans in the future.
This is important because you will need credit upon graduating from college. Your first employer might run a credit check, assuming that your credit score is a good indication of whether you are responsible or not. And a landlord will definitely run your credit before renting a home to you.
With all this in mind, here are nine things you should know about student loans and credit.
Student Loans and Credit, Fact #1:
When you apply for a student loan, your credit might or might not be pulled. Some lenders do require a credit score, but others do not. If your credit score is pulled, a credit inquiry will be added to your credit report. This might cause your score to drop, but the impact will be minimal.
Student Loans and Credit, Fact #2:
About 30 percent of your credit score is determined by your outstanding debt: the ratio of how much you owe versus how much you have paid. The more you have paid and the less you owe, the better your score. If your payments are being deferred until you have graduated, or if you have deferred payments for another reason, the ratio will not be in your favor, and your score might drop. However, it will start to increase after about six months of timely payments.
Student Loans and Credit, Fact #3:
With this in mind, consider that students who are positioned to pay back their loans before graduating will enjoy a faster ride to good credit. Even though a lot of student loans do not require repayment until you have graduated, your credit score might be higher if you start repaying the loans immediately. Keep in mind that some employers will run a credit check when you apply for your first post-college job, so having a high credit score could behoove you.
Some people have speculated that if borrowers pay back their student loans too fast, they will lose credit points (presumably because the maximum interest on the loan will not be accrued if the loan is paid off early). I think this is a bogus claim. The exact details of credit-scoring formula have not been released, so I cannot definitely confirm this theory one way or another, but I seriously doubt its accuracy. Credit-scoring bureaus are not interested with your creditor’s ability to earn the most interest, but rather with your ability to repay your loan on time. The bureaus want to know that you will pay your debts on time. Paying your student loans sooner rather than later is a wise thing to do because your debt-to-principal ratio will drop and your score should increase.
Student Loans and Credit, Fact #4:
Before you leave college, avail yourself of the opportunity to receive exit counseling, a service most schools offer to prepare their students to repay federal student loans. This counseling can provide you valuable information about your rights and responsibilities and the terms and conditions of your loans.
Student Loans and Credit, Fact #5:
Once you begin repaying your loan, never miss a payment. Here’s something you might not know about student loans and credit: 35 percent of your total credit score will be drawn from your payment history on credit cards and loans.
Student Loans and Credit, Fact #6:
If you cannot make a payment, ask for forbearance, a short-term agreement that allows you to make smaller payments, or no payments at all. Otherwise, you will harm your credit score. Keep in mind that if you do not make payments, interest will continue to accrue and the amount due will grow larger.
Student Loans and Credit, Fact #7:
Keep in touch with your lender. If you are struggling with your payments, never wait until the lender approaches you or until a delinquency notice is logged on your record. Instead, initiate communication with your lender. Talk about forbearance or student loan consolidation.
Student Loans and Credit, Fact #8:
Student loans can never be discharged during bankruptcy.
Student Loans and Credit, Fact #9:
Making regular payments on your student loans is a great way for young adults to begin building their credit score, setting the foundation for better loan terms and lower interest rates on future loans, and saving bundles over the course of a lifetime. But this isn’t enough. As you move on after school, you should try to incorporate different types of credit into your finances while keeping current on your payments. The mix of credit you have makes up 10 percent of your score. The credit scoring bureaus want to see that you can handle a variety of types of loans—from credit cards to student loans to car loans.
Now that you know the nine important facts about student loans and credit, be sure you learn the 35 facts the banks don’t want you to know! These money-saving tips and insider secrets about credit scores can help you save a bundle and position yourself for success.
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