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What Does Coronavirus Crisis Mean For Your Finances?

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In the past few months, we have all noticed a crisis brewing due to the COVID-19 epidemic; however, it wasn’t so clear how it was going to affect everyday Americans. Read out what does coronavirus crisis mean for your finances and how to protect credit score during the coronavirus pandemic?

Now, we’re hitting a point where the crisis is starting to affect the stock market, interest rates, working life, business cycles, and even employment.

Cities and states are calling states of emergency, starting to lock down non-essential business and government functions for the coming weeks.

Schools and public spaces have been closed and most large gatherings have been cancelled proactively. There are ways on how to protect credit score during the coronavirus pandemic.

Panic has started to set in because we’re dealing with something that hasn’t been seen in a long time.

It’s scary, and for people who aren’t working or are working fewer hours due to the epidemic, it can have a drastic effect on one’s finances.

We at The Credit Pros want to assess the situation as clearly as possible in order to understand your own personal situation while also alleviating some panic.

Dealing with the Unknowns

There are many people who are worried if they’re going to have a job to go back to after the lockdowns end. You might be one of them.

There is also uncertainty with stock market movements and supply chain management. For many business owners, it can be difficult to even get products ready for sale since fewer and fewer people are working.

Sourcing from China in the last few months had become difficult due to the outbreak in Wuhan and the Chinese government’s responses. 

Unknown

We don’t have an answer for the unknowns. However, we do have some tips to relieve some panic and help you understand the situation from a logical point of view.

  • Stock market movements are not a perfectly accurate measure of overall economic performance or potential. Just because stock trading causes things to move up or down doesn’t mean that your income will necessarily be personally affected.
  • Being specifically told to work from home doesn’t mean that you’re more likely to be laid off.
  • Business activities being temporarily paused affects everybody, and you are not alone in feeling scared.
  • Just because the virus continues to spread doesn’t mean that all business activities will be held in lockdown forever until the virus disappears from the planet. 

It’s important that, during a time of crisis, you’re able to see the situation from a logical point of view rather than get swept up in the emotions of fear and worry.

Keep reading what does coronavirus crisis mean for your finances?

What’s Happening to My Credit?

Your credit will only be affected if your ability to make payments is affected. However, it could mean that credit becomes harder to come by, and that getting more money to borrow may become more difficult for those who have currently lower credit scores.

One should know how to protect credit score during the coronavirus pandemic. Also read about improving your credit scores: The Rule Of 45.

Some banks have taken measures to make it easier for people to deal with their credit situations. It’s doubtful that these will hurt your credit score.

There are a couple of credit myths you will find as for reference credit myth – each credit pull hurts.

What Does Coronavirus Crisis Mean For Your Finances

Your credit is the last thing you should be worrying about, as it’s one of the things that is the least likely to be affected.

Don’t Miss: How To Protect Credit When Unemployed

If the crisis is affecting your ability to pay, it’s important that you not delay and make sure that you contact your lenders.

They may not be in office to take your call, and they may not be in office on the payment due date.

Even so, it’s important that you follow up with them and not let a missed payment slide.

These are the known tips on how to protect credit score during the coronavirus pandemic. Keep reading what does coronavirus crisis mean for your finances?

Final Thoughts

We at The Credit Pros want to urge everyone to stay safe. Work from home if possible, and specifically ask your employer if it’s a possibility for you.

Keep your contact with others at a minimum and stay inside except for the absolute necessities. Wash your hands often and take care to keep your areas clean. 

Final Thoughts

It’s imperative that every American do their part to ensure that the spread of the virus is slowed down enough for the necessary measures to be taken by hospitals, researchers, and pharmaceutical companies. 

With the combined effort of every American, the lockdowns will end and business will resume as normal.

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What Does Coronavirus Crisis Mean For Your Finances? - The Credit Pros

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What Does Coronavirus Crisis Mean For Your Finances? – The Credit Pros

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Read out what does coronavirus crisis mean for your finances? How to protect credit score during the coronavirus pandemic? See more.

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Jason M. Kaplan, Esq.

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The Credit Pros

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Credit Repair

Simple Ways To Improve Your Credit Score Before Buying A House

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Making just about any big purchase today requires a check on your credit score, including buying a car, taking out student loans, renting an apartment, and obviously, getting a credit card. Considering just how many different things require your credit score, it shouldn’t be any surprise that many things can also affect it. Sometimes credit scores can get hit hard and require deliberate efforts to repair. What about if you’re planning on making a purchase as large as buying a home, how can you get your credit score high enough to qualify for a mortgage? Below are a few of many tricks that some Americans use to boost their credit score as simply and quickly as possible.

Know Your Credit Card Reporting Dat

Every credit card company will send a monthly report of the balances on every credit card they have issued. These dates vary from company to company and are often on a specific day of the month that doesn’t necessarily coincide with the end of the month. Getting in contact with your credit card company and asking them what day they send their monthly report will give you a perfect timeframe to know when to aim for a payment on your credit card. Of course, it would be even better if you were able to pay the credit card off in full before this date.

For the best results, you want to aim for a credit utilization ratio of less than 10% across all your credit cards, but less than 30% will still give you a positive statement on your credit history. Calculating your credit utilization ratio is rather simple; you take the balance and divide it by the credit limit, then multiply the result by 100. (i.e. $1,500 balance on a limit of $5,000 will give a utilization ratio of 30%) For multiple cards, simply add all the balances together and divide that by the added total credit limits.

Know Your Credit Card Reporting Date

Raise Your Credit Limit

If you are having trouble keeping your credit utilization under the 30% or 10% in order to improve your score, consider asking for a raise on your credit limit. This way, you won’t have to balance payments and purchases strictly in order to keep your credit utilization ratio lower. Take the same credit card as above with a $5,000 limit; if the limit was raised to $10,000 and you didn’t change your spending habits, you would still have a $1,500 balance. This would give you a utilization ratio of only 15% versus the 30% it had been.

Do some research before pursuing this avenue, as applying for a raised credit limit will give your credit score a “hard” check, which will penalize your credit score for up to a year. If your application is accepted, however, then the long-term payoff will certainly be worth the short-term hit to your credit score.

Diversify Your Credit

Spreading your credit out across multiple different accounts may seem like a catch-22, if spreading your credit out too much is what gets some people in trouble with their credit score. However, most lenders are more interested in approving new loan applications or credit limit applications if they see that you have a variety of accounts in your credit report, as long as they are all kept up-to-date on their payments. Such variety comes in the form of multiple credit card accounts and installment loans like auto loans, student loans, and, yes, even mortgages. Not only does having multiple accounts on your credit report help to diversify your report, it can also help to build your credit history since installment loans typically span years.

Diversify Your Credit

Wait To Apply For Loans

If you’re looking to raise your credit score in order to qualify for a mortgage, then wait to apply for the mortgage. As mentioned earlier, applying for more credit, which includes a mortgage, will give your credit score a “hard” check, which will hurt your credit score. Applying for loans, credit limit raises, and new credit cards all within a short time frame will definitely hit your credit score and can make each subsequent credit increase have a worse interest rate or even cause you to get rejected from some of the applications.

The lowest credit score that you will want to aim for is 580, unless you are applying for a VA-backed loan, which is specifically for eligible veterans and their dependents, and do not have a minimum credit score requirement set by the Department of Veteran’s Affairs. Non-veterans should look at FHA loans, which have approvals as low as 580, but a score of 620 or higher will help you get better interest rates. Until your credit score is at least at the lower limit, it’s best to hold off applying for that home loan just yet.

Monitor Your Credit Score

Lastly, and most importantly, make sure you’re aware of your current credit score and all your current credit accounts. Sign up for credit reporting services, either through your credit card company, bank, or a third-party credit-monitoring software. Be careful of where you choose to monitor your credit, because some avenues of checking your credit will actually count against your credit score if you check it too frequently. This can also help to keep you familiar with your payment history and keep you on your toes to help save you from missing a payment. Lastly, checking your credit score history can alert you to errors in your credit report, or alert you to a situation where someone may have fraudulently opened credit cards or took out loans in your name.

Hopefully these tips will give you the game plan you need to boost your credit and apply for the mortgage to buy the home of your dreams. Fixing your credit score isn’t a quick process and it can become very complicated in certain situations. Consulting with professionals about your credit report and setting up a personal game plan is the best way to boost your credit score.

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Simple Ways To Improve Your Credit Score Before Buying A House

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Simple Ways To Improve Your Credit Score Before Buying A House

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Making just about any big purchase today requires a check on your credit score, including buying a car, taking out student loans, renting an apartment, and more.

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The Credit Pros

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Credit Repair

Should You Close Your Credit Card Account

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Having a credit card has made life easier for most people as it frees you from the need to carry cash with you every time. It allows you to go cashless and with the rise of e-commerce, paying for your purchases is now easier than ever. But, many credit cards have annual fees attached to them, and having a lot of cards can make it difficult to track all of your credit card debt.

As a credit card holder, there’s a chance that the question of whether you should close your credit card account or not has crossed your mind at some point. Cancelling your credit card is more than cutting the card itself into pieces; it requires going to your bank or card issuer and requesting that the account be closed.

Closing your credit card does have a negative impact on your credit score. Here’s how closing your credit card account will affect your credit score.

How closing your card affects your score:

  • Increased credit utilization: credit utilization refers to the ratio of the outstanding balance on your card to your card limits. The lower the percentage, the better it is for you. Closing your credit card increases your credit utilization percentage.
  • Reduced average age of accounts: the length of how long you have been using also has an impact on your score. Closing the card you have had for the longest time reduces the average age of your accounts.

As a result, it’s generally not considered a good idea to close a credit card account without a valid reason to do so. Here are some reasons why you might want to close a credit card account.

Valid reasons to close your credit card account

  • When you’re unable to control your spending: If you have tried options like keeping the card in a place that’s hard to access or using cash only for most purchases to reduce your spending and have failed, closing your account might be the only option left.
  • High annual fees: If you’re paying a high annual fee for a credit card you’re not using, then closing it is warranted especially if you don’t benefit from it. Talk to your issuer about the fees before deciding to close the account to see if they’ll give you a better deal.
  • Separation or divorce: If the credit card you have is a joint one, it’s better to close it once you separate or divorce since you’ll be liable for any charges made to it whether you’re together or not.
  • Your card has been used fraudulently after it was stolen or you lost it. In most cases, the issuer will automatically close it but if it keeps attracting charges, then it’s best you close it even after being issued with a new one.

How to close a credit card account

Keeping your credit card account open for as long as possible is beneficial as it helps you build up a positive credit score, more so if you’re planning to apply for a mortgage or a loan in the near future.

The first thing you should do before closing the account is evaluate how your credit score will be impacted and follow these steps:

  1. If your card had any accumulated rewards, redeem them as they would be lost when the card is closed. Ensure that you’re familiar with the redemption rules for your card.
  2. Pay off any balances on your card or transfer the balance as you will not be able to close the card if it has any balances. You can request your issuer to freeze the card until all the balance is paid to stop any charges from accruing. In the event that your balances are carried from one month to the other, then you will need to pay the full statement balance two months in a row to stop charges from accumulating.
  3. Call your card issuer: You will need to make this call to confirm that your card balance is zero as there could be residual interest that could have accumulated after the last payment. Once you’re assured that it’s zero, inform them of the cancellation. Should you be met with any resistance, insist on closing the account as it’s your right.
  4. Send a certified letter to your issuer to close the account. In the letter, request for written confirmation of the zero balance to be sent to you. The letter should have all your official details. Make a copy of the letter for your records.
  5. Check your credit card report to confirm the cancellation 30 to 35 days since the process can take a month or more. The account should be marked as closed and if it appears as open, repeat the steps above. If the report has any incorrect details, raise a dispute with the relevant bodies.
  6. Dispose of the card after confirming the cancellation process is complete. Don’t just throw it away or cut it into two, use a pair of scissors to cut each bit of information to make it difficult for anyone to steal your identity.

Benefits of closing a credit card

  • You’re protected from incurring potential debt on that account.
  • Help you manage the temptation of extra expenditures
  • Reduces the likelihood of card fraud since any unused cards that you don’t keep track of can easily be stolen.
  • You won’t have to keep paying the fees associated with it.

Want to learn more about how your credit score is calculated? Check out this quick and dirty guide to your credit score!

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Should You Close Your Credit Card Account

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Should You Close Your Credit Card Account

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Should you close your credit card account? Having a credit card has made life easier for most people as it frees you from the need to carry cash. Read more.

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Jason M. Kaplan, Esq.

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The Credit Pros

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Credit Repair

Should I Rent Or Should I Buy A Home

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There is no straightforward answer to whether you should rent or buy a home. We are all sold on the dream of working hard and owning a home. While this dream is admirable it’s not for everyone and is sometimes a bad bargain.

The mortgage crisis that triggered the 2008 financial crash is proof of this. Buying a home without the right conditions in place can prove to be a burden leading to huge losses.

It’s a huge financial decision that depends on various factors such as:

So is renting a home the answer?

The Pros of Renting a Home

  • Little to No Responsibility

    If the home you’re renting suddenly springs a leak in the roof, the most you’ll be worried about is the damage to your belongings. The headache of getting contractors and funds to fix the roof is not yours. It falls on the homeowner.

    That’s the primary benefit of renting. You can up and leave whenever you choose, signing a lease that suits your lifestyle. You don’t have to worry about the cost of maintaining a house and the taxes and fees involved.

  • Predictability and Affordability

    When you’re renting, you know for sure how much you’ll spend on rent and utilities. You can then budget accordingly. Even rent increments are usually communicated ahead of time.

    Homeowners, however, may enjoy a seemingly peaceful financial period only to be flooded with repair costs that can run thousands of dollars. Mortgage interests and insurance premiums can also be quite high for homeowners.

The Cons of Renting a Home

  • You’re Powerless

    Unless you live in a rent-controlled apartment, rent hikes can be steep when your lease is up for renewal. You’re at the mercy of your landlord. The same goes for whether repairs are done on time or not.

  • You Can’t Build Equity

    Equity is the value you get from your house once all debts are paid. Building this value is not an option available to renters. The monthly rent you pay doesn’t contribute to you owning an asset.

The Pros of Buying a Home

  • Intangible Rewards

    Homeownership gives one a sense of accomplishment. It is a tenet of the American dream.

    It also imparts a sense of safety. Basically, you own the roof over your head, or will once you finish your mortgage payments.

    Whether it is tiny and mobile or sprawling, knowing that you can close the door and be in your own space is very reassuring to most.

  • A Long-Term Investment

    Once you check off all the criteria of a successful homeowner, having a home can be a huge financial asset.

    This asset can be a source of rental income in later years, or home security during your retirement years. Or you could sell it for an appreciated value and make a lump sum to be reinvested.

    Of course, this investment aspect is dependent on how the market behaves and whether your property appreciates or depreciates.

The Cons of Buying a Home

  • Unexpected Hidden Costs

    Buying a home costs much more than the down payment and your monthly mortgage payments. Without consulting a robust guide to buying a home, here are some of the costs you might miss:

    • Mortgage Interest Payments
    • Property Taxes
    • Insurance premiums for Homeowners, floods, and mortgage
    • Utilities (e.g. electricity, gas, water, etc.)
    • Maintenance & Repairs
    • Homeowners Association Fees
    • Investment Opportunity Cost (the cost of investments you will forego because your money is tied up in your home)

    Remember that for the first few years of your mortgage, your monthly payments go towards mortgage interest. You only start reducing the principal well into the fourth or fifth year of the mortgage, depending on your interest rate. Your interest rate depends on your credit, and some credit problems can ruin your mortgage application.

    Premiums and maintenance costs can fluctuate widely making it difficult for you to cover all contingencies from the get-go.

  • It’s Time-Consuming

    Repairs, tenant wars, HOA requirements, contractors, maintenance, building regulations… the list of things to attend to as a homeowner is almost endless.

When Should You Buy a Home?

  • You Have the Financial Means To Buy a Home

    You should have enough money for your downpayment and monthly mortgage payments.

    Your budget should also be able to accommodate extra costs such as maintenance, repairs, taxes, utilities, HOA fees, and insurance.

  • You Plan To Live In Your House Long Term

    Buying a home only makes sense if you’re planning to live in it for at least 5 years. In this way, you will have started making a huge dent in the principal of your mortgage and will have started building equity.

    Don’t forget the huge outlay of time and resources required to get a home up and running. You should only put these in when you’ll reap the results years later.

    Granted, refinancing is always an option and can help you afford a new home. Check out our guide to mortgage refinancing!

  • You Find the Right House to Buy

    Don’t just buy a home because that’s the best one you could find at your price point. In that case, it would be better to rent.

    Look for the house that speaks both to your heart and the health of your future investments.

  • You Want To Be a Homeowner

    We can’t reiterate this enough, homeownership is not for the faint of heart. It requires time, resources and is often a labor of love.

    Be sure going in that owning a home is what you want. Otherwise, 2 years in it will feel like an albatross around your neck.

Is Renting or Buying a Home Better?

This is but a snapshot of the considerations you need to make before you decide whether you want to sign a lease or a mortgage contract.

If you can find a rental that is cheaper than monthly mortgage payments for a comparable home and you’re not staying for good, you’d rather rent. If you want to put your roots down for the long haul, buying is better.

Neither, of them, is better, it really just depends on your current goals and financial capabilities.

Summary

Should I Rent Or Should I Buy A Home?

Article Name

Should I Rent Or Should I Buy A Home?

Description

Should i rent or should i buy a home? There is no straightforward answer to whether you should rent or buy a home.

Author

Jason M. Kaplan, Esq.

Publisher Name

The Credit Pros

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