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Why Is It Important To Pay Your Bills On Time, Every Time?

A late payment is simply a payment that you have not made to the lender before the due date. This happens to the best of us as we can make mistakes due to oversight or shortage of cash. Unfortunately, these mistakes will negatively affect your credit score and cause it to drop dramatically as your payment history is the key component used to calculate your credit score.

In this article, we will discuss how late payments affect your credit score, the other potential penalties, and tips on how to keep your future credit in tip-top shape.

THE EFFECTS OF LATE PAYMENTS ON YOUR CREDIT SCORE

You know that late payments can negatively affect your credit scores. However, you may not be aware of how much your credit scores can fall or how long it will take you to repair the damage. You should because credit scores can boost or drain one’s finances.

According to Experian, a single 30-day-late payment will lead to the ding of 90-110 points if you have a good credit score of above 780 and a drop of 60-80 points if you have a score of say 680. However, the number of points that your credit score can drop when a late payment is added to your score depends on many factors. The FICO scoring models will consider all the points given below to determine the impact a late payment will have on your credit score.

  • It depends on how long you wait before paying the bill. Your payment will be reported after 30 days past the due date and again after 60 days, then 90 days and then again after 150 days. The longer your bill goes unpaid the greater will be the impact on your credit score. And after that, your account will be written off as a loss of charge and that will be very bad news for your credit scores.
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  • Late payments that have occurred in the past year do more damage than from several years ago. So, your recent credit history severely harms your credit score but this negative impact lessens over time.
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  • The number of points your credit score can take a ding also depends on the number of late payments on your credit report. If you have many late payments already then you are on the low end so the addition of one more late payment may not cause a lot of damage to your credit score as most of the damage has already been done.
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  • The amount of your late payment can also play a role as a small amount of say $200 and $300 will not harm your credit score as say a $300 and $3000 late payment. So the more you owe the more your score drops.

OTHER POTENTIAL PENALTIES OF LATE PAYMENT

  • You will usually be charged a late fee by the lender and if you continue to miss the due date you can be charged additional late fees too.
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  • The interest rates of your future loans will increase.
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  • Your interest rate can be reset to a penalty annual percentage rates (APRS) or default, depending on the creditor’s policy. Credit cards penalty APR can go up to 29.99%
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  • You can also forfeit your 0% promotional rate on a balance transfer card if you have one and it can be reset to the default interest rates. So, you will pay much more interest on your outstanding balance if this is done.
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  • It will remain in your credit report for seven years so you may not qualify for a mortgage (at the best interest rates), get a personal or auto loan, or even receive the best credit cards or rewards programs.

HOW TO MASTER YOUR LATE PAYMENTS

You may be just forgetting to pay your bills or struggling to pay your bills, or just forgot to pay one small bill. Either way, there are ways to master your late payments.

  • You should select a payment due date that coincides with your paydays or a time when you pay all your bills together. Many credit card issuers do allow you to select a due date.
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  • Set up bill payment email reminders or text alerts that will remind you about the bills that are due in a few days. If you require more than one alert you can set up multiple electronic prompts.
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  • Consider setting up automatic payments, especially if you have made late payments in the past due to forgetfulness or being too busy. However, you should ensure that you have sufficient funds in your account so that you do not get to pay overdraft fees. Once you start paying your bills on time your credit scores will begin to improve over time.
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  • Even if money is tight you can review your budget. You may be able to find ways to cut back on spending and make it easier to pay your bills on time
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  • Prioritize which payments you need to pay if you do not have sufficient money to pay all bills. The essential bills like mortgage, rent, and utilities should be paid first. Then pay the bills that have a hefty late fee. Finally you can pay the bills that are about to go into collections.
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  • Finally, a smart move would be to set up an emergency fund that will help you when you have unexpected expenses.
 

 If you need help to improve your credit scores do contact our financial experts at Zinucreditrepair.com.

The Practical Reasons Why Married Couples Should Share Finances

Money management can be tough when you are single, but incorporating your spouse’s finances when you get married can be overwhelming. It is nothing new that financial conflicts can cause major problems in relationships and is one of the main reasons couples end up in divorce.

Traditionally sharing finances was a part of the journey after marriage but nowadays it is becoming more and more common for couples to either divide expenses down the middle, or delegate certain expenses to each. This is becoming more common especially for working couples.

However, at the end of the day, there are advantages of sharing your money with your life partner. This does not mean that you cannot have separate bank accounts for certain things. But you have to make a financial plan TOGETHER and consider all the money to be family money to make both your money and your marriage work. Here are a few practical reasons why married couples should share their finances.

1. Builds A Stronger Relationship

Many couples avoid discussing finances and it is the number one issue that they wind up bickering about. It is also the second leading cause of divorce in America.

However, by sharing your finances with your spouse you start to work as a team to build your financial roadmap and start thinking in terms of “us”. You also learn to see individual financial decisions from your partner’s perspective instead of your own which will result in an overall stronger and happier relationship.  

2. Enables You to Understand Household Budget in Totality

When you share finances you have what you call a “household income”. You can figure out what lifestyle you as a couple have together if you have a full picture of your total income including both your earnings, investment income, and income stream. Also, you will fully understand where the money is going after each paycheck, which would not have been possible if you had kept your spending from your spouse and your spouse did the same to you. It will also lead to transparency which has a positive impact on your overall relationship and will help you to figure out where to cut costs to save money for the future. However, having a   “household income” does not mean that you cannot assign money for yourself, to spend as you see fit.

3. Allows You to Save For Short-term and Long Term Goals

Sharing finances will fully allow you to plan for your future and create a list of actionable steps that can bring your short-term as well as long-term goals to fruition. Whether you saving for the holidays, a vacation, or a buying a vehicle you can achieve your goal faster and also reduce the risk that your partner may become upset or bitter about money matters in the future. 

Your spouse’s cooperation maybe even more important if you are planning to buy a home together because if you are applying for a mortgage together, both your incomes and debt and credit histories are applicable. Secondly, you may also have to address issues such as credit utilization before you are approved for a mortgage. This process will be more of a headache if you have two sets of accounts instead of one.

 Sharing finances and having a shared budget can make these decisions easier and can envisage a future that meets both partner’s desires.

4. Allows You to Make Retirement Goals

Saving for retirement needs to be coordinated as one day neither of you will be working. When you share finances your “retirement savings plan” will be the result of a joint decision based on your long term commitment and saving level you are both comfortable with. But if each of you contributes for retirement separately it will be much harder to coordinate these goals. That is probably why couples who share finances tend to save more.

5. Leads to a Family Focus, not a Self-Focus

One of the benefits of sharing your finances is that if one person goes through a period of unemployment the other steps in and helps. If one of you is sick (or just delivered a baby) or if one wants to start a business the other one covers. You may be more likely to take certain career risks if you have someone to back you up. And in the end, these risks can be good for you. But on the other hand, if you keep paying your share of bills you might be less likely to take the leap. When you are committed to the relationship then both of you can start to do what is best for your family.

6. Help in Case of Emergency

Marriage means complete transparency. If you do not provide your spouse with your financial information it can build distance. It can also be dangerous if one of you is incapacitated, hurt or worse and the other needs access quickly.  Your spouse will be able to continue managing your financial assets and also help support your responsibilities. But if you keep your spouse in the dark about your financial situation it will a challenge for him/her to help out in the case of an emergency.

Final Word

If you are looking to build a life together than the best thing is to be open and share goals. The goals between two people cannot be aligned without talking about money matters and coming up with a solid plan to deal with budgeting, spending, and investing. In the long run, this will help you to grow closer financially as well as emotionally.  

6 Times When You Are Smart Not to Pay Off Your Mortgage Early

Plenty of homeowners would like to pay off their mortgage early as it is a hassle and a headache. Itis their largest monthly payment and takes out a good chunk out of their budget.

It is understandable as there are many reasons to pay off your mortgage early. It will not only help yousavehundreds (even thousands) in interestbut will also helpyoufeel secure at the thought of owning your own home.

At the same time, there are benefits of not paying your home loan ahead of schedule.

The approach which is better for you will depend on your financial situation and goals. If the following situations apply to you, sticking to your mortgage payment schedule and using the extra cash for other purposes will be the best option.

1. You Do Not Have a Hefty Source of Emergency Cash.

Financial ups and downs are inescapable. Though the house you own free and clear is a significant piece of wealth, it is not something that you can quickly convert into cash in a crisis. It takes months even in a strong market to sell a house. You could secure a home equity loan more quickly but this also will take a few weeks and will put you back into debt with possibly a higher interest rate than you had on your original mortgage.  So, the best way to ensure that you can cover any unexpected expenses like a job loss or medical bills without having to take on new debt is to make sure that you have set aside a healthy “rainy day” fund to cover at least six months’ worth of household expenses. 

2. You Want to Lower Your Tax

Before you decide to reduce your mortgage debt, make sure you have fully funded any tax-advantaged account such as 401(k) or individual retirement accounts(IRAs). According to Patrick Whalen, a certified financial planner at Whalen Financial Planning in Los Angeles “Paying off a mortgage early competes with the priorities that can help lower your taxes, like funding a 401(k) plan up to the maximum amount.”

The tax advantages of these contributions coupled with the potential for long-time growth in your retirement investments makes them the first place you should be stowing any extra cash you have.

3. Is There A Prepayment Penalty On Your Mortgage?

Prepayment penalties are rare in new mortgage contracts but some older mortgages containrequirements that you must pay several thousand dollars if your mortgage loan is paid off ahead of schedule.

Prepayment penaltiescould be the equivalent of a certain number of monthly interest payments or equal to a percentage of the mortgage loan amount. So, if your mortgage loan contains such a prepay penalty clause you should compare the penalty amount with what you will save in interest by paying off the loan early. You should make sure that you do not lose money by triggering a penalty.

4. You Can Earn a Better Rate By Investing

The smartest choice to make when you have extra cash to pay off a mortgage loan with a low-interest rate is putting it into the stock market or mutual funds and building up a diversified portfolio. It is reasonable to expect a long-term return of 6 to 8 percent when you invest in a broader market.Meanwhile, your mortgage rate may be around 4.5%, so over time you are likely to earn better returns on your money and can benefit from years of tax breaks and be much better off in the long haul.

5. You Have Other Debt

The mortgage loan should be the last debt you pay off. If you are payingother debt that has higher interest rate such as car loans, school loans, credit card debt or home equity lines of credit, it is technically better to put any extra funds towards these debts than your mortgage.

Many of these debts can carry 0%interest at least for a time. However, in most cases, these 0% deals apply to either temporary or relatively short term loans. So, paying off these loans should always be a higher priority than your mortgage loan.  

6. You Are Still Savings For Big Purchases

It is not enough to only pay off debt and save before tackling the mortgage, you should make sure all your future cash needs are addressed. Generally, you should plan to cover all significant expenditure for at least the next five years or preferably for ten years that include:

  • Child’s education
  • Home remodeling,
  • Car purchase
  • Wedding
  • Vacations

There is no point of paying off a mortgage early if you are getting into more debt for a large purchase.

HOW WOULD PAYING OFF YOUR MORTGAGE LOAN AFFECT YOUR CREDIT SCORES?

They will not be a dramatic change in your credit scoreas a consequence of closing your mortgage loan. But closing credit cards can hurt your credit score as it reduces the total amount available to you to borrow. Mortgage loans like paid off student loans and auto loans will remain on your credit reports for 10 years as a “closed account in good standing.”

FINAL WORD

 Whether you should pay off your mortgage early or not depends on how much money you have to spare, what other alternatives you have and other factors that are unique to you. If paying off your mortgage loan early is on your radar you should seriously consider all your options so that you are sure it is the best path forward for you. 

Rapid Rescoring Can Help Raise Your Credit Scores Quickly

When you apply for a loan, a credit card or any other form of
credit, every point in your credit score counts. So, you may
want to consider boosting your credit score before applying
for any type of credit as even a few points added can make a
large difference. With a higher credit score, you can save on
fees, annual percentage rates, higher bonuses, and perks.
There are many things that you can do to improve your credit
score over time, but credit bureaus often do not make the
relevant adjustments for several months. So if you do not have
the time to wait for creditors and credit reporting agencies to
update your scores, especially if your credit score is just
below the range to qualify for a large loan like a mortgage you
can consider rapid rescoring.
What is Rapid Rescoring?
Rapid rescoring is a service offered by some lenders,
including banks and credit unions to make updates to your
credit reports. The goal is to improve and update the
information in your credit reports considerably quicker than if
you were to work directly with the credit bureaus. Normally it
takes 30-60 days but with rapid rescoring, you can update
your credit within 3-5 days. By reflecting the most recent
positive information your credit score will increase to meet
the time-sensitive aspects of a low-cost loan.

How it can help you?
A rapid rescore is best used when your credit score is within a
few points of qualifying for a large loan, credit card or any
form of credit. It will ensure that your entire credit profile is
completely updated and ready for any loan application
process. Your updated credit score will also result in a
significant difference in the interest rate available to you.
The rapid rescoring process is fairly predictable as lenders
generally use simulator beforehand to see how the update
would affect your credit score. According to Adam Carroll,
Chief Education Officer at National Financial Educators, “A
0.5%-1% difference in interest rate may not seem much when
you are not looking at long term costs. But, every single
percentage that you can decrease means massive amounts in
savings later on.”
For example, say your current credit score will get you a
4.75% interest rate on a typical 30-year fixed-rate loan of
$250,000 and after rapid rescoring, your new credit score
qualifies you a 4.25% rate. Then this can help you save you
$74 a month or $26,737 over the life of your loan. You can
use online calculators to calculate the exact difference in your
case.
When it may not work
A rapid rescore does not raise your credit score alone but
rather updates your current credit profile. So, it will not work
if have recently missed a credit card payment, closed out a

line of credit, had a raise in hard inquiries, or any other form
of negative entry.
Rapid rescoring will also not work if the reporting creditor
does not acknowledge the item in question is a mistake. For
example, if you dispute a late payment and the creditor has no
record of timely payment or you cannot prove it then the
lender will not even attempt a rapid rescore.
It isn’t Magic
To succeed with rapid rescoring you need to participate in the
process. For example, if you are late on payments you will
have to pay up and get it to your lender before you order an
updated credit score. Likewise, you would also collect the
documentation to prove that the accounts were paid up. This
takes time and effort and you cannot depend on your lender to
do all the work.
Are there fees involved?
Rapid rescoring is a service provided by your lender or
mortgage broker and typically you do not have to pay a
separate fee for the service under the federal law (FCRA).
But nothing comes for free, so sometimes there may be a
small fee involved in using the service or even if they do not
charge you will be paying for your lender’s capabilities in the
interest rate and closing costs that you pay. However, in the
long run, this service can save you much more money than
what you pay.
Plan Ahead

Would it not be better to have one less thing to worry about
when you are in the middle of a stressful and complicated
transaction? Rapid rescoring does help fix inaccuracies
quickly. But ideally, if you check your credit reports
regularly, fix errors and keep your credit card balances low
you will have nothing to fix the next time you apply for a live