“What rate can I get with my credit score?” is now “Can I get any rate with my credit score?”
June 21, 2009 by VideoCreditScore-Andy
Filed under Episodes
The question of “What will your interest rate be?” is now “Will you even get a loan?”
More and more evidence is surfacing that credit scoring is now becoming a go/no go decision tool. More people are facing denial of credit in this tight credit market. Here’s just a sample of how things have changed. myFICO used to publish rates for credit scores from 500 and above. Now, they are only publishing for 620 and above. That’s at least 12% of the population that’s being closed out from the data equation. I can’t say that people with 500-620 scores are being denied loans altogether, but the data doesn’t look good. LendingClub, for example, only accepts people with credit scores over 620.
These rates tell another story. People with the best credit scores are getting better deals than one year ago and people with 620 and below credit scores won’t get credit at all it seems. Prove me wrong, if you are reading this and you’ve been approved for a loan or approved someone else for a loan with a credit score under 620, I’d love to hear about it.
Just a reminder that looking at today’s weekly credit score/rate report shows you will save $109,800K with a 30 yr fixed loan of $300K. A year ago you would have saved $92,880. The math doesn’t lie. Today, you save $16,920 more over the course of the loan with the best credit than a year ago.
The big point of this is that your credit score matters more than ever. You should start tracking your FICO score to make sure you can save.
Chart from myFICO on June 21, 2009
Compare this chart with the same chart from August of 2008
30 Year Mortgage in 25 Years
June 8, 2009 by VideoCreditScore-Andy
Filed under Episodes
Here’s a look at my guest post on Ramit’s site I Will Teach You to Be Rich. We’ve all heard it before…time value of money… blah, blah, blah. So, let’s see some real world examples of how you can save money on your biggest ticket item…housing.
Instead of paying off your mortgage once per month, set up a system to pay it twice per month. I’m not telling you to double your payments. I’m saying that paying every two weeks WILL mean several years less of payments and
Here’s how it works with Bank of America [Countrywide] and I’m assuming it works this way with others. BofA has a plan PayPlan/26 which means instead of making 12 payments a year you are paying 26 payments a year. Note the math. It seems like you should be paying 24 payments a year, but that’s not how the calendar works, so you make extra payments. But, that’s a good thing. It’s like you are making 13 payments a year [the way BofA does it, more on this below*] Let’s take a look.
Scenario 1: Typical Mortgage
APR: 6%, $300K, 12 annual payments of $1798.65, total interest paid over 30 years, $347,514.57
Scenario 2: Making an extra payment each year
APR: 6%, $300K,? 26 bi-weekly payments of $899.38, total interest paid over 25 years, $276,591
You just saved almost $71,000 in interest payments. Wow, that’s like 18,000 lattes or one every day for the next 50 years.
What’s happens if you have bad credit and have higher interest rates than 6%. Moving to every two weeks helps even more. At a 7% interest rate, you will shorten your loan by 6 years instead of 5 years for the 6% rate. Better yet, you save from paying $98,545 in interest.
Scenario 3: Making extra payments each month
Okay, this doesn’t save you a lot more, but you stop payments 5 months sooner and your interest payout is $273,852 for an extra savings of $2739.
The problem with the scenarios above is unless they are automated, most of us will never do it. That’s why the Bank ofAmerica PayPlan/26 plan is great. It’s set it and forget it.
