Borrowing Money Responsibly

Borrowing money responsibly

Whether you’re looking to purchase your first (or second) home, buy a new family car or pay off some credit card debt, it’s important to find a loan you’ll be able to comfortably afford. We’re here to help.

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What exactly is a credit score, and why is it important?

A credit score is a three-digit number, based on your previous credit history, which gives lenders like banks a measure of your use of credit. Credit scores influence the loan rates you receive and how much banks will be willing to lend you.

The most commonly used credit scores are FICO scores, which rate you on a scale of 300–850. The national credit score average in 2015 was 6951 and a credit score over 700 would normally be considered “good.” The higher your credit score, the lower the implied risk of lending to you.

Does my credit really “follow” me?

When you use credit or borrow money, your payment information will be reported to one or more of the three national credit bureaus. Credit bureaus use this information to create a credit report (or credit history) about you.

When you apply for a loan or apply to rent an apartment, a credit report will be requested from a credit bureau. Only people with a legitimate business need may obtain a copy of your credit report, however. For example, when you apply for a job an employer may obtain a copy of your credit report – but only if you give them permission in writing to do so.

It is a good idea to check your credit report once a year to make sure the information is accurate. By law, you are entitled to one free credit report every 12 months from the three major credit bureaus. Visit the Federal Trade Commission’s Web site, annualcreditreport.com, for your free credit report. Most information older than seven years automatically drops off your credit report and is replaced by new information.

If an error is found, the credit reporting agency must investigate and respond within 30 days. Errors should be reported directly to the credit reporting agency:

Equifax 1-800-685-1111
Experian 1-888-397-3742
TransUnion 1-800-888-4213

How do I choose the right mortgage?

Buying a home will be one of the most important purchases you ever make. Once you find the right place, finding the right mortgage will be the next step.

You will first have to choose between a fixed-rate and an adjustable-rate mortgage. With a fixed-rate mortgage, you will pay the same amount every month and can plan accordingly. An adjustable-rate mortgage, on the other hand, is fixed for a set period of time, and then fluctuates according to market inflation rates. Typically, this kind of mortgage offers a lower, more attractive, rate. However, if the market interest rate increases, it is likely that your mortgage rate will increase as well. This means that looking at the projected interest rates for next year and the years to come can give you an estimate of how your adjustable-rate mortgage payments will change.

Adjustable-rate mortgages have more variability than fixed-rates ones, and are hard to predict, so they are suitable mostly for individuals not planning on holding long-term mortgages.

Important Disclosure Information


This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

Loan products are subject to credit approval.

 

  1. FICO. "US Credit Quality Continues To Climb – But Will It Level Off?" FICO. N.p., 2015. Web. 27 Oct. 2016. http://www.fico.com/en/blogs/risk-compliance/us-credit-quality-continues-climb-will-level/  Back