Does a Lawsuit Affect Your Credit Score?

In the wake of the 2008 financial crisis, lenders aren’t as eager to approve loan and credit card applications. That means consumers must be more diligent in preserving their credit worthiness.

If you’re facing a lawsuit, you may be wondering whether the outcome will affect your credit score. The answer? It depends. And what about if you’re the one filing the lawsuit?

Does Filing a Lawsuit Impact Your Credit Score?

If you’re the one filing a lawsuit, will your credit score be impacted? Probably not.

It doesn’t matter if you’re suing the government of California or your neighbor down the street; filing a lawsuit probably won’t impact your credit score.

But if a judgment is made against you, the effects may be very different.

Can a Lawsuit Hurt Your Credit?

Yes. FICO says there are certain situations in which public records would have an effect on your creditworthiness.

Lawsuits, foreclosures, bankruptcies and other financial-related public records will likely be a factor in your credit score because they contain financial information. That information is usually reported to the credit bureaus.

A lawsuit can affect your score if there’s a judgment against you. Along with owing money as part of the civil judgment, there are also legal costs that will add to your monthly expenses.

Can You Prevent Your Score from Dropping?

Yes. Losing a lawsuit and having a judgment against you doesn’t automatically mean that your credit score will take a hit. You have the power to keep your score intact if you take a smart approach.

First and foremost, make sure that you’re still paying your bills and paying off your debts during and after the case.

Having to deal with a lawsuit can be stressful, and you may feel overwhelmed. It’s easy to forget to pay a bill here and there in this scenario, but missing one payment will only add to the stress. Not only will you have to pay late charges, but you’ll have to worry about the issue being reported to the credit bureaus.

If there is a judgment against you, make an effort to pay it off in full as quickly as you can. Failing to pay the judgment in a timely manner may result in it going into collections, which will only add to your monthly bills and stress.

How Long Does a Lawsuit Affect Your Credit?

A negative public record can stay on your credit report for 7-10 years. Tax liens typically stay on your report indefinitely.

Judgments from lawsuits usually stick around for seven years – even if you pay off the judgment quickly.

It’s best to avoid a negative judgment altogether if you can, but if the other party won’t drop the suit, you may have no other option but to accept the impact it will have on your credit. In some cases, consumers can dispute the judgment later on and have it removed from their credit reports. While not impossible, this is an uncommon scenario.

Lawsuits can impact your credit score if there’s a negative judgment against you, but continuing to pay your bills and paying off the judgment as quickly as possible will minimize the impact.

4 Tips for Finding the Right Online Lender for Your Business

Most businesses need capital at some point, but finding a lender can be difficult. Online lenders offer a quick and convenient way to get the cash you need without having to take time out to visit your local bank.

Finding a reputable online lender can also be a challenge. Use these four tips to find the right lender for your needs.

1. Make Sure the Lender is Transparent about All Fees and Costs

When taking out a loan, it’s important to know and understand all of the fees involved. Some lenders are very transparent about extra costs, while others slap their borrowers with hidden fees when they get their first bill.

APR is only one piece of the puzzle that you need to consider. Additional fees might include:

  • Origination fees
  • Application fees
  • Processing fees

Make sure that you know exactly how much money will be deposited into your account after paying fees, and ask about any prepayment penalties you might incur. Read over your loan documents carefully before signing on the dotted line.

“We actually encourage our customers to pay off their loans early,” says CreditCube, an online lender. The company is also transparent about their fees and the APR they charge on loans.

Unscrupulous lenders sometimes offer borrowers the chance to refinance their loan before the payment period ends, and then charge you an early penalty fee. You’ll also have to pay for fees associated with the refinance. Borrowers who go this route often wind up with triple-digit APRs.

The bottom line: Know exactly how much you’re paying for your loan.

2. Know Your Options

Research lenders before you decide to borrow, and go beyond their website to learn more about their offerings and the customer experience.

  • Does the lender offer excellent customer service?
  • What rates do they offer?
  • Do their loans have long terms?
  • What are real borrowers saying about the company and their lending practices?

Find a lender that’s transparent about fees, offers fair terms and rates, and provides excellent customer service.

3. Make Sure Your Documents are in Order

Before you even submit an application for a loan, make sure that you have all of the appropriate business documents in order.

You’ll need your business records for the paperwork part of the loan process, but you’ll also need the data from your records for other things, like:

  • Determining how much money you need to borrow
  • How much you can afford to pay in payments

If you’re having trouble figuring this out on your own, the Small Business Administration‘s Development Center offers one-on-one mentoring and workshops that can help.

4. Determine the True APR of the Loan

Some lenders make it difficult to determine the true APR of the loans they disperse. Instead of listing the APR of the loan, they might use terms like “factor rate,” “rate,” or “cost.”

A 15% factor rate, according to the Responsible Business Lending Coalition, could equate to a 50% interest rate.

A loan’s APR includes the fees, interest rate and the loan term. If a lender won’t disclose the APR, move on to another company.

3 Things to Do If You Can’t Afford Your Rent on Time

While no one wants this to happen to them, it’s not uncommon for finances to stretch a little thin sometimes to the extent that you’re going to have trouble paying your monthly bills. Some bills you can let slide or get by with only paying a portion of the payment. But when it comes to your rent, this is one bill you’re never going to want to get behind on. Not only could this be a slippery slope to have to overcome, but you could end up without a place to live if things get too far. So to help you retain your home and navigate this tricky situation, here are three things you should do if you can’t afford to pay your rent on time.

Understand Your Lease

To know what you’ll be getting yourself into if you can’t afford your rent payment, Constance Brinkley-Badgett, a contributor to Credit.com, recommends first reading your lease and seeing what is says about this situation. Your lease should give you some guidelines as to what will happen if you’re late paying your rent or only pay a portion of the balance. If you’re only going to be a few days late and will only be given a small fee, you might just want to take that as it is. But if you won’t be able to pay and your lease says this could result in you being evicted, you’re going to have to find another way to make things right.

Speak With Your Landlord or Property Manager

After you’ve read your lease, you should then speak to your landlord or property manager. By letting them know that you’re going to be late in paying your rent or that your payment might not be in full, you have a better chance of working things out than if you try to slip something by them. Marcia Stewart, a contributor to Nolo.com, shares that by being upfront and honest about your financial situation with your landlord, they may be much more willing to be lenient with things like penalties or fees. This could make your negotiations go much smoother.

Seek Financial Assistance

If this situation is something that goes beyond just one month of bad financial planning, you should probably consider a more permanent solution. When you simply can’t afford to live somewhere, you may want to try looking for a less expensive place to live. Cara Newman, a contributor to YoungMoney.com, shares that you can also seek financial assistance from many organizations, like your state’s rental assistance programs, the Housing and Urban Development Department, or the USDA Rural Development Program. If you qualify, these programs could be very helpful in paying your rent each month and keeping you in a safe home.

If you’re concerned about your ability to pay your rent on time this month, use the tips mentioned above to help face this problem head on.

5 Things to Consider Before Applying for a Loan

Applying for a loan is an important decision for any individual from the age you start pursuing your professional education to when you are in the process of making your own house and settling in. Loans may be an excellent way to finance such projects, but they come at a dreadful price other than the basic amount you have to pay back: the interest rate. The higher the interest rate, the more you will lose from your income just for the sake of financing your loan.

This article will highlight the main aspects you should check for before applying for a loan, so that it does not become a lifetime burden on you.

 

  • The Interest Rate

 

This is by far the most important catch to consider in the case of loans. If you are an employee of the financial institution you are applying for a loan from, chances are that the interest rate will be lesser than for other clients, so this is an ideal situation.

In other cases, you will need to search a lot before you arrive at a decision from where to borrow. Your financial history goes a long way in determining how trustworthy you are to a creditor.

 

  • Loan Security

 

Securing your loan through assets is a common way institutions measure your intention and propensity to take and pay back the loan you are taking. Most firms will ask for security in the form of an asset in case you are unable to pay back the loan, because in the unfortunate event of bankruptcy, unemployment, or death, the institution does not want to lose its money.

 

  • Present Income

 

You need to be aware of the reliability of the sources of income through which you are managing your finances presently. This is important because if these sources are not able to meet the demands and satisfaction of your creditor, your chances of getting the loan amount you are looking for will be very slim.

Do not apply for loans with unrealistic aims such as cutting down essential spending, because the pressure on you and your family will likely be disastrous.

 

  • Credit Score

 

Institutions are keen to check your credit score as a rough estimate of how worthy you are in terms of your ability to pay back, so thoroughly review your annual report and make sure you cut any loose ends such as verdicts of unlawful practices or payment defaults.

This information can be found on your credit report, so it is advised to regularly request for your report and review it.

 

  • Managing Finances

 

After being credited with your amount, the pressure of repayment will rise every day, and even a delay of one day in your payment of installation can cause the institution to monitor your finances and develop low trust in you.

With a loan, especially when the servicing amount is not cut at source, it is a good practice to make sure you separate out your payment at the start of each month.

Refinancing may still be an option

To no one’s surprise The Bank of Canada has left its key interest rate unchanged at 0.5%. After reading the latest Monetary Report, it doesn’t sound like it will raise its policy rate any time soon. Inflation is flat, as is wage and export growth, and there is still uncertainty in the US and globally.

Despite record low interest rates, some new home buyers are finding it challenging to qualify for a mortgage due to a new round of rule changes announced late last year. These changes have also affected existing mortgage holders who may want to refinance to get a lower rate.

While low interest rates and robust regional housing, markets continue to be the norm, Canadians are still burdened with record-high debt loads. The ratio of debt to disposable income rose to 167.3% by the end of 2016. That means Canadians owe $1.67 for every dollar of disposable income, up from $1.66 the year prior.

If you’re sitting with equity in your home yet can’t seem to manage your debt payments, refinancing could still be an option. With credit card interest rates often pushing the 20% range and unsecured lines of credit in the 7% and higher range paying off high-interest debts can make sense.

Let’s review a refinance. Specifically, you are increasing the amount of your mortgage to pay off debt. Your actual mortgage payment may or may not increase, depending on a number of factors, and you may incur a penalty to break your existing mortgage if you are refinancing midterm, but your overall monthly payments should decrease. You could be paying off the refinanced debt at a much lower interest rate, which could save you thousands of dollars in interest in the long run.

Here are some reasons to consider a refinance:

Decrease your overall monthly debt payments by using your equity to pay off those high-interest credit cards or unsecured loans, which can help you better manage your budget.
You can refinance to purchase another property. Using the existing equity in your home can be a great way to buy a rental property which, if done right, can also make the interest you pay tax deductible.
You could also take out some of the equity for investment purposes.
Or you may want to refinance to renovate.

As you can see there are many factors to consider before deciding to refinance. Each individual’s financial situation is different. Call me and we can discuss the options available to you.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

What’s going on with my appraisals

Changes in mortgage rules for home buyers and insurers certainly have had an impact on the housing market, and those changes have impacted property appraisals as well. Conventional mortgages – up to 80% of the value of the property – historically, were required to have a full appraisal. Now, in many areas of the country, an appraisal may also be required on insured mortgages — 80 to 95% loan-to value.

The decision to approve a conventional mortgage, after all other lending criteria have been satisfied, is made on a property’s fair market value. This is defined as the market value of an interest in land at the highest price reasonably expected, when sold by a willing seller to a willing buyer, after an adequate amount of time and exposure to the market.

So who determines the value of that property? One could argue that the market itself determines the value, which is true, but from a lender’s perspective that number must come from an independent third-party – the appraiser. An appraiser, who is specifically trained and has sufficient experience, will be asked to offer an impartial, written opinion of the property’s value.

Realtors normally use a comparative market analysis (CMA) to evaluate a property’s value based on local market data. Agents analyze listing and sales data for comparable properties in the area to recommend a price to list or to offer. However a CMA is not an appraisal. Although appraisers use the CMA approach, they use it in combination with other factors to determine the value of a property.

The major difference is that appraisals are done for a specific client — the lender. Because real estate is the major security for mortgages, the market value estimate needs to be as accurate as possible. Appraisers use ‘sold’ properties information only and compare similar property types, in close proximity, that have sold within a relatively short period of time – usually 90 days.

Not all residential properties are subject to a traditional appraisal. If the property is in an established area with similar properties then sometimes the price can be validated electronically. This model of appraising property, called automated valuation model (AVM), has become quite popular in the last 10 years.

However, given the nature of the housing market these days, mortgage lenders have moved away, in many areas, from AVMs for conventional mortgages, and for some high-ratio mortgages as well, and are asking for live, full on-site appraisals.

At the end of the day, an appraisal must reflect a property’s realistic true market value and needs to be backed up with accurate data.

So why does an appraisal come in lower than expected?

With the introduction of bidding wars, where, in some areas, prices may be artificially inflated, appraisers are still tasked with coming up with a property’s fair market value. Rapidly changing markets can be very challenging for an appraiser to properly evaluate a home’s worth.

Appraisers will try to get to the purchase price when evaluating a property. However, sometimes the sale is a few weeks ahead of the market. If prices are increasing, it may not show up in their analysis yet and the appraisal will reflect a lower value.

At the end of the day, the appraisal has to be a realistic evaluation of a property’s true market value and be backed up with data.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

The Reasons You May Be Declined for a Debt Consolidation Loan

When individuals begin to experience financial difficulties, one of the first things they do is consider contacting debt consolidation Toronto firms. This is an option for solving debt issues by lowering interest rates while also combining all debts into a single monthly payment that is more manageable for them. Although this is an excellent idea for many individuals, getting approved for this type of loan is not as simple as many people believe.

The following article outlines several reasons why a lot of people are declined when they apply for debt consolidation loans. Once you understand why you can be denied, you can discover what you can do to improve your chances of being approved.

Credit Score and Credit History Issues

This is generally the primary reason why you will be denied when applying for a loan to consolidate your debt. Once a lender receives your credit report, they will look for a history of delinquent payments, judgments and current debt collections against you. These are factors that can negatively affect your credit score.

If you have several outstanding high balances, they can complicate the problem even further. With so many deciding factors, you should take the time to research how credit reporting agencies calculate consumers’ credit scores.

Low Income

Typically, payments for debt consolidation loans are more than the minimum payment you are probably making on your credit cards. Unfortunately, by the time an individual realizes that debt consolidation is an option for them, they may not be able to make more than a minimal payment.

Were you aware that the minimum payments most credit card companies require are so low, you would be paying the balance off in decades and not months? This is true if you stopped using the card altogether, and simply made the minimum payment.

A debt consolidation loan does not give you the option of paying the loan off over the course of several years, unless the loan is secured by collateral like a home. In this case, the loan would simply be a second mortgage. These loan payments are scheduled so the entire loan can be paid off within 5 years. This will mean that every payment would need to be set at an amount that would allow you to pay it off within this period of time.

If it is determined that your income is too low to cover the estimated monthly repayment amount, you will be declined.

A Lot of Debt

Most credit unions and banks will generally only allow applicants to borrow no more than 40% of their gross yearly income. So, what does this mean? This means that should you decide to apply for a loan with your bank, the bank will combine the proposed loan with your current debt payments. This will determine if your TDSR (Total Debt Service Ratio) exceeds 40% of the total income you make before taxes. If the loan will place you at a percentage higher than this percentage, you will have to consider trying to apply for a smaller loan or even forgoing the loan completely.

If you have been denied a debt consolidation loan, consider asking someone to co-sign. You can always speak to a counselor to help you gain some perspective on your financial situation, along with ways to remedy your situation.

Debt and debt settlement services

The debt-to-income ratio has hit the headlines again. This time the ratio rose to 167.3 % in the fourth quarter of 2016 compared to 166.8% in the third quarter. That means for every dollar of disposable income, consumers owe $1.67. Approximately 63% of that debt is in mortgages.

While this increase worries some policy-makers, studies have shown that consumers have been able to pay their debt relatively easily. Low interest rates have allowed consumers to pay down more of their mortgage principal, with payments split almost evenly between interest and principal in the fourth quarter.

But for some, the debt load is unmanageable and they search for solutions. You are no doubt familiar with advertisements from debt settlement services that promise to settle a consumer’s outstanding debt, for a fee. The caveat is buyer beware. If you’re considering this option, make sure to do your research and find a reputable company to work with. Or, I may be able to refer you.

Before you pay upfront fees or service charges, I may be able to help. Much of what debt settlement services offer can overlap with the services of a licensed mortgage broker.

Here’s how it works. Mortgage brokers can arrange debt consolidation on a mortgage renewal or on a refinance. When arranging a consolidation mortgage loan on a refinance or renewal the amount of the mortgage principal may be increased to pay out the total debt amount. This becomes part of the mortgage commitment and a condition of the mortgage loan. On closing, your lawyer will disburse the funds to your creditors and register the new mortgage.

What you need to know
A refinance alters the terms and conditions of your mortgage; specifically you are increasing the amount of your mortgage to pay off debt. Your mortgage payment may or may not increase, depending on a number of factors, and you may incur a penalty to break your existing mortgage if you are refinancing midterm. Depending on your current mortgage you could be paying off the refinanced debt at a much lower interest rate, which could save you thousands of dollars in interest in the long run.

As with all renewals, it’s always a good idea to review your mortgage with a mortgage broker who can shop the rates for you and get you the best deal, tailored to your particular situation. And, if you decide to switch lenders, there are no penalties at renewal time.

One of these options may be the perfect solution if you’re struggling with debt. Call me today for more information.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com

Start Getting Out Of Debt Now

Debt sucks and it can ruin a lot of things for you. It can cause you to lose your home or to not be able to buy a home in the first place. It can make it impossible to get a loan, even to get a new car when your old one breaks down.

It’s not easy getting out of debt either. Like weight gain, you didn’t go into debt overnight or that quickly, so it will take some time to work your way out of it. Here are some things you can start working on in order to dig your way back out of debt.

Pay Off Those Loans

Start by paying off any loans you have out there. Loans are often in large sums of money, so getting them paid off can help with a big chunk of your debt. If you have larger loans you’re not going to be able to pay them off over night.

One thing that may help some is to pay off more than just the minimum you owe. This will help you begin to knock off that debt a little bit quicker and bring down the amount that’s getting added to it monthly from your interest rates.

Clear Those Credit Cards

After your bigger loans (and even the small ones) are dealt with, it’s time to start clearing up your credit card debt. Do not cancel any of your credit cards until you have them all down to a zero balance. This will do more bad for your credit than good.

While you’re working on paying off your credit cards you shouldn’t be using them or applying for new ones. Instead, use cash when you need to shop, or a debit card directly connected to the money already in your bank account. You’re just making it harder to pay them down if you keep using them.

Looks At Your Credit Report

Now that you’ve been doing some work on your open accounts, it’s time to take a look at your credit report and see what kinds of things you’re getting penalized for when it comes to your credit score. Find out if you can clear any of these debts or if they are items that have already been charged off.

Cut Back On Bills/Expenses

Once you’ve dealt with all of that debt you want to do what you can to make sure you don’t find yourself in debt again. You may even want to start doing some of this ahead of time so that you have more money to go toward paying off your debts.

This includes finding ways to use less electricity, watching your heater and air conditioner temperatures, and even finding things you can cut from your entertainment expenses. If you have both cable and a few streaming accounts, cut one or more of them. You don’t need them all!

The Four Types of Creditor Insurance

Home is more than a place you live. It’s your family’s haven from the world. But what if something happened to you? What would happen to the home you’ve invested so much in? You wouldn’t think about owning a home without insuring it, yet the odds of your house burning down is more remote compared to the odds of experiencing a life-changing event such as a job lay-off or a disabling accident.

Mortgage payments don’t stop when you’re unable to work so many home owners opt-in for mortgage creditor insurance. This type of mortgage protection insurance preserves ownership of your family’s home by making sure the mortgage keeps getting paid – even during the most difficult times.

Here are four types of mortgage insurance available:

Life Coverage: Mortgage life insurance provides security to both you and your insured co-borrower. If your co-borrower does not qualify for life insurance, you can still apply. Also known as mortgage insurance or creditor insurance, it’s offered by lending institutions and us. It is a life insurance policy that pays the balance of your mortgage to the lending institution if an insured person listed on the mortgage passes away.

Disability Coverage: This insurance is designed to pay a portion or all a homeowner’s mortgage payment if they become disabled — up to 24 months per occurrence. Individuals who opt to take advantage of this type of insurance need to take care to understand the policy completely. Determine the length of time the policy will pay mortgage payments during an episode of short-term or long-term disability. What dollar amount of the mortgage does the policy pay? Is there a waiting period associated with payment from the policy?

Critical Illness Coverage: What if it happens to you? When you survive a critical illness, you may not be able to return to work and your expenses could increase dramatically. If you are diagnosed with one of the 15 covered critical illnesses, based on our service provider’s criteria, which includes certain types of cancer, your mortgage payments are covered for 24 months, whether you return to work or not. Key questions to ask: What critical Illnesses are covered? What happens if I have an acute heart attack, recover in a few weeks or months, and return to work? Does my disability insurance cover me for living benefits? What cancers are covered? Do I need to take a medical examination? Mortgage Critical Illness Insurance is a benefit you enjoy while you are alive. It builds on your Mortgage Life Insurance to complete your protection.

Accidental Job Loss Coverage: If you are injured or are unable to work or become involuntarily unemployed, your monthly mortgage payments will be covered up to six months per occurrence.

If you don’t have any of these coverages now on your mortgage, we may be able to add them on.

Call me for more information.

Guy Ward is a Mortgage Broker in Calgary, Alberta with TMG (The Mortgage Group Alberta) and can be contacted at www.guythemortgageguy.com