My Mind on Mortgages » Credit

Credit Card Rates Rise as Mortgage Rates linger at all-time lows

Evan — Mon, 23 Aug 2010 15:16:01 +0000

I thought it was interesting that as mortgage rates linger at all-time lows credit card interest rates have been steadily rising and are now at 9-year highs. This article in the WSJ this morning explains why. Here are a couple of the highlights:

*”New credit-card rules that took effect Sunday limit banks’ ability to charge penalty fees. They come on top of rule changes earlier this year restricting issuers’ ability to adjust rates on the fly. Issuers responded by pushing card rates to their highest level in nine years.”

*”In the second quarter, the average interest rate on existing cards reached 14.7%, up from 13.1% a year earlier…”

*”More increases are looming as card issuers respond to the new penalty-fee limits…”

Deleveraging is the word of the year

Evan — Mon, 29 Sep 2008 19:31:54 +0000

The Economist featured this great article today about the fact that not only financial firms but businesses and individual households will be forced to deleverage over the course of the next few years.

Among the points that I found interest in:

*In the near term delveraging of banks, hedge funds, and households will likely depress asset prices lower. This is because as people sell assets to pay-off debt (deleverage) they will increase the supply of assets in the marketplace.

*Even if the bailout plan goes through the financial industry will likely suffer for sometime making credit harder to come by.

*Thanks to the impact of devleveraging, “a shortfall of bank capital of around $170 million may reduce the potential supply of credit by $1.7 trillion.”

*”Morgan Stanley reckons that total American debt (ie, the gross debt of households, companies and the government) has risen inexorably since 1980 to more than 300% of GDP (see chart), higher than it was in the Depression.”

Multiple inquiries on credit are not as bad as you think

Evan — Mon, 18 Aug 2008 15:48:14 +0000

Often times our customers are hesitant to grant us permission to access a new credit report for them because of concerns that it will hurt their credit score. The problem with not reviewing a client’s credit history and credit score is that we end up proposing mortgage options that may change once we do pull a credit report. When we’re unable to deliver on our proposal it is not only frustrating for our clients but also ourselves because we try to take great care of our reputation.

I came across an article on Inman News by Dian Hymer in which she helps explain why for most people allowing multiple lenders to pull a credit report WILL NOT impact their credit score to the point where it will adversely impact the terms they are receiving on the loan.

Among her points that I like:

“The FICO credit-scoring model ignores all mortgage inquiries made within the last 30 days, so they will have no impact on your score.”
The number of new inquiries is counted towards the “new credit” factor in determining your credit score. The “new credit” factor makes up ONLY 10% of the equation.

You may view the article yourself by visiting this link.