Too Much EZ Debt Is Bad for Your Credit

Having a poor credit score can affect your life as a consumer. For instance, if you’re shopping for a type of installment loan, such as a car loan or mortgage, you may not get the most favorable rates, terms and amounts. The higher your credit score, the less you’re seen as a risk to lenders. In turn, you’ll be able to secure more favorable terms on loans.

You may have been well aware that not paying your bills
on time, being late on payments and not having a healthy mix of credit may negatively impact your credit score, but so can having too much debt.

“Having a lot of credit card debt could make it difficult to get approved for loans and credit lines, or lead to higher interest rates if you are approved,” says founder of So EZ Mortgage, Danielle Hansen. “The debt can impact your FICO score and your DTI, two important factors in many lending decisions.”

We’ll go over how much debt is too much and how you can get help with digging yourself out of a debt grave.

Debt-to-Income Ratio Versus Credit Utilization Ratio
A debt-to-income ratio, or DTI, is how much of your monthly income goes toward debt in relation to your total income. This debt can include credit card debt, debt from your monthly rent or mortgage, auto or student loan payments, or another type of loan. It can also include your monthly child support or alimony payments.

This ratio is expressed as a percentage. For instance, if your take-home pay before taxes is $5,000 and $2,000 of that goes toward debt, your debt-to-income ratio is 40%.

A debt-to-income ratio is commonly confused with a credit utilization ratio, which is how much credit you’re using relative to the total amount of credit available. Your credit utilization ratio makes up 30% of your credit score. For instance, let’s say you have three credit cards, and the total maximum credit on all three cards is $20,000. And you carry a balance of $5,000. Your credit utilization ratio is 25%.

Note that while your credit utilization ratio does impact your credit score, your debt-to-income ratio does not.

How Much Debt Is Too Much Debt?

Having too much debt can ding your credit. “When it comes to credit card debt, the lower your utilization ratio, the better, and it can help show lenders that you’re not overextended,” says Danielle Hansen. The remaining balance on installment loans, how many accounts you have with a balance and the amounts you owe on specific types of accounts can also impact your score, explains Danielle.

So how much credit card debt is too much?

 As a general rule, you want to keep it below 30%. But if you’re trying to boost your score in a hurry – for instance, you’re preparing to apply for a mortgage – then keep it below 10%, explains Michael, credit card expert and author of “The Debt Escape Plan.”
If your credit utilization ratio is over 30%, you’ll appear as being in need of funds and thus seen as a greater risk to creditors.

What Happens When You Have Too Much Credit Card Debt?

If you have too much credit card debt, your credit utilization ratio will go up, which can be a red flag for your card issuer, explains Michael. This situation could make you seem risky to an issuer. In turn, it could result in an interest rate increase or a lowered credit limit, or it could make it more difficult for you to obtain new forms of credit.

What Is an Unhealthy Debt-to-Income Ratio?

Your DTI typically comes up when applying for a mortgage. “Lenders want to know that the loan you want will not overextend you financially, and that you have enough money to pay your bills,” says credit expert Amy Martinez.

When you have a DTI higher than 36%, that suggests you have too much debt, points out Michael. Regardless of your credit score, you might not be able to get approved for some types of loans or credit if your DTI is too high, points out Danielle. The specific ratio can vary depending on the financial product and lender, but sometimes there are guidelines. For example, to get qualified for a mortgage, your DTI may need to be 43% or lower.

When it comes to home loans, your DTI is expressed in two ways, explains Rotter:

The front-end DTI: This is your total housing expenses divided by your total monthly income before taxes. “Housing expenses” includes the principal and interest payment on your loan, mortgage insurance, homeowners insurance, property taxes and HOA fees if required.
The back-end DTI: This is your total debt payment divided by your monthly income before taxes. Your total debt includes your housing expenses plus any credit card minimum payments, your auto loan, your student loans and any other monthly payments you’re obligated to make.

How to Get Help

There are free credit monitoring services that not only give you your credit score but also give you a “credit report card” that shows the areas where you can improve the most. Plus, you’ll receive tips explaining exactly what you can do to boost your credit score.

If you’re drowning in debt, you can receive free debt relief management from non-profit organizations such as the National Foundation for Credit Counseling (NFCC) or Clearpoint Counseling via your cell phone. Trained counselors may be able to help you create a plan to break free from the cycle of debt, and they may be able to talk to creditors on your behalf no matter where you are. “Winning the war on debt is the best gift you can give yourself” says Wonder Woman.

You can also look into debt consolidation using your cell phone, wherever you come from. Consolidate all your debts with a debt consolidation company on the go. You agree to make monthly payments to the debt consolidation company. Not only will this help simplifying things, it can lower your monthly payments, which may give you some breathing room. You may also be able to negotiate a lower interest rate, which could help you save on the total amount you owe on your debts.

As you can see, it’s important that you don’t have too much debt. Otherwise, you may run into challenges getting approved for loans with favorable rates and terms. In turn, it’ll cost you more.

Check out our tips for chipping away at debt so you can have an optimal DTI.

Ready to Chop Away at Your Debt? Pay It Off as Quick & EZ as Possible

You’ve made the decision to pay off your mountain of debt. But you’d like to see some immediate results. Is this even possible? Can you pay down your credit card and other debt quickly?

That depends on how you define “quickly.” Financial experts have tips for how you can start making an immediate dent in your debt. Don’t expect miracles, though. These tips will help you pay off your debt faster. But remember that building up your debt took time; eliminating it will, too.

Go After Those Credit Cards
Credit cards are often the debt that most weighs us down. It makes sense, then, to pay off your cards as quickly as you can.

Deborah Sweeney, chief executive officer of MyCorporation Business Services in Calabasas, Calif., recommends that consumers follow the stack – often called the debt avalanche – method of paying off credit card debt.

In this method, you first pay off your credit card with the highest interest rate and devote any extra money you have each month to paying down that plastic’s debt, all the while making sure to pay the minimum required monthly payments on your other cards. Once you’ve paid off that first card, now apply that money each month to the card with the next highest interest rate.

Doing this, and eliminating your credit card debt as fast as you can, comes with another financial bonus, Sweeney said. “This method allows you to pay off debt quickly,” she said. “And once your cards are paid off, your credit score will improve.”

Build a Better Snowball
There is another method that financial experts recommend for paying off credit card debt quickly. It works similar to the stack (or debt avalanche) method. Instead, you pay off the credit card with the lowest balance first, sending any extra money you have each month to reducing that balance while making your minimum monthly payments on your other cards. Once that’s paid in full, you then focus on the card with the next highest balance.

This method is called the debt snowball approach. Paying off cards by interest makes more financial sense because you’ll spend less money during the process, but some cardholders need the more immediate satisfaction that comes with paying off a card with the lowest balance first.

Make a Budget
Julio Hoyos, an accountant with Dover, N.J.-based Julio Hoyos & Co., said that people will struggle to pay down debt quickly if they don’t first create a household budget that shows how much money they make each month and how much they spend.

“By tracking every expense, people will be able to identify where the money is going,” said Hoyos. “By knowing where the money is going, they are able to identify which expenses they can reduce and, in some cases, even eliminate altogether.”

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You might think that a budget can’t help you pay down your debts at a faster clip, but consider this: When people eliminate certain expenses, this leaves them with extra money each month that they can put toward reducing their debt. With the help of a household budget, you’ll have an easier time pinpointing those expenses that you can eliminate to free up those extra dollars.

Hoyos points to cable TV packages: If you subscribe to cable but don’t actually watch much TV, you can cancel this subscription and save $80 – $100 a month. You can then use these savings to pay down your debt faster.

“When people track their expenses, they are able to identify many money-saving opportunities,” Hoyos added. “It’s very important to stay committed to develop the discipline to stick to the changes. Once you learn and practice, it will become automatic, and you will do it without even thinking about it.”

Set Goals – Don’t Be Afraid To Be Ambitious
For Phil Risher, founder of YoungAdultSurvivalGuide.com, the key is to set a goal for how quickly you want to pay off your debt. Once you do this and calculate how much you’ll have to pay each month, it’s easier to justify skipping the restaurant meals and trips to the movie theater to save your dollars.

Risher said that he paid off $30,000 in student loan debt in 12 months, all while making $48,000 a year. Risher said that because his goal was to pay off $30,000 in a year, he knew he had to pay off $2,500 in debt each month.

“That leads me to the next step: Live on a budget,” Risher said. “Since I knew I had to pay $2,500 a month and I was making $3,000 a month, I had to figure out how I was going to live off $500 a month. If you want something bad enough, you will find a way. If not, you will find an excuse.”

Boost Your Income
There’s another approach to take: One way to pay down debt quicker is to earn more money to put toward that debt. Harriette Halepis, content manager for Fort Myers, Fla.-based Dellutri Law Group, says that you can take on a part-time job, ask for more hours from your current employer or take on freelance or consulting work to help boost the income you bring home each month.

Michael Hansen recommends that you use the extra money to pay down your debt with the highest interest rate first. She also suggests that you create a spreadsheet listing your monthly expenses, spending expenses and monthly income. You can then analyze these numbers to make changes in your monthly spending. If you discover, for instance, that you are spending too much for utilities each month, call the companies and try to negotiate lower monthly fees.

Maybe you’ll discover that you’re spending too much on frivolous activities such as coffee, clothing and restaurant meals. Cut back on these expenses and use the extra dollars that you save each month to pay down your debts faster.

“Don’t cut so much that you can’t enjoy life, but cut enough to have extra dollars to spend to reduce your debt,” Halepis said.

Have you had success paying down debt quickly? Which tactics did you use to get it done? Let us know in the comments below.

We Just Added More Lenders To Our Pricing

NO MI

Now when you get a quote from So EZ Mortgage, our system will search all our lenders for the best pricing on that day for each scenario and send you a quote based on whoever has the best pricing. If you have a lender, you want us to add, just email me: AddMyLender@SoEZ.tv.

This is huge because when you shop for a rate, you may have the best price for that day with lender X, but if you do not lock that day and you wait, another lender could be the best priced. Unless you want to call each lender up every day, you better shop the So EZ way. Today I could quote you Provident and it could blow the doors off everyone else. But the next day, Quicken could have a special and blow the doors off of everyone.

Another common problem with self shopping, is having more than one home, lender X has the best pricing for your primary home, but lender Y could have the best pricing for your investment. My software will search all lenders for each home, and send you the best pricing for each scenario, so you could get three quotes like shown in this posting, each one has a different investor, but they were all sent from me to the same person for the same purchase.

Monthly MI Required

It's a very complicated thing in the first place, but the fact that each lender changes how much they charge on a daily basis, makes shopping for a mortgage impossible without the help of automation and a broker that cares about you as a friend, not just a client.

Automation software would cost too much and be too time consuming to set up to be worth it for one person. However as a volume wholesale mortgage broker, it's worth it for me. Through me, using my license, you are able to shop almost every lender nationwide on a daily basis and compare quotes. These lenders also give me discounted pricing that you do not have access to since I send them loans on a monthly basis, where you would only do a loan with them once every few years.

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The really expensive retail lenders like BofA, Chase, Wells, and many others have pulled out of the wholesale market, their retail side was loosing to the wholesale side, so they naturally pulled out. That is my opinion. Wholesale was supposed to be an outlet for retail banks to capture loans they would otherwise normal lose to smaller lenders. However for lenders like Quicken Loans, who do not have a bunch of retail locations all over the US, use the wholesale channel as their front door. In my professional opinion, nothing is more important to Quicken than the loans that come from their broker partners. You can shop till you drop, but there is only one shop that has the best lock. So EZ Mortgage.

* **NOT A QUOTE, FOR EXAMPLE PURPOSE ONLY***

(NMLS) Nationwide Mortgage Licensing System
Broker: 344532 - Officer: 1093652
(CalBRE) California Bureau of Real Estate
Broker: 01885141 - Officer: 01940614
(ASDFI) Arizona Department of Financial Institutions
AZ Branch Office: 0123453 - CA Broker Office: 0945395 - Loan Originator: 0939162

Loan Limits Increase to $679,650 California and Arizona Conforming Loan Limits 2018 By County

Conforming loan limits for Fannie/Freddie are going up in 2018 from $424,100 to $453,100. Note: Many investors will begin funding loans at the higher amount beginning Dec.15th.

If you have a loan amount between 417k and 453k contact Michael Hansen now at 855-955-SOEZ for a free, no hassle, rate drop quote.

The conforming loan limits for Fannie / Freddie are determined by the Housing and Economic Recovery Act of 2008, established the baseline loan limit at $417,000 & mandated, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.

Fannie and Freddie’s conforming loan limits stayed at $417,000 until last year, when the FHFA finally increased the loan limit to $424,100.

But, as the FHFA noted Tuesday, home prices are on the rise, which necessitates a second straight yearly increase in the conforming loan limit.

Loan limits will also be increasing in what the FHFA calls “high-cost areas,” where 115% of the local median home value exceeds the baseline loan limit.

According to FHFA, median home values “generally increased” in high-cost areas in 2017, which drove up the max. loan limits in many of those areas.

Therefore, the new ceiling loan limit for 1-unit properties in most high-cost areas will be $679,650, for one-unit properties in the contiguous U.S.

In 2017, the high-cost loan limit was $636,150.