1 / 24

8 Benchmarks for Borrowing & Credit Card Act of 2009

8 Benchmarks for Borrowing & Credit Card Act of 2009. Financial Planning for Women August 2009 Jean Lown. September 9 FPW. Don’t give your money to Bernie… outsmarting investment fraud Protect yourself, your parents, your kids. 8 Borrowing Benchmarks from Consumer Reports.

noura
Télécharger la présentation

8 Benchmarks for Borrowing & Credit Card Act of 2009

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. 8 Benchmarks for Borrowing &Credit Card Act of 2009 Financial Planning for Women August 2009 Jean Lown

  2. September 9 FPW • Don’t give your money to Bernie… outsmarting investment fraud • Protect yourself, your parents, your kids

  3. 8 Borrowing Benchmarks from Consumer Reports • Severe recession creates debt problems • Responsible borrowers lost jobs • Someone you know needs this help

  4. Warning Signs of Excess Debt • Relying on credit cards for daily purchases • Using home equity line of credit to extend purchasing power • Paying minimum on credit card bills • Using cash advances to keep afloat • Losing sleep over debts

  5. 1. 20% • Add up: • Monthly car payment(s) (loans & leases) • Average new charges on credit cards • Other non-mortgage debt payments • Total should be not > 20% of gross monthly income

  6. 2. 28% • Monthly mortgage + property taxes & insurance • Should not > 28% of gross monthly income

  7. 3. 36-48% • Total monthly debt (mortgage + non-mortgage) should not > 36% of gross monthly income • 36-48% is really scary • > 48%: seek help

  8. 4. 80% • First mortgage + any second mortgage or home equity line of credit should not > 80% of property’s value • A lower debt-to-equity ratio is better

  9. 5. 6 points • Low teaser rates on adjustable rate mortgages (ARMs) • Most ARMs have 6% point cap • If considering ARM, add 6% to the teaser rate and calculate the monthly payments • Worst-case scenario • If (with taxes & insurance) > 28% of gross monthly income: don’t do it!

  10. 6. 6 months • Need 3-6 months of living expenses in reserve for emergencies • How secure is your job? • Spouse or partner’s income? • How quickly could you find a new job? • Would you have to sell house and move for new job?

  11. 7. 36 months • Don’t take out vehicle loan for > 3 years • Longer terms: upside down • Owe more than vehicle is worth • Buy used instead of new • “Cars depreciate faster than they roll downhill.” (bankruptcy researchers Sullivan, Warren & Westbrook)

  12. 8. Updated FICO score info • FICO Credit Score needs to be higher to get the best rates. • Median (mid point) FICO® score is 723 • 760-850 needed for lowest rates • http://www.myfico.com/

  13. How to Dig Out • Assess your finances • Add up debts • Use PowerPay to develop a plan to repay • Stop borrowing • Use cash or debit card for daily expenses • Use 1 credit card & pay in full each month • Keep 1 card in reserve… in case of theft or fraud • Call creditors before they call you.

  14. Credit Card Act of 2009 • Limits interest rate increases & fees • 45 day notice of rate hike • Bans: Universal default, double-cycle billing, retroactive rate hikes • Info on how long to repay w/ min. payments • Payment of > min. must go to highest % balance • Promo rates must last at least 6 months • Prohibits raising rates in 1st year (unless variable rate) • Bills must be mailed 21 days before due • Limits cards to applicants < 21 years old

  15. Banks’ Response to New Law • Tightening standards on new applicants • Requiring more info on $ status • Rejecting more applicants • Offering lower credit limits

  16. Impact on Current Cardholders • Raising rates and fees • Switching from fixed to variable rates • Reducing credit lines • Closing accounts • Good to have 2 cards • Reducing teaser rate offers

  17. Future Credit Card Directions • “Era of easy credit is over.” WSJ • HH debt as % of disposable income: 130% • Move towards: • No-fee, no frills cards • Premium rewards cards with annual fees • Harder & costlier to get credit • Is this a good or bad effect?

  18. Check your Credit Report Definition: A continuing record of a borrower’s debt commitments and how well they have been honored.

  19. Free Annual Credit Report Obtain a free credit report once per year per credit bureau Experian, TransUnion, and Equifax www.annualcreditreport.com Ensure your report is accurate 3 times per year: August: Experian December: TransUnion April: Equifax

  20. Estimate your FICO Score • Range: 300-850 • http://www.bankrate.com/calculators/credit-score-fico-calculator.aspx • About FICO Scores: http://www.myfico.com/Default.aspx • (click on “About FICO Scores” near middle of page)

  21. USU Family Life Center Housing & Financial Counseling Center 493 N. 700 E. Logan at bottom of Old Main Hill 435-797-7224

  22. Power Pay Debt Reduction Software • www.powerpay.org • Stop borrowing until debts are paid • Make power payments • As one debt is paid, use that $ to pay another debt rather than spending it. • Get out of debt more quickly • Pay less interest

  23. Questions? Comments? • Don’t forget to respond to email regarding the FPW newsletter • Check out the updated FPW website • Stay tuned for emailed FPW survey • September 9 FPW: Outsmarting investment fraud

  24. Managing Debt: From Credit Cards to Foreclosures • 50-minute Webcast presented by Marilyn C. Dimitroff, CFP® • http://register.webcastgroup.com/event/?wid=0770913084424 • Please feel free to leave as needed • URL is in the August newsletter

More Related