Improving Your Credit Rating

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Perhaps you want to get a good mortgage, or maybe you simply want to qualify for better rates on credit cards or personal loans. Whatever the case, a good credit rating can be invaluable. There are a number of steps you can take to give your rating a boost. Some are long-term strategies, while others are surprisingly quick.

Look at Your Credit Report

You will be in a far better position to look at your credit rating if you actually have a look over your credit report. This can help you identify where your situation is at the moment, but also see if there are any mistakes. Sometimes, information relating to someone you live with or even a previous occupant of your home can accidentally become attached to your credit report, and this can result in you being falsely marked down. If you don’t identify the problem and request it be corrected, the mistakes will just sit there, unnoticed except for the effect they have on your overall rating.

Borrow

Whether you have actual bad marks in your credit history or are just an unknown quantity with no history of borrowing, the best way to improve is to take out some credit. This is easiest to do with a credit card. Even if you don’t qualify for the kind of credit card deal you want at the moment, take out the best card you can and use it for small amounts of spending. Pay them back promptly, before interest accrues, to build up a reputation as a reliable borrower.

Cancel Old Cards

If you have lots of old credit cards you no longer use, now is the time to cancel them. A lender looking at your credit report won’t be aware that the cards are disused. They will simply see that you have a lot of credit cards in your name, and be concerned that this might mean you are struggling to manage your finances. Making sure you cancel your old cards will noticeably improve your rating.

Know What Goes on Your Report

It is useful to know exactly what does and doesn’t go onto your credit report in order to appreciate which things will have an effect on your overall rating. For example, many people don’t realise that bill payments can appear on their credit report. Late payment of a bill can bring your credit rating down in much the same way as a late loan repayment.


New European Laws see Buy-to-Let Mortgages Tightened

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New laws have been passed by Europe which tighten up the regulations surrounding buy-to-let mortgages and make it harder for would-be landlords to obtain loans. Tens of thousands could find they are newly ineligible to take out a buy-to-let mortgage, and many other borrowers will have to pay more than they would previously have done.

The changes will have to take place by March 2016 at the latest. It is expected that they will place further strain on a housing market that has already been weakened by other changes to mortgage rules. September has seen zero growth in the British property market, according to data from Hometrack – the first time this has happened for more than a year and a half.

The changes are designed to affect “accidental landlords,” and change the ways in which they are able to obtain credit. This category includes those who let after failing to secure a sale, for example, or those who let a property that they have inherited. These are cases where, as a document from the Treasury put it, the borrower finds themselves in the position of landlord “as a result of circumstance rather than through their own active business decision.” It is thought that these “accidental landlords” could represent up to one in five current buy-to-let mortgage holders.

The introduction of tough affordability checks could also affect older landlords who wish to supplement their upcoming retirement income through letting a property. This is because lenders often stipulate that borrowers must be on-track to repay the full amount prior to retirement.

To obtain a “regular,” home-buyer’s mortgage, borrowers have to go through strict checks to ensure that they will be able to afford their mortgage not only in the short term but also in the event of future rate-rises. To establish this, lenders assess both their income and their outgoings in-depth. Previously, much of the regulation surrounding these mortgages and affordability checks has not applied to buy-to-let mortgages, but under the new system a much stricter framework will be imposed that is more in line with the mainstream mortgage system.

There are currently around 1.6 million holders of buy-to-let mortgages in the UK, and 151,000 new buy-to-let mortgages were taken out last year.

A number of experts have expressed concerns over the impact of the new rules. Speaking about what constitutes an “accidental landlord,” Rosanna Bryant, a partner at Addleshaw Goddard, said “The line that is drawn isn’t that obvious.”

Finance and Leasing Association head of consumer finance Fiona Hoyle expressed concerns about the speed with which lenders would have to implement the changes.

“Firms will only have nine months to get to grips with it, and that’s not really how mortgage lending works – there is a pipeline.”


Number of mis sold PPI claims drops for the first time

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The number of claims concerning Payment Protection Insurance (PPI) has dropped for the first time in years according to the latest figures from the Financial Services Compensation Scheme (FSCS).

In the 2013/14 tax year, the FSCS dealt with 12,000 claims compared to around 19,000 the previous year. In total it paid out £243m in compensation, protecting more than 34,000 people who could not get redress from their lender.

A financial claim safety net

These claim figures and compensation amounts may seem low, but that’s because the FSCS only deals with financial claims where the lender has gone bust. It is a safety net for mis sold consumers who would otherwise have no hope of getting their money back. The number of Payment Protection Insurance claims handled by the FSCS only makes up a small portion of the total number of PPI claims being made in the UK, with the majority being processed and paid out by banks themselves. Many of which used a ppi claims calculator to worth out their refund.

Since 2001, the FSCS has paid out billions in compensation to over 4.5m people but in 2013/14 it saw an overall fall in the number of financial claims in received. The Scheme received around 39,000 new financial claims compared to 62,000 the year before. These claims can be about anything from PPI and mortgages to bank account fees and savings products.

PPI claims management companies proving popular

Although the total number of PPI claims received by the Scheme dropped, the number of claims that are PPI related compared to non-PPI claims actually rose from 30% to 37.5% suggesting other financial claims dropped off more severely than PPI. Over two-thirds of the PPI claims received by the FSCS came through claims management companies.

About the FSCS

The FSCS is funded through a system of levies imposed on financial institutions, the idea being that the money is there for consumers should that lender go bust – it’s like an insurance product.

In 2013/14 the levies totalled £1.1bn compared with £726m in 2012/13, but the amount is subject to change depending on how well the FSCS does its job. As part of its commitment to reducing costs for levy payers it recovered £353m from the estates of failed firms during the year, meaning existing banks pay less of a levy.

Speaking about the Scheme, FSCS Chief Executive, Mark Neale, said: “The FSCS is there for consumers when authorised financial services firms go bust. Last year we paid out more than £240m in compensation to people that might have put their savings into a credit union that failed, had a PPI mis-selling claim, or might have been given bad investment advice.”


Government Debt increases by further £13bn

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In May the government borrowed more than expected which further put a dent in Chancellor George Osborne’s effort to shrink the deficit. Official figures from the Office of National Statistics (ONS) stated that public borrowing had no escalated to £13.4bn for the month of May. This is somewhat shocking due to the fact that the public deficit for this year alone has already amounted to £24.3bn making it 8.7% higher than it was a year ago. The figures for the previous month were initially estimated to be around £9.35bn.

The Office of Budgetary Responsibility (OBR) has calculated the estimate yearly borrowing for the public sector to be £96bn for the 2014/15 financial year. However, economists doubt that this will be true by stating that the chancellor will have a tough time meeting this borrowing target. A statement released by the treasury however said that the government is well “in line with the budget forecast”.

The Treasury explained it’s larger than forecasted borrowing figures by stating they were predominantly effected by abnormal receipts in the past month when the Bank of England transferred £3.9bn in interest payments that were due on government bonds. Further, the government received a boost of £0.9bn in a deal with Swiss authorities in charge of tax to compensate them for the schemes designed to allow UK nationals to dodge tax. Further positives were seen from the income received from income tax and national insurance which were 0.3% better than the same time last year.

However, so far this year tax and NI receipts are 0.8% less than they were in the first two months of the previous tax year. Government officials stated that this is because individuals and companies delayed their bonus payments to be given when the top rate of tax is reduced from 50% to 45% at the beginning of the new tax year.

Inevitably, many people would ask the question, if figures show that more people are in work then why is the government not receiving more in income tax? Since last year there has been an increase in the employment figures by 700,000 more people now in work. However, it would appear that a good proportion of those people are in part time work and in low paid jobs. Nevertheless, a good reason remains unknown. It is for the Chancellor and the government now to reflect on the previous month’s borrowing and readjust their spending plans for the remainder of the financial year in order to meet their expected borrowing figures and avoid further increasing the UK debt.  


A Summary of the 2014 Budget

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The following is a basic summary of this 2014′s Chancellor’s Budget:

The GDP is estimated to increase by 2.7% and by 2.5% in 2018. Meanwhile the estimated deficit in 6.6% of GDP in 2014, then declining to 0.8% by 2017 and 2018, this will bring an extra 0.2% in 2018 and 2019.

Borrowing is estimated to be £108 billion in 2014, which will lead to approximately extra £5 billion in 2018 and 2019. The discount rate to businesses will be extended for a further 3 businesses too for a Government lending to UK businesses  to help with exports rose to £3 billion and these interest rates have been reduced by a third.

In 2017 there will be a new 12 sided £1 coin in circulation.

There will be a rise of25% on duty on fixed-odds betting, however duty on Bingo will be reduced to 10%. Duty on tobacco will increase by 2% higher than inflation. Despite duty on Beer will be reduced by 1p per pint. Duty on cider and spirits will remain the same.

Fortunately the duty on fuel will remain the same and a cap on the carbon price to £18 per ton; this should save families £15 a year.

In the housing sector, £140 million will be available to maintain and repair flood defence and £200 million will be on hand to repair pot holes. Fresh legislation will enable Welsh government to control tax and borrowing, which will help improve the M4 and other infrastructure requirements.  Also there will be 200,000 new homes built.

There will be a cap on Welfare of £119 billion in 2015 and 2016, which will increase to £127 billion in 2018 and 2019. Child benefit, incapacity benefit, winter fuel payment and income support will be affected but Jobseeker’s Allowance and the state pension is excluded from this cap.

A single new Isa will replace separate cash and shares Isas and the tax – free savings limit will increase to £15,000 from July. The 10p tax rate will cease for savers. The Premium bonds limit will rise to £40k and then to £50k in 2015. A Pensioner bond for the over 65’s will be introduced with rates estimating 2.8% for a 1 year bond and 4% for a 3 year bond. There is a limit of £10k per bond.

However, it is good news for pensioners. They now have access to their pension pots without buying annuity. The taxable portion of the pension, taken as cash will be at the standard income tax rate, a reduction of 55%.

The lump sum that can be withdrawn from pensions has also been increased to £30k.


Mortgage Rates Explained

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House buying is a complicated business. First of all you’ve got to pick a location. For most, non-exorbitantly wealthy people this will be in an area that is not too expensive and not too crime-ridden (there will probably be some crime, but there is always some crime, unless you live in a wondrous utopia or a lawless dystopia). Once you’ve picked your area, you’ve got to pick your house. Hopefully it won’t be awful. Of course, it’s best to have a few backups in case your bid isn’t accepted, the house is taken off the market or you lose all your money in a complicated pyramid scheme that, at the time, seemed too good to be true and in actual fact turned out to be entirely that.

One of the final steps – along with the bidding process, the signing of contracts, legal wrangling (isn’t wrangling a great word?) and many a bank meeting – is negotiating the tricky world of mortgage rates.

A mortgage rate is essentially the amount you are charged to borrow money. This rate is determined by all kinds of things, many of them economic. One of the big influences on mortgage interest rates is that hoary old economic phrase: supply and demand. It affects everything from the price of a pint of milk to the price of a half pint of milk. And other stuff too. If the property market is booming and a lot of people are looking for mortgages the interest rate will go up. If on the other hand the market is not in peak condition then interest rates will fall to help encourage interest in the property market.

Another, more personal, issue that is going to affect the interest rate you are offered is your credit rating. This lifelong irritant can really screw thing up. Whether you’re looking for a giant mortgage or a phone contract, you got to have yourself a decent credit rating. If you don’t, well you might just be considered high risk and get yourself stuck with a high interest rate. Of course, impeccably credit rating and your interest rate will be low.

Either way, there’s not much you can do to affect either your credit rating (right now at least) or the current demand in the property market. What you can choose is the kind of mortgage you get. There are three principal mortgage types.

Fixed rate mortgages

A fixed rate mortgage allows the property owner to pay the same rate of interest throughout the entire life of the mortgage. Now as you might imagine this is great if you get a low interest rate and the economy suddenly picks up. You wind up saving a fair bit of money. Of course, if interest rates drop you could be stuck paying a lot more than you wanted to. If interest rates stay down for a long period of time you could potentially refinance you current mortgage to take advantage of this.

Variable Rate Mortgages

The alternative to a fixed rate mortgage is, of course, a non-fixed one, or a variable rate mortgage. That means your interest rate is determined by the current interest rate. If the interest rate is low, your interest rate stays low. The interest rate is generally updated every two years or so and if it does go up in that time then you could get laboured with a high interest rate, at least for a couple of years.

Tracker Mortgages

These are sort of like variable rate mortgages (mainly because the interest rate varies) but are not quite the same. Tracker mortgages are generally linked to the Bank of England’s base rate (this is the rate the Bank of England charges banks for secured lending and impacts everything from mortgages to savings). So if the rate falls you’re in luck, if not, hard luck.

Capped Rate Mortgages

Another variant of the variable mortgage with one subtle difference (the clue is in the title). Interest rates are paid at the lender’s standard variable rate. However if it rise above a predetermined threshold it is capped and will rise no further.

Interest Only Mortgages

An alternative is the interest only mortgage that means you only pay the interest on what you’ve borrowed for a certain period of time. This has plenty of advantages in the short term: lower payment rates, spare cash. However you will have to pay the full amount eventually and unless you plan on investing the money you save in the short term it’s probably best to go with option number one or option number two.

Over to you: Take Charge and Win Yourself… £60 worth of Amazon vouchers, by answering the following question:

What is the current base rate of interest as set by the Bank of England?

Email your answer and contact details to Ash at writersselect@yahoo.co.uk. Answers must be in by 6th Feb. Winner will be randomly selected from correct entries, and notified on Friday 7th February via email. Good luck!


America and its issues with Student Debt

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One in ten Americans have student debt. In relation to the country’s population that is equivalent to 37 million people! On average, each student has about $25,000 in debt according to 2010 figures. What’s even more shocking is that this figure overtook credit cards as the largest source of debt in the country.

What can this be attributed to you ask? Well the rise in tuition costs paired with inflation plays a dramatic role. Another factor to consider is Congress’s inability to stop interest rate hikes on undergraduate loans like the Federal Stafford Loan (doubled from 3.4 to 6.8 last year).

Economists predict that student debt will surpass the $1 trillion mark and continue to rise at a rate of 10% from here on out. This is a frightening reality which is causing many young folks to reconsider earning their degree. Don’t falter though because we’ve joined efforts with the debt experts at Consolidated Credit to create a visual timeline which will paint a clearer picture of your options. If you have not done so yet, take a moment to review your loan’s guidelines, explore alternative financing, or enlist the help of a professional to get your books in check.


Making the decision to quit your job

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It’s never easy to reach a big decision, especially when it affects your financial security. Many people want to leave their jobs, but never quite make the leap as they can’t take the risk of leaving behind that financial security blanket that their job gives them.

But life’s not all about financial security; it’s about fulfilment, too. And if your current job only meets half of that equation, then perhaps it’s time to make a change. Of course, you have to have things in a relative amount of order before you hand in that resignation letter.

If you’re moving onto another job that you’ve already secured, then you don’t necessarily need to wait. Similarly, if you’ve decided to retrain and you’ve sorted out finances to support yourself during the length of your training course, then you’ll need to quit and give your boss as much notice as you can. But if you haven’t got to that stage and you just want out, then it’s probably best advised to hang fire on doing anything hasty until you have a clear plan in mind of what you’re going to do next.

Being in a role that you find unchallenging isn’t such a bad place to be in when you’re making plans. It will keep your costs covered and perhaps allow you to start putting some savings to one side for that moment when you make the leap.

When deciding what to do next, talk to lots of different people about what you want to get out of your working life and find out what the people you know find satisfying and rewarding. The more people you talk to, the more ideas you’ll get and the more knowledge you’ll accumulate. As well as talking to people you know, you might consider talking to someone who can help you get a fresh perspective on your situation.

Don’t panic when you’re looking to change your life, there is always time to make a change, and the important thing is to be as prepared as possible when you make that big step.


Making the Right Decision When Moving House

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For the majority of people, getting a foot on the property ladder is becoming increasingly difficult, so if you’re in a position to take the plunge it’s important to make the right decision. Buying a property can often take many months and there’s no point rushing into anything simply because you are impatient to move. As with any big financial decision there are certain factors you should take into consideration particularly when buying a new home.

Establish a realistic budget

You may think you have a good deposit saved up but many people don’t realise all the additional costs which come with buying a house. These can have an impact on the type of property you can afford to buy so it’s important to be aware of these costs before you start house hunting. Some of these expenses can include stamp duty, solicitor’s fees, mortgage arrangement fees and the valuation fee. If you are taking out a mortgage, speak to your advisor to see how much you will be able to borrow so that you have a figure in mind for when you start searching for a home.

Research your location

Location is crucial when buying a home. If you are a family you might look for amenities such as schools and parks whereas if you are a professional then good transport links might be a priority. You can also do research into the crime rates in the area or speak to someone who has a good knowledge of the area. For example, if you are buying a property in Mayfair, it would be wise to speak to a Mayfair estate agents who can give you a detailed insight into your chosen location.

Go on lots of viewings

Going on as many viewings as possible will give you a good indication of what’s available in the area in relation to your budget. It also means you won’t rush into a decision by purchasing the first house you see. It’s easy to find yourself caught up in the excitement of house hunting but remember the first house you see may not necessarily be the best.

Be patient

For most people it takes many months to find, purchase and move into their new home. Try to be patient and remember that such a big step will take longer than a few weeks. If the house is right for you then it will be worth the wait.


How to reduce home insurance costs

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We all have plenty of necessities that we have to pay for in life, and home insurance is one of them. Even if you don’t own your own home and therefore don’t need buildings cover, it’s a risk not to have home insurance contents cover in place. If you lost everything in a fire, it would really be a blow to have to replace everything without insurance.

Most homeowners require both buildings and contents cover and many insurers offer a discount for those customers taking out a combined policy. There are other ways that you can save money on the insurance premiums though.

For a start, you should make use of an insurance comparison website like igo4, which will compare a number of home insurance products from different providers and bring up a list of the different results. So all the hard work of calling different insurers is done for you; all you need to do is read the details of what each policy offers and decide which one to choose.

And if the quotes don’t seem as low as you were hoping, there are other ways you can look at reducing the cost of home insurance.

Many insurers add in extra cover that will increase the annual costs of insurance. A great example is home emergency cover. This is where you are covered for home emergencies such as a burst pipe, the boiler breaking down. With home emergency cover, the insurer will send out a service engineer to assess the problem within a very short time period and make repairs up to a ceiling amount (usually around £500). This would be a great boon in times of such a home emergency, but it is an additional option on a home insurance policy that you don’t have to have. By taking home emergency cover off your policy quote, you could save a small amount.

Similarly you don’t need to have personal possessions cover included on your home insurance policy. If you do, it means that portable items you take out of your home – such as your camera, phone or iPOD – are covered if they are stolen away from your home. However, this is another option that will increase the cost of your premiums. You need to weigh up how useful it might be to you and whether it’s worth the increase in the premiums.

Take the time to read through each insurance quote you receive and check you are happy with the level of cover provided before you decide which company to use. A little research today could save you a significant amount on your annual home insurance premiums.