Did Your Credit Score Get a Boost?

Roger Legner, Vice President—Residential Lending 

Recent changes in the information appearing on your credit report may give your score an added boost. It’s estimated that 12 million consumers can expect a 10- to 20-point gain once information on tax liens and civil judgements is removed by the three credit reporting bureaus. While modest, those gains could help mortgage borrowers with scores hovering near 610 or so earn a loan approval. For those with higher scores, it could mean access to a slightly better interest rate on their loan.

Why the Change Occurred

Credit scores are like a big cauldron filled with the factors of your financial life. They reflect your past use of credit as much as your lack of history and your timeliness in making payments. They are also an accounting of your current and previous debt levels. Until recently, any tax liens that you might have had, court judgements and unpaid medical expenses were also included in this financial stew.

Going forward, reports of those tax liens and court judgements will disappear from your record, and medical expenses will also be removed at a later date. Although you still owe the amounts, they will no longer be reported due to widespread inaccuracy in the outstanding balances and personal information. Often, information related to judgements and liens not only appeared with incomplete information, it was posted to the wrong records.

5 Tips for Improving and Maintaining Your Credit Score

Whether or not you are impacted by the changes, there are still many other ways to improve your credit score. Here are five of the best moves you can make.

Tip #1: Have credit outstanding. Even if you pay your credit card bills off each month, using your cards is a positive for scoring purposes.

Tip #2: Keep your utilization rate low. It’s actually better to have multiple credit cards with balances well below the maximum for each account than it is to use one card in a way that brings you close to its limit monthly. For instance, your utilization rate is better if you charge $300 to two cards, each having $1,000 ceilings than if you charge $600 to one card with a $1,000 limit.

Tip #3: Refrain from closing accounts. This is especially advisable when you intend to apply for a loan. Closing accounts increases your utilization rate over all your credit accounts. One of our clients recently closed all his accounts, deciding to go to an all-cash payment method. His score dropped from 812 to 708!

#4: Make timely payments. It isn’t about how much credit you have but how well you handle it. Lenders look at your score for reassurance that you will repay them and view late payments as a red flag that may signal financial issues.

#5: Check for accuracy. While the recent changes were made to improve the accuracy of credit records by removing the items most likely to contain errors, accuracy is not a given. This is especially important in light of recent cyberattacks that may have compromised personal credit information. Visit www.annualcreditreport.com at least once a year to review your records.*

There Isn’t Just One Score

While you can review and exert control over your credit record, different lenders use different scoring systems to interpret it. For instance, a residential mortgage report will look at and score your credit history differently than a retailer will. Similarly, different mortgage programs have different minimum scoring requirements.

To discuss your credit history and score, as well as how it might affect your chances for a loan approval, give us a call at 815.361.6469. One of our residential lenders would be happy to walk you through the different mortgage programs available to you and any additional steps you might want to take to help get you through the door of home ownership sooner.

*With the recent announcement of a cyberattack on consumer data housed at Equifax, you should visit www.equifaxsecurity2017.com to see if your information was compromised. If it was, you will have the option of enrolling in a year of credit-report monitoring.

Guardianships: Someone to Watch Over Them

Michele Morgan, Vice President/Trust Officer MorganM_BUS003xqc

The one thing you should know about guardianships—also known as conservatorships—is that they protect individuals who are unable to make sound decisions for themselves. As court-ordered arrangements, they result in the appointment of an individual or corporation to handle that person’s care and/or financial matters.

The arrangement lasts as long as necessary. In the case of a minor, that may be until they reach the age of 18. For an adult, it could be a lifelong appointment or just until they sufficiently recover from a health issue.

Circumstances That Lead to the Need

Guardianships are subject to state laws, and established by a court proceeding in the individual’s home county. Where children are involved, there is typically a large sum of money—either an unexpected inheritance or a personal injury settlement. Adult guardianships generally arise due to a temporary or permanent disability or an injury.

When the need arises, there are two different roles created in a guardianship: one involving the “Guardian of the Person” where the named individual or corporation is appointed to oversee the needs and care of the individual. The second role is the “Guardian of the Estate” to oversee the individual’s financial matters.

Guardians can be family members, unrelated individuals or, as mentioned above, corporations. Where large sums are involved, judges often prefer to see a bank serve as the guardian of the estate or, at the very least, as a co-guardian to ensure the assets will remain in place to support the individual throughout their life. Regardless of who is appointed the court requires an annual report to ensure the current arrangements continue to serve the needs and best interests of the individual.

Guardianships for children end at the age of 18 with a proceeding that determines the individual is now capable of making rational and prompt decisions about their own care and finances. For adults, a physician typically supplies a statement verifying they’ve regained the capacity to assume responsibility for their own care and finances.

Guardianships versus Powers of Attorney or Estate Plans

The need for a guardianship arises from the lack of other legal documents, such as powers of attorney or an estate plan. Sometimes, family members are overwhelmed by the medical side of caring for a loved one or have trouble agreeing on a course of action. In such cases, they may petition the court to appoint an impartial corporate guardian, especially to oversee financial matters. This saves family members from having to account to the court for how money is spent and from having to reimburse the estate if any charges are deemed inappropriate later.

Compassion Is Part of the Arrangement

While having the court involved in the care and financial matters of a loved one may seem invasive, judges involved with cases like these typically act as extended family members, especially where juveniles are involved. They take a genuine interest in ensuring each person gets what they need to be the best they can be. Compassion carries the day.

To learn more about guardianships and how Old Second can be of assistance in this area, please call me at 630-844-3222. I’m here to help get you the answers you need as you consider your family’s options.