Nine Tips to Improve Your Credit Score

When you apply for a car loan, mortgage, or other financing, the loan officer tells you that they must pull your credit score. What does that mean? How is it figured? Let us explain a bit more about credit scoring and how it affects your ability to receive credit in today’s market.

There are three consumer bureaus that collect and analyze credit information on consumers: TransUnion, Experian, and Equifax. The three agencies compile information on your open, closed and cancelled accounts. They also use public record to figure your credit score, including judgments, liens, and other public record items. Your score is considered a FICO® score. Each reporting agency may have a different name for the score. Scores vary from a range of 300-850. Typically the higher the score, the more likely you are to get the loan or financing request approved. Each lending institution has different cutoff scores.

Here are nine tips from FICO® to improve your credit score:

• Pay your bills on time.

• If you have missed payments, get current and stay current.

• Be aware that paying off a collection account, or closing an account on which you previously missed a payment, will not remove it from your credit report.

• If you are having trouble making ends meet, contact your creditors or see a legitimate credit counselor.

• Keep balances low on credit cards and other revolving credit.

• Pay off debt rather than moving it around.

• Don’t close unused credit cards as a short-term strategy to raise your score.

• Don’t open a number of new credit cards that you don’t need, just to increase your available credit.

• Avoid credit repair agencies that charge a fee to improve your score.

Are you now curious about your credit? Visit www.annualcreditreport.com for your free report today! To receive a free “Understanding Your FICO Score” guide, drop us an email at info@mafc.com.

Top 3 Tips for Obtaining a Farm Loan

Some folks say that it’s impossible to start farming now. And even if you could find a great property, it's hard to find a lender who is willing to talk to you. While that is probably true at times, thankfully, you've arrived at the one lender who is always willing to talk to you. After all, "farm" is our middle name!

 

Here are our 3 top tips for obtaining a farm loan:

 

#1 Create a great credit history.
You may not have had a farm loan before, but that doesn’t mean that you don’t have a credit history. Your credit record includes your credit card information (how much credit you have available on each of them, if you have an outstanding balance, if any of your payments have been late), and other loan information (such as car loans, student loans, or any other mortgages).

If you don’t have a credit history, there are other ways to create one, like getting information from past landlords or service vendors, such as gas and electric companies or telephone companies.

One of the most important parts of a great credit history - always, always, always pay your bills on time. Statistically, it has been proven that if you pay your current loans as you agreed to, you are more likely to pay future loans as agreed to as well. And that’s good news for any lender.

 

#2 Have a plan.
You must have a plan for success. Create a business plan, whether it’s in writing or something you can talk about. This is a blueprint for establishing and then meeting your goals. The plan should include what you want to do, how much money you’ll need, and what ways you’ll repay the money.
If you have never written a business plan, never fear. You can find information about doing them from your local cooperative extension office.

 

#3 Ask about special financing programs.
When you talk with a lender about financing, be sure to ask about any special programs or partnership opportunities. We aren’t just lending you money; we want you to look at all funding options to help you succeed. Here are a couple of programs to keep in mind:

• StartRight – this is a MidAtlantic Farm Credit program geared specifically for young, beginning, small and minority farmers. We have low interest term, operating and best management practice loans. You can find more information about this program here.
• Farm Service Agency – offering guaranteed and direct loans to qualifying borrowers.
• Federal or State Funding – USDA and NRCS has several grant programs available.  Small Business Administration – the 504 Loan program is a financing program for expanding farms

It seems like a lot to think about, but don’t worry. You don’t have to be the expert in farm loan financing – that’s our job. You enjoy being the expert in your farm business.

MidAtlantic Farm Credit Hires Crop Insurance Representative in Pennsylvania

Kathi Levan, crop insurance manager, has announced the hiring of Jordan Risser as a crop insurance sales representative for MidAtlantic Farm Credit’s Penn region. According to Levan, Risser’s responsibility will be business development and acquiring new crop insurance customers throughout the 15 county territory in southeastern Pennsylvania which makes up the Penn Region.

“The crop insurance industry overall is undergoing considerable changes because of current political and economic realities,” Levan noted. Many farmers and the crop insurance agencies that serve them are finding that keeping up with product changes and complying with new regulations is a complex task.”

MidAtlantic Farm Credit focuses solely on providing agricultural credit to farmers, rural landowners and agribusiness and our insurance agents specialize only in crop insurance products,” she adds. “Because of that, we are able to maintain a high level of expertise and demand for our services is increasing. By having Jordan join our team we will be able to exceed producer needs for risk management advice.”

Jordan grew up on his family’s dairy farm in Lancaster County and comes to Farm Credit with a crop insurance background. “His background in farming and knowledge of crop insurance will be a real asset to current customers as well as developing new business relationships,” Levan says.

Jordan resides in Elizabethtown, PA with his wife and enjoys farming, hunting and camping in his spare time. He is a graduate of Delaware Valley College where he obtained a degree in Agronomy.

About MidAtlantic Farm Credit

MidAtlantic Farm Credit is one of the largest agricultural lenders on the east coast providing credit and crop insurance in Delaware, Maryland, Pennsylvania, Virginia and West Virginia. They are part of the national Farm Credit System, a cooperative lender with more than 500,000 borrowers and a portfolio of over $160 billion.

What's in Your Rate? (Part 2)

Yesterday we shared 13 of the 26 factors that affect your rate. Today, we're sharing the other 13! So, here goes:

1. Co-borrowers – will there be other people on the loan, and if so, what does their credit look like? All parties involved in the loan will be used in determining the rate.

2. Debt Ratio – how much money is made monthly versus the cost of monthly bills. The typical ratio that lenders looks at is 42%.

3. Housing Ratio – what does the ratio from above look like when you add in the cost of the mortgage? Usually a good housing ratio is 28%.

4. Improvements Needed – this will affect the value of the property. Remember from yesterday's post that the lower the percentage of the loan amount to the value of the property, typically the better the rate.

5. Employment Type – self-employed, hourly employed, bonus-based pay – these all affect the risk factors of whether you’ll be able to pay back the loan.

6. Employment History – this also affects the risk to the lender. If you show a consistent history of employment, the better chance for a lower rate.

7. Documentation Available – are you able to produce all documentation (bank statements, taxes, retirement accounts, etc.) to show your assets? This will help ease the risk factors for a lender and help lower the rate.

8. Relocation – are you being temporarily or permanently relocated by an employee? That will determine if the house is considered a secondary (higher rate) or primary residence (lower rate).

9. Seller Contributions – if the seller is able to contribute money towards closing costs, that will increase the amount you have available for a down payment.

10. Gifts – again, lowering the amount of loan you’ll need with gifts from family members will help to lower the interest rate. 11. Cash-out – if you refinance and want to walk away from closing with money in your pocket, you may be increasing the percentage of loan to property value.

We hope this information is useful to you! If you have other burning questions you'd like us to answer, post a comment here or send us an email at info@mafc.com.

What's in Your Rate?

In our previous post, we shared some of the frequently asked questions to a lender. One of those questions was “what’s your rate?” And the answer was “it depends.” That’s not the answer most people want to hear, but it’s true. There are approximately 26 different factors that goes into quoting rates. We'll share 13 today and the other 13 in tomorrow's blog.

1. Loan Size – how much money are you asking for? Often if you are requesting an amount under a certain level (i.e. $100,000), there may be a slight increase in rate.

2. Loan-to-Value (LTV) – what percentage is your loan amount to the value of the property? Typically, the lower the percent, the lower the rate.

3. Combined Loan-to-Value (CLTV) – this ratio includes not only the current loan you are wanting, but any additional loans on the property, such as a home equity.

4. Credit Score – the higher the credit score, the lower the rate.

5. Credit History – the less credit history you have, the less knowledge a lender has of your repayment ability, possibly making you slightly more risky. The better the payment history, the better the rate.

6. Escrow Preference – some lenders require escrows, or money put aside to pay for things such as taxes, insurance, etc. If you choose not to escrow, you may be penalized by having a higher rate.

7. Closing Date – it is important to lock in on a rate that is as close to your closing date as possible. The longer the rate lock period, the higher the rate will be.

8. Loan Type – fixed, variable, balloon – these all have varying rates because of the variation of risks.

9. Property Type – a residential house will have a lower interest rate than a commercial farm on 50 acres.

10. Occupancy Type – typically rental or investment properties have higher interest rates.

11. Residency – rates will be lower if you plan to live in the house full-time versus using it as a second home.

12. Available Assets – what additional assets do you have as possible collateral? The more down payment you have, usually the lower the rate.

13. Asset Seasoning – how long have you had your assets? There may be restrictions for assets owned under a certain timeframe that could affect the rate.

You don't have to remember all of these, but if your lender is quoting you a rate without asking some of these questions, be sure to ask them what criteria they are using to factor your rate.

Check back tomorrow for the other 13 factors that affect your rate.

Frequently Asked Questions to a Lender

What's your rate? How much are closing costs? You got questions. We got answers! At Farm Credit, our loan officers meet with hundreds of customers a year who ask those exact questions. So, what's the answer to those questions you ask?

Q: What are your interest rates? A: It depends. This isn’t the answer most people want to hear, but it’s the most honest one. Before a loan officer can quote rates, they need to gather as much information as possible – amount of loan, loan type, desired terms, etc. There is a wide range of rate products that are available depending on your needs. It’s also important to remember that rates change daily (even several times a day for mortgages).

Q: How much are closing costs? A: It depends. Most closing cost fees are tied to the loan amount, and a purchase has more costs than a refinance. Some of the things that are included in the closing costs are: transfer tax, recording costs (we are exempt in MD), title work, initial escrow (to pay taxes and insurance), appraisal, daily interest (interest from settlement to the first payment) and origination fee.

Q: How much down payment is needed? A: It depends. There are many different products available that have a wide variety of down payment requirements. For farm loans, the general down payment is 20%. For residential mortgages, it can vary from 0% (depending on program qualifications) up to 20% (in order to avoid mortgage insurance). In general, the more down payment you have, the more likely for both approval and a great rate.

As you can see, the answer to many of these questions is often “it depends.” We look at every loan request as unique and individual. If you have other questions you'd like answered, leave a comment or email info@mafc.com. In the meantime, look for our next blog listing the 26 factors that go into quoting a rate.

MidAtlantic Farm Credit's CEO Receives Award

Bob Frazee, CEO of MidAtlantic Farm Credit received the University of Maryland Distinguished Alumnus Award. These awards are presented annually to the University of Maryland alumni who have achieved recognition for excellence in their profession or field.

Bob was recognized at the Twelfth Annual Alumni Association Awards Gala held on Saturday, April 14, 2012. Visit Bob’s blog to read his acceptance speech. For more information about the awards, visit http://alumni.umd.edu.