It is now 2016 and with every year changes happen that will impact you financially. While we can’t predict every change we do have sure bets that you need to aware and to plan accordingly.
FICO IS GOING TO TWEAK CREDIT SCORES FOR MORTGAGES
We have learned that Fair Isaac, the corporation that generates most credit scores. is going to implement a change to how they calculate your credit score when applying for a mortgage. Now this change won’t affect most people but for some can be very good news. Right now people who max out their credit cards every month but also pay off the balance in full every month are generally penalized. This is because when your credit is updated every month you will show as having a balance and hurting your Credit Utilization Ratio. With the new tweak set to happen this spring when applying for a mortgage your credit score will reflect the past two years of payment trends on your accounts and if you are someone who does pay off the balance monthly your score will reflect that good behavior.
THE FED Will RAISE ITS KEY INTEREST RATE
The Federal Reserve, the central bank of the Government that is responsible for The United States fiscal policy has announced they will raise the key interest rate, which for years has been near 0%. This is the interest rate at which banks borrow from the FED. In 2008, as the world entered the financial crisis the FED began lowering the Key Interest Rate as a means to create cheap money to encourage banks to lend to consumers and businesses. As the recession has been over for a few years now and growth has been stable the interest is set to be raised to help curb inflation. Now this remains to be seen as to what impact this will have on mortgage rates. Some economist predict that mortgage rates will stay the same as the housing industry continues to rebuild while other predict the mortgage rates will rise as well. What we can recommend is that if you have been wanting to buy a home soon is better than later as eventually mortgage rates will rise.
THE ELECTION WILL CAUSE VOLATILITY IN THE STOCK MARKET
Uncertainty in leadership has always caused spikes and dips in the stock market, mostly dips however. As we have seen with most presidential elections you can expect the stock market to be very volatile leading up to November. After November and into 2017 there will generally be a leveling off period. If you are someone who invests in stocks it might be a good idea to speak to your financial advisor regarding an election year strategy.