Money Management

Timing is everything. 

Securing a credit limit increase doesn’t just enable you to charge more to your credit cards each month. It can also help raise your credit score by lowering your credit utilization ratio. But requesting a credit limit increase isn’t always a smart move.

Certain factors can make you more likely to get denied, and that could hurt your credit score. So it’s best to make sure you check the following boxes before you request a credit limit increase in 2023.

You haven’t applied for a credit limit increase in the last six months

Credit card issuers don’t give out credit limit increases too often, so it’s best to request them no sooner than six months after your last credit limit increase. Creditors will want time to see how you handle your most recent credit limit increase before you request another one. If you apply too soon, there’s a greater chance you’ll get denied.

You’ve been paying your credit card bill on time

You’re more likely to be approved for a credit limit increase if you’ve been consistently paying your bills on time. Late payments might suggest to a creditor you’re already struggling to pay back what you borrow. Enabling you to spend more money each month could increase your risk of default, which is something all credit card issuers want to avoid.

Your income has remained the same or has increased

Many credit card companies ask for information about your annual income when deciding whether to grant you a credit limit increase. They use this to assess how much money you’ll have coming in and how much you can conceivably borrow without defaulting.

Those whose income has risen since they first opened the card or since they last requested a credit limit increase have a better chance of success than someone whose income has declined over time.

Ready to apply?

Some of the largest credit card issuers enable you to request a credit limit increase online, but often, you’ll have better luck if you reach out by phone. This gives you an opportunity to plead your case, highlighting your good payment history and explaining why you think you deserve an increase. If you’ve already been pre-approved for a higher limit with one of the company’s competitors, you can bring this up as well. Credit card companies don’t like to lose customers, so they may offer you an increase just to keep you from leaving.

If you know what kind of an increase you want, you can ask for that directly, but be prepared to negotiate. You’ll usually have to agree to a hard inquiry on your credit report, which can drop your credit score by a few points. Some companies may increase your limit with just a soft inquiry, which doesn’t affect your score. But these increases are usually smaller.

No matter what, there’s no guarantee that you’ll get approved for your credit limit increase. But if you meet the criteria above, you stand a good chance. And if you’re denied, reach out to the credit card company to learn about why it denied you. Then, try to correct the issues it cites before you try requesting another credit limit increase.

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Maybe it’s time to approach house hunting with seller concessions in mind. 

If you’re hoping to buy a home, no one needs to tell you how ridiculous the housing market has been. You’ve lived with bidding wars, unwise advice to waive home inspections, and rising interest rates. It’s enough to make anyone want to stop looking. If you’re considering giving up the dream of homeownership, don’t make the decision just yet. It looks like the tide may be turning.

To find out why, we turned to Wendi Boudreau, a real estate agent with Keller-Williams in Simi Valley, California. Boudreau explained the real-world reasons potential home buyers should keep the faith.

The market truly is cooling

According to Boudreau, the market was still red hot into the summer. Most homes received multiple offers and anyone hoping to buy was expected to pay far above the asking price. Some sellers refused to allow for contingencies, like home inspections. Investors scoured the market daily to find homes they could flip. It was clearly a seller’s market.

Boudreau says she first noticed a changing of the tides as summer ended. Suddenly, sellers with anything other than a move-in ready house were forced to drop their asking price. And as interest rates rose, fewer buyers were interested in making an offer.

By September, an analysis from Zillow announced precisely what Boudreau witnessed first-hand: The housing market is cooling. In fact, according to Zillow, experts expect the U.S. housing market to shift in favor of buyers by the end of 2023.

A big piece of the cooling trend is associated with rising interest rates. But there is also buyer burnout. A buyer can only lose out so often before deciding that now is not the right time.

Home buyer programs make a difference

Throughout the changing market, Boudreau has continued to sell homes to first-time buyers. And that’s due, in large part, to advice she offers.

“I tell my buyers to look at different mortgage lenders because every lender is different. And then, talk to a couple of lenders to find out what kinds of programs they offer,” Boudreau said.

Here’s a small sample of the programs offered to home buyers that they may not know about:

$25,000 Down Payment Toward Equity Program: A grant that awards up to $20,000 cash to first-generation home buyers, plus an additional $5,000 to buyers from economically disadvantaged backgrounds. This program is expected to be passed into law in early 2023.The National Homebuyers Fund: Home buyers who agree to live in their home and make payments for at least five years may receive up to 5% of the home’s purchase price. State and local government cash grants: The amount varies depending on the state, but anywhere from $500 to $50,000 may be applied toward a mortgage rate reduction, down payment, or closing costs. Most of these grants have income restrictions.FHFA first-time home buyer mortgage rate discount: First-time buyers who use a Fannie Mae or Freddie Mac-backed mortgage and earn an income at or below their area’s typical income can qualify for a mortgage rate up to 2% lower than the standard 30-year fixed-rate mortgage. Let’s say the current rate on a 30-year mortgage is 7%. This program would reduce it to 5%, allowing the buyer to boost their purchase price.

There are dozens of buyer programs nationwide, designed to ease the financial burden of getting into a home. Boudreau reiterates that it’s important that buyers shop around to find the program that best fits their needs.

Shopping around also allows buyers to find out which lending institution has the lowest rates. For example, Boudreau said that she recently found a nearby credit union that had a rate “no one else could touch.” You never know which bank or credit union will end up being most competitive.

Home seller credits are becoming common again

According to Boudreau, it’s becoming increasingly rare for a home seller to demand that buyers waive contingencies like home inspections. Asked why she thinks that’s the case, Boudreau answered, “People can read the news and they know what’s going on.”

In other words, home sellers seem to realize the market has softened, that fewer buyers are interested in buying anything less than a “perfect” home, and that concessions must be made.

One of those concessions is a seller credit. Those credits may come in the way of money back to the buyer at closing to help cover closing costs or the seller may offer enough money to buy the buyer’s interest rate down to a more manageable level.

Boudreau said that she and her husband once bought their own interest rate down, not knowing it’s okay to ask the buyer to contribute those funds. She doesn’t want her buyers to make the same mistake.

“Some sellers are going to say no,” Boudreau said. “They may even pull their house off the market. But those people were not that serious about selling in the first place. This time of year, both buyers and sellers are serious. After all, people do not want to put their house on the market during the holidays.”

The point is that it never hurts to ask. If a buyer can’t afford a house payment due to the interest rate, ask the seller to buy that interest rate down. It’s often less expensive than dropping the price of the home.

Don’t give up

“Owning a home is the path to becoming middle class. Historically, it’s how the middle class has passed wealth on to descendants,” Boudreau said.

She makes it a point to encourage buyers to keep going and to take advantage of every program and credit available to them.

“You just have to have faith,” she said. “Don’t give up. It will happen. It’s only a matter of time. And every time you don’t get a house, just know that it wasn’t the right one.”

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.Dana George has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Zillow Group. The Motley Fool has a disclosure policy.

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It really boils down to one key measure. 

Since the second half of 2021, consumers have been forced to cope with sky-high living costs. Inflation has made everything from food to housing to utilities more expensive. And until inflation starts to cool in a meaningful way, a lot of people could end up depleting their savings or racking up scores of debt on their credit cards just to cover their essential bills.

The Federal Reserve has been eager to address the problem of inflation. To this end, the central bank has already implemented several aggressive interest rate hikes that have made borrowing more expensive for consumers on a whole.

Now to be clear, the Fed isn’t tasked with directly setting borrowing rates, so the rate you get on a mortgage, auto loan, or personal loan isn’t being dictated by the Fed directly. Rather, the Federal Reserve oversees the federal funds rate, which is what banks charge one another for short-term borrowing purposes.

But when that rate goes up, it tends to drive up the cost of consumer borrowing as a whole. So now, consumers are spending more money than usual not just on living costs, but also, on interest for common loan products and credit cards alike.

Clearly, this is putting a financial strain on a lot of people. But will things get better from a rate hike perspective in 2023? Or will the Fed keep up its aggressive rate hikes?

It’s a matter of how inflation trends

The reason the Federal Reserve has been raising interest rates is to encourage a pullback in consumer spending. Inflation has been so rampant because there’s been more demand for consumer goods than available supply. Once that gap is narrowed, inflation levels should start to come down.

As such, whether the Fed continues with interest rate hikes in the new year will really depend on how inflation levels trend. Thankfully, over the past few months, the rate of inflation has slowly but steadily been dropping. If that pattern continues, consumers could get relief as the Fed slows down its rate hikes.

In fact, the Fed has already pledged to slow down those hikes as early as late 2022. So the pace of rate hikes could slow even more as 2023 rolls along. And if inflation levels continue to drop, the Fed may decide at some point not to raise the federal funds rate at all. But we’d need to see a pretty drastic drop in inflation for that to happen.

We’ll have to just wait and see

It’s too soon to predict what interest rate hikes will look like in 2023 — and just how expensive it will be for consumers to borrow money in different forms. But right now, borrowing rates are already up. So those looking to take out loans should prepare to proceed with caution in the new year and keep their balances to a minimum.

The same holds true for credit cards. Those tend to charge even more interest than most loan products, so consumers should make every effort to keep those balances down.

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If you’re on the fence about early mortgage payoff, this advice could help you decide. 

Most people who obtained a mortgage in recent years have an interest rate of around 4% or below (although rates have gone up much higher this year). If you have a mortgage at a reasonable rate, paying it off early doesn’t make a lot of sense.

Your return on investment from early mortgage payoff is just the saved interest. Since you can earn an average annual return of around 10% (over the long term) by investing in a pretty safe fund that tracks the S&P 500, you’re usually better off investing in a brokerage account rather than sending extra money to your mortgage lender.

That’s especially true since mortgage interest can be tax deductible if you itemize. Since your payments won’t change over time if you have a fixed-rate loan, you essentially pay off your home with money that’s worth less each year due to inflation.

Still, while paying off your mortgage early probably isn’t the best financial move and doesn’t make a lot of sense when you do the math, there is one reason why you might want to get your home loan paid off ahead of schedule.

This is the best reason for early mortgage payoff

Finance expert Suze Orman addressed the issue of early mortgage payoff in a podcast episode. A listener wrote in and said that she was thinking about paying off her mortgage early but her financial advisor told her not to do so because she could earn returns by investing that were higher than the 4% interest on her home loan.

The advisor is right about that. But — and this is a big but — the listener said that she wanted to pay off her home ahead of schedule because doing so would make her feel secure. And, in response, Orman made a strong argument that early mortgage payoff can make sense if doing so would provide that financial security most people crave.

“Money is never the end goal,” Orman said. “Making more money is never the end goal if during the process of you making money make somebody feel insecure because when somebody gets insecure, they are powerless and when they are powerless, they make mistakes with money of all kinds.”

While early mortgage payoff might not be the financially sound choice for most people, as Orman points out, you don’t always have to make choices with your money that maximize your net worth at the expense of your happiness.

If you truly feel like paying off your mortgage would give you the peace of mind you crave, doing that as a priority over investing might make sense even if your net worth doesn’t end up quite as high as it could have because this approach is likely to make you happier in the long run.

Is paying off your mortgage early right for you?

If you feel passionate about paying off your mortgage, there’s nothing wrong with doing that as long as you’re not jeopardizing other important financial goals first. You should not, for example, pay off your mortgage early if doing so would mean you can’t afford to invest for retirement or if extra mortgage payments make it take longer for you to pay off high-interest credit card debt.

Just make sure you’re aware of the opportunity cost, and you’re willing to accept a lower ROI in exchange for the added financial security that comes from owning your own home outright instead of having a loan with the bank.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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While side hustles aren’t for everyone, one may be a good fit for you. 

You’re not alone if you’re feeling anxious about money. Many people are struggling to pay their bills while avoiding taking on debt. With higher price tags at every store, it can be challenging to stretch your paycheck far. A side hustle could give you a chance to increase your income while also having fun in your free time. These signs may indicate you’re ready to get a side hustle.

1. You want to increase your income

If you’re feeling unsatisfied with the money you’re making and hope to increase your income, a side hustle could help make your goal a reality. When you take on a side hustle, there are no guarantees that you will make a certain amount of money or any money at all. But if you commit to a gig and do it well, you could be successful in boosting your income. Here are a few side hustles that could earn you $5,000 or more next year.

2. You have extra free time and want to be more productive

Some people enjoy spending a lot of their free time relaxing, but others get bored when they’re not busy. If you have free time and want to use your extra time productively, a side hustle could be one option to explore. You may feel more fulfilled by having other tasks to handle.

3. You want to explore new skills and interests

It’s never too late to learn new skills and explore new passions. If you’ve been wanting to develop new skills and have other interests outside your job, a side hustle may be the right fit. This experience may help you acquire new skills that allow you to land a new job or promotion or find a new, more fulfilling industry to work in.

4. You’re disciplined

If you’re very self-motivated and disciplined, you may find it easier to stay committed to your side hustle. It takes effort to want to spend your free time taking on additional work and new challenges, but you may have the skills and personality needed to thrive in this kind of role.

5. You have a big savings or debt payoff goal

Do you have personal finance goals that you want to reach? Whether you’re looking to increase your savings account balance or pay off debt, a side hustle could help you get there. Keeping these goals in mind can help you stay motivated while trying out a new money-making gig.

6. You’re unable to get a raise or promotion at this time

Getting a raise or a new promotion can be a fantastic way to increase your income. But it’s not always a possibility for every worker. If you know that a raise or promotion is out of the question at your current place of employment, there are other ways to make your income goals a reality. These side hustles could earn you $10,000 or more in 2023 while still working your regular job.

Working a side hustle isn’t always easy, but it can be a rewarding experience. Plus, you may be able to enjoy some added perks that come with getting a side hustle. If you’ve been thinking about giving a side hustle a try, see what’s out there for you.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers.
The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has a disclosure policy.

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