Yuba City Realtor – Ranjit Kandola

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By Chris Isidore, senior writerDecember 23, 2010: 3:34 PM ET

NEW YORK (CNNMoney.com) — Economists are evenly split on whether the Federal Reserve’s current policies are helping the economy. But they’re in agreement on one point — the Fed won’t be raising interest rates anytime soon.

A CNNMoney.com exclusive survey showed that economists expect the Fed funds rate — the central bank’s key overnight interest rate used as a benchmark for a wide range of loans — to remain near 0% for at least another year.

Only seven out of 25 participants are forecasting a rate hike in the next twelve months, and most of those expect it to come in the final three months of 2011. Another nine expect the next rate increase to come in the first quarter of 2012, while eight more are expecting a hike later that year.

Just one economist, John Ryding of RDQ Economics, predicts that the Fed will keep rates near zero all the way into 2013. He believes unemployment will stay above 8% until the following year, prompting the Fed to keep rates low.

Persistently high unemployment is one reason the economists think rates will remain low. While their forecasts for growth are improving, unemployment is expected to stay at about 9% through the end of 2011. But low inflation pressures will also allow the Fed to keep the low rates in place. The economists believe prices will rise only 1.7% over the next 12 months.

The Fed cut the fed funds rate to near 0% for the first time in its history in December 2008 in response to the economic meltdown. Since lowering rates is the typical tool the central bank uses to spur economic growth, it has had to find other means to encourage growth since then.

In November of this year, the Fed announced a plan to buy $600 billion more in long-term Treasuries to try and spur growth. The move prompted widespread attacks from critics who believe the Fed risks devaluing the dollar, a return of high inflation and creating asset bubbles.

But the survey showed disagreement among the economists, with 12 out of 25 expecting no significant economic impact from the Fed’s controversial policy.

Another 11 believed the policy would boost growth, although two of those said it would be at the price of high inflation.

But even some of those who expect the Fed’s policy to work still have their doubts about the move.

“Growth … is likely to be later than we hope — in the second half of 2011 and into 2012,” said David Berson of PMI Group. “Unfortunately, we won’t need the boost then.”

Almost all the economists think the Fed’s current plan will run its course, as 22 of the 25 expect the central bank to purchase the full $600 billion in Treasuries. Just two economists surveyed predict that the Fed will pull the plug early, although a third believes that it should.

And despite some ambiguous comments from Fed Chairman Ben Bernanke on 60 Minutes earlier this month, the economists don’t expect another round of purchases after this one, with only one predicting that outcome.  source:money.com

Most people know the importance of making at least minimum credit card payments on time, and avoiding financial no-nos like bankruptcy and foreclosure if possible. However, some less obvious factors can still make a negative impact on your credit rating. They may seem counterintuitive, and some may go against what you’ve been told in the past, but Tim Chen, CEO of the credit-card search website NerdWallet, will explain why these five practices can wreck your credit score.

1. Settling past-due debts with a creditor to pay less than you owe. Anyone who has amassed enough credit card debt has gotten the pitches in the mail, and sleepless fretting debtors see the ads on late-night TV: Pay Down Your Debt! It sounds too good to be true, and Chen confirms this. “Even though you’re getting rid of bad debt, it stays on your report as ‘settled’ rather than ‘paid off,’ and is now updated on the payment date, making it look like it happened more recently than the original loan. Your credit score is weighted more heavily toward recent events than past events, so taking a bad debt from the past and moving it to the present will count against you.”

2. Transferring balances from a high-interest account to a low-interest account. Ahh, the old trick of debt-juggling from card to card. You get an offer for a new card with an enticing 0 percent annual percentage rate for a whole year. Who knows what might happen in that interest-free year—you could even pay off this debt for good, right? Balance transfers can seem like a good idea at the time, but Chen says, “While it’s better for your bottom line, opening new accounts works against your credit score. Plus moving all your debts to one card could negatively impact your credit utilization (your ratio of debt to available credit).”

3. Closing old credit cards. One school of thought holds that the more credit you have open, the more risk that it could be misused, or it could leave you more vulnerable to fraud, so you should close your unused cards. But closing cards hurts you two ways, says Chen, by increasing your debt utilization and shortening your credit history length. “Creditors like to see that you have a lot of unused, available credit, and that you have accounts that have been open for a long time without problems.”

4. Paying off your car or your mortgage. What? Paying off your mortgage can work against you? Chen steps in to explain the enigmatic concept of “credit mix.” “FICO reports that 10 percent of your credit score is determined by your ‘credit mix,’ and they like to see a variety of installment and revolving loans. If all you have is an auto loan and three credit cards, paying off the car will leave you with nothing but revolving credit.” However, Chen points out that in that case you might want to focus on paying off that debt.

5. Avoiding debt altogether won’t help you. So basically, no matter what, you’re doomed! (Kidding. See the conclusion below for a glimmer of hope.) “While eschewing debt is in vogue these days, your credit score is based on how well you can handle credit, and all of your score’s components are based on you having open debt accounts,” Chen says. That means that even if you are anti-credit cards, well-managed credit accounts will eventually help your case if you plan on getting a mortgage.

It may now seem like credit scores are a hopeless “damned if you do and damned if you don’t” situation. But there are ideals you can strive for to achieve a good credit rating. Chen points to Lending Club’s rate table, which has remarkably transparent disclosures, for some parameters to aim for.

Based on their data, you can draw the following conclusions:

• The ideal number of loans or credit lines open is 6-21. Therefore, it’s pretty difficult to get penalized for having too many accounts.
• The ideal number of credit inquiries is 0-3 in the last 6 months. Anyone who has had 6 or more will have a tough time getting a loan. This can be troublesome when shopping around for mortgage rates. “Soft pulls” of credit scores (such as when you check your own credit score, or when a potential employer does) are always better, when possible.
• A 5+ year credit history is ideal.
• 5% to 85% credit line utilization is ideal.

And don’t forget the basics: pay off at least the monthly minimum balance for many years running.  source:

You can’t time mortgage rates any more than you can time the stock market, but that hasn’t stopped any number of my friends and colleagues from begging me to tell them if rates are going up or heading further down.

I have no idea.

What I do know is that borrowers are more sensitive now to mortgage rates than ever before in my memory, even as rates continue to hover near record lows.

All you have to do is look at last week’s data on mortgage applications from the Mortgage Bankers Association. Rates jumped up over a quarter point, and applications to refinance plummeted 16.5 percent. Applications to purchase a home, which you would think would be far less sensitive to weekly rates, also dropped, albeit just 5 percent, but that was after many weeks of increases.

I thought it might be interesting to take a look at how applications run with rates. Take a look first at the last three months of rates compared to refis. You can see a definite correlation that when rates go down, applications go up. That’s an easy one because a lot of refinancing is really just gambling with time. source:cnbc…