Financial Topics Archives | Page 275 of 823

Dec

2024

How Long Does It Take to Build Credit?

By Dan Miller | Credit, credit card, Financial Independence | Comments Off

Building good credit (or any credit at all) doesn’t happen overnight. Instead, if you’re starting from scratch, you may need to have an open credit account for around three to six months before you first get a credit score.

From there, a good credit profile and good credit score can take a while to build. In reality, it can be much faster and easier to lower your credit score, which is why it’s vital to aim to make solid financial choices, like consistently paying your bills on time. Building and maintaining good credit isn’t always easy, but by following a few simple steps, you can improve your standing.

Key Points

• Establishing a credit score takes three to six months after opening a credit account.

• On-time payments are essential for a good credit score.

• Credit scores depend on payment history, credit utilization, account types, age of accounts, and inquiries into accessing credit.

• Opening too many accounts at once can harm credit scores.

• Beware of scams promising quick credit improvement; building credit is gradual.

How Long It Can Take to Build Credit From Scratch?

The exact length of time it takes to build credit from scratch varies. That being said, it’s usually around three to six months from the time you first open a credit account.

Even though establishing and building credit can take time, it’s worth it as a way to improve your overall financial situation. Having good credit can make it easier to get approved for loans and secure lower interest rates.

Recommended: How to Avoid Interest on a Credit Card

4 Ways to Build Credit

If you’re hoping to begin building credit, here are some tactics you might consider.

Become An Authorized User

One way to help build your credit is by becoming an authorized user on an account of someone who already has good credit. This might be a trusted friend or family member. As they manage the account responsibly, that can have a positive impact on your credit score as well. Just know that if they miss or make late payments, that can also negatively impact your credit.

Recommended: When Are Credit Card Payments Due?

Apply For a Credit Card

If you’re getting a credit card for the first time, know that it is possible to apply for and get approved for a credit card with no existing credit history. However, you do need to be selective about which card you apply for.

You’re unlikely to get approved for, say, a rewards credit card if you don’t already have excellent credit. Still, there are credit cards that are marketed toward those who have no credit or a limited credit history. You might also consider a secured credit card, where you put down a refundable deposit that then serves as your credit limit.

If you can get approved for a credit card, and then use your credit card responsibly, such as by making on-time payments, can help you build up your credit.

Get a Cosigner

If you aren’t able to get approved for a loan on your own, you might consider applying for credit with a cosigner. Using a cosigner with good credit can help improve your chances of getting approved for a loan.

Then, your loan payments will be reported to the major credit bureaus and hopefully help you start building your credit score. Of course, that depends on your making those payments on time.

Maintain Good Credit Habits

Once you have opened a credit account like a loan or credit card, it’s important to practice good credit habits. This includes paying your statement off in full, each and every month. Demonstrating a pattern of reliably paying your bills over time shows potential lenders that you’re likely to repay your debts.

Factors That Affect Credit Score Calculations

There are five major factors that affect your credit score:

• Credit utilization: Your credit utilization is the amount of the credit you’ve used compared to your total available credit. It’s recommended to keep this ratio to 30% or less.

• Payment history: This indicates how reliably you make payments on your existing accounts.

• Types of credit accounts: Having a good mix of different types of credit accounts has a positive impact on your credit score, as it indicates to lenders that manage multiple types of accounts.

• Your average age of accounts: Having a lengthy credit history is a positive sign. This shows you have experience in responsibly managing accounts.

• New credit: Opening a number of accounts or making a number of hard inquiries in quick succession can suggest to lenders that you’ve overextended yourself and are in need of funding to bail you out.

Recommended: Starting Credit Score for 18-Year-Olds

Things to Keep in Mind Before Building Credit

If you’re looking to build good credit, here are some tips on establishing credit to keep in mind.

Have a Solid Financial Plan

The first thing you’ll want to do is make a budget. Getting a new credit card should not be viewed as a way to fix your budget or dig yourself out of a financial hole. Instead, the best way to use a credit card is as a tool of convenience for money that you already have. Make sure that you have the financial ability and discipline to pay your bills in full, each and every month.

Watch Out For Scams

Usually building credit is something that you do over a period of several months or years. If someone tells you that they can build or repair your credit quickly, it could be a sign of a credit card scam. There aren’t many shortcuts to the simple rules noted above, like regularly paying your bills on time.

Don’t Open Too Many Accounts At Once

You might think that since opening a credit account can help build credit, opening many accounts will help build credit even faster. However, that is usually not the case. Many lenders view a high number of credit inquiries in a short period of time as a negative indicator. They may see it as a potential red flag that someone is in a bad financial situation.

The Takeaway

If you’re just starting out and have no credit history at all, you generally start without an actual credit score. It can take a few months after you open a credit account to start establishing a score. As you continue to show that you’re responsible for the credit you have, your score will likely increase. Building credit can take time, and you should be skeptical of any people or programs that say they can build your credit fast.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What credit score do you start with?

There isn’t a starting credit score for those without any credit history. While you might think that you start with the lowest possible credit score (like 300) and have to build your way up, you actually don’t start with any credit score at all. As you open credit cards or other accounts, you’ll start to establish a credit history and score.

How long does it take to build a good credit score?

It usually takes anywhere from three to six months to start building a credit score after you’ve opened your first credit account. You’ll then continue to build and improve your credit by continually making on-time payments. You can always check your credit score periodically to see where you’re at on your credit journey.

How long does it take to recover from a hard inquiry on your credit?

Usually when you apply for a new credit card or other loan, your potential lender will pull your credit file. This is known as a hard inquiry. Since the number of recent hard inquiries is one factor in determining your credit score, applying for credit cards can lower your credit score. However, these inquiries typically only lower your score by a few points and drop off your report after a few months.

How fast can you build your credit in 3 months?

How fast you can build your credit depends on a number of factors. Generally, it takes a few months after you’ve opened a credit account to even establish any credit. Your credit score will improve as you continue to use your credit responsibly. It’s best to think about building credit as more of a marathon than a sprint.

Photo credit: iStock/YakobchukOlena

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Dec

2024

15 Seasonal Jobs for College Students in 2025

By Melissa Brock | Financial Topics, Going to College, Life & Career | Comments Off

College students are uniquely positioned to take advantage of seasonal jobs since they tend to have summers off from school and long holiday breaks. This gives them the opportunity to earn extra money for college and get some hands-on work experience to put on their resume.

Whether you’re looking for a job that lets you earn as much money as possible to help pay your college expenses, or a position that’s in the same field as your studies, there are a variety of seasonal jobs for college students that may be right for you.

Read on to learn more about the best seasonal jobs for college students.

Key Points

• Seasonal jobs offer college students income and work experience, and can help them pay expenses and build a resume.

• Job opportunities include virtual assistant, social media marketer, tutor, lifeguard, and landscaper, with varying pay rates.

• Winter jobs like professional driver, warehouse worker, and snow remover provide income during cold weather months.

• Jobs such as pet sitter, babysitter, and summer school teacher are ideal for college students during the summer.

• Holiday jobs in retail and gift wrapping offer flexible work opportunities during the school break.

Why Is It Important for College Students to Find a Seasonal Job?

Landing a seasonal job as a college student is crucial for a number of reasons. First, it can give you income to pay your bills, including college expenses. You might even want to start paying the interest that accrues on some of your student loans while you’re in school, including your private student loans.

Along with paying for a college degree, other reasons for college students to get a seasonal job include gaining work experience, developing skills to put on your resume, and getting the chance to network and meet working professionals who may be helpful to you when you’re looking for a full-time job after graduation. A seasonal job can also teach you things like time management, effective communication, and how to collaborate with others.

What Are the Best Seasonal Jobs for College Students?

Here are some of the best seasonal jobs for college students based on such factors as wages, job availability, and the skills required.

Virtual Assistant

Virtual assistants are remote administrative contractors who assist businesses with a wide range of duties, including administrative support, customer service, social media management, email marketing, bookkeeping, data entry, research, transcription, and content or website management. Because these jobs are virtual, college students can do them no matter where they live.

Average pay: $7.21 to $62.74 an hour

Social Media Marketer

In this position, college students are employed by a company to use social media platforms such as Facebook, Instagram, and TikTok to promote the company. They might work on projects to reach new customers, engage with current customers, and announce new services and products. Their day-to-day tasks could range from writing posts, optimizing performance, and responding to comments and messages, to helping to plan the company’s social media marketing strategy.

Average pay: Approximately $26.18 per hour

Tutor

Working as a tutor can be a natural fit for those in college. You can connect with other students and help them learn by explaining information in a way that’s relatable to them.

You can find work as a tutor by advertising your services at your college, getting a job at a local learning center, or signing up with campus tutoring services. You could also join an online tutoring platform like Tutor.com.

Average pay: $7.25 to $43.40 per hour

Recommended: Student Debt by Major

Winter Seasonal Jobs for College Students

Wintertime offers some special seasonal jobs for college students to do part-time and help pay for college. These are some options to consider.

Professional Driver

Becoming a professional driver, such as a delivery truck driver, can be a lucrative job for a college student. To become a professional driver who drives a delivery truck, however, you will first likely need to obtain a commercial driver’s license. In the training you’ll learn technical driving skills, safety procedures, and federal and state regulations, and get track-driving practice.

You can also be considered a professional driver if you drive to earn money for a ride share company or do food delivery. These jobs usually don’t require a commercial license.

Average pay: $26.12 per hour for a professional driver with a commercial license; $14.42 to $20.19 for rideshare drivers

Warehouse Worker

Warehouse workers pack and ship orders, and manage, organize, and retrieve warehouse materials. They might also transport merchandise from distribution centers, and identify missing, damaged, or lost merchandise. Some warehouse workers may need a forklift license and the ability to lift heavy objects.

Average pay: $17.81 per hour

Snow Remover

If you’re willing to shovel snow or you have a vehicle such as a pickup truck or an SUV that you can use for snow plowing, you may want to consider a snow removal job. You can put up posters advertising your services in town, or you can approach local companies to see if they need snow plowing help. You might also be able to get a job working for a local snow plowing business.

Average pay: $50 to $204 per snowfall

Resort Jobs

In the winter, there are often jobs available at ski resorts, spas, and lodges. You might find employment as a room attendant, front desk clerk, food server, bellhop, and more. Check with resorts in your area to see what’s available

Average pay: Earnings vary depending on the job; room attendants earn $18.25 per hour.

Food Service Worker

Colleges frequently need food service workers for cafeterias, cafes, and coffee shops on campus. Some of these positions may be work-study jobs, which are a type of federal financial aid. To qualify, you must submit the Free Application for Federal Student Aid (FAFSA) and receive work-study money as part of your financial aid award.

Aside from work-study food service jobs, you can look for positions in the food industry at local restaurants and brew pubs. These jobs may be fairly plentiful in college towns, which often have a number of different dining establishments.

Average pay: $17.52 per hour

Seasonal Summer Jobs for College Students

Whether you stay at college in the summer or go back home you will likely have about three months to devote to a summer job.

Pet Sitter

If you love animals, this could be the perfect summer gig for you. Since summertime is the prime vacation season, you may be able to find many pet-sitting opportunities.

As a pet sitter, you’ll typically go to people’s homes to care for their pets for a set amount of time each day, or even overnight. Tasks include feeding pets, walking dogs, cleaning litter boxes, administering medications, and playing with the pet.

You can alert prospective clients to your services via social media, including Facebook, TikTok, and Instagram. You can also ask around in your neighborhood to see who might need a pet sitter.

Average pay: About $25 for a 30-minute visit, $20 to $30 a day, $45 to $75 per overnight, or $250 to $375 per week

Babysitter

Many parents need help in the summer when their kids are home from school. As a babysitter, you may spend time playing with children, doing crafts with them, feeding them, and taking them to activities like sports practice, doctors’ appointments, and summer camp sessions.

Average pay: Approximately $23.61 per hour for one child

Summer School Teacher

If you are an aspiring teacher who has completed their bachelor’s degree, you could become a summer school teacher in a school district. For such a position, you’ll need your degree plus certification or licensure in your state.

For a somewhat similar but less formal summer school job, you could consider tutoring, working at a summer camp, or getting a position as an assistant in a kids’ arts or music program.

Average pay: $15 to $49 an hour for summer school teachers

Lifeguard

Lifeguarding is a popular job for college students since you get to spend your days at a pool or beach. You must pass a swimming test and undergo a lifeguard training and certification program that usually includes First Aid and CPR/AED training.

Average pay: $13 to $15 per hour

Landscaper

As a landscaper, you’ll do such tasks as plant flowers, mow lawns, prune trees, aerate soil, and fertilize plants and lawns. If you like to be outdoors, you’re able to do heavy lifting and digging, and don’t mind getting dirty, this could be a rewarding summer job for you.

Average pay: $15.94 per hour

Seasonal Holiday Jobs for College Students

On your year-end break from school, you can earn some extra money by getting a seasonal job for college students. Many businesses need additional help during the holidays, and some big companies hire tens of thousands of seasonal employees.

Retail Employee

Retailers often offer some of the best seasonal holiday jobs for college students. Retailers like Dick’s Sporting Goods, Target, Walmart, Macy’s, Bath & Body Works, Kohl’s, and J.C. Penney employ many seasonal workers for the season. Companies like Amazon also offer seasonal jobs, so consider looking there as well.

Average pay: $15 to $24 per hour, though it varies depending on the retailer

Gift Wrapper

If you enjoy wrapping presents for family and friends, why not do it professionally? Many retail stores offer gift wrapping services to their clients, and they’re typically looking for seasonal employees to fill this role. The job typically involves paying attention to detail while working quickly to meet customer demand during the holiday rush.

Average pay: $9 to $17 per hour

Recommended: Student Loan Forgiveness Guide

Other Ways to Pay for College Tuition

In addition to getting a seasonal job, there are a number of other options you can use to help pay for college. The more money you can put toward your college expenses now, the easier getting out of student loan debt later on may be.

First, be sure to fill out the FAFSA for any federal financial aid you might qualify for, including scholarships, grants, and federal student loans. These loans come with specific federal student loan interest rates that can vary from year to year.

You can also look for private scholarships and grants. This type of gift aid may be offered by your state, various organizations, and some businesses. SoFi’s scholarship search tool can help you find different gift aid opportunities.

Another alternative is to take out private student loans. These loans are offered by banks, credit unions, and private lenders. Private student loans have fixed or variable rates, and the rate you may qualify for depends on your credit history, among other factors. You can opt to refinance student loans in the future to get a lower rate or better terms if you’re eligible.

A student loan payment calculator can help you determine what your loan payments might be.

Student Loan Options From SoFi

Getting a seasonal job for college students is one way to help pay for college. Federal financial aid, such as federal student loans, scholarships and grants can also help you cover your school costs. And private student loans can supplement your federal financial aid and help fill in the gaps.

SoFi has private student loan options you can explore, as well as student loan refinancing. With refinancing, you replace your existing loans with a new private student loan, ideally one with a lower rate and more favorable terms. Just be aware that if you refinance federal student loans, you won’t be able to access federal benefits such as income-driven repayment plans.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

photo credit: iStock/jacoblund

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Private Student Loans
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Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Nov

2024

9 ESG Metrics Investors Should Know

By Kenny Zhu | Growing Wealth, invest, Investing | Comments Off

A number of investors are choosing to invest in securities with an environmental, social, and governance (ESG) focus that may align with their values and investment goals. Many see ESG companies as being potentially more sustainable long-term. But determining whether a company’s ESG strategies are having the desired impact requires the use of ESG metrics to measure progress and enable accountability.

In addition, these days many investors also want to know how well companies are managing the risks associated with climate-related changes — which also requires metrics that can show whether a company is meeting key standards.

These concerns aren’t new, but they have driven a number of new ESG-focused regulatory efforts here and abroad. As yet, however, there isn’t a universal set of ESG metrics used by all investors or financial firms to evaluate a company’s progress toward ESG goals, or better manage ESG risks. What’s more, the regulatory landscape in this sector is evolving, which, for the near future, may make it challenging to track certain metrics over time. That said, there are a number of frameworks that companies and governments have embraced that can inform investors’ choices.

Key Points

• With the growing appeal of ESG strategies, there is also a need for reliable ways to assess companies’ ESG performance and risk mitigation.

• ESG metrics are necessary for accurate company disclosures, which also support transparency and accountability.

• The use of ESG metrics and disclosures can also help investors compare companies within and across industries.

• A number of organizations are establishing mandatory standards and/or compliance rules, although some are in flux or facing legal opposition.

• At the moment, companies can choose from a range of ESG frameworks and standards.

What Is ESG Investing?

ESG stands for environmental, social, and governance standards that can help people assess whether companies are meeting certain criteria, as well as whether they are mitigating ESG-related risk factors that may impact performance.

• Environmental factors capture how well a company safeguards the physical environment (e.g., reducing emissions, pollutants).

• Social criteria refer to employee safety, fair labor practices, community investment, relationships with customers and vendors.

• Governance factors include issues of leadership, fraud prevention, transparency in accounting and reporting, and more.

ESG investing began in the 1970s, broadly speaking, although impact investing in various forms has been around for centuries.

At first, investing with the aim of creating positive change for society and the planet seemed anchored in a kind of “do-goodism” and less focused on financial outcomes. In the last 20 or 30 years, though, investors have become interested in socially responsible investing (SRI), as many funds in this category have shown themselves to offer returns that are comparable to traditional strategies, according to a report published in 2023 by Morningstar, a fund rating and research firm.

ESG Metrics Are Key to ESG Reporting

Thus, with the growing appeal of ESG investments to some investors, there is a commensurate need for reliable ways to assess companies’ ESG performance when choosing to invest online or through a traditional brokerage.

ESG frameworks help companies, as well as investors, assess an organization’s stated aims in terms of meeting ESG standards. In theory, relying on a common set of metrics should help encourage more efficient and transparent ESG reporting.

• ESG metrics establish a layer of transparency and accountability.

• Reliable ESG reporting helps build trust and a positive image with investors, communities, and other stakeholders.

• In addition, companies that adhere to ESG standards may be able to demonstrate better risk management.

What Are ESG Metrics?

Until now, ESG metrics and reporting standards have been largely proprietary or voluntary. But owing to widespread concerns about climate change and climate-related risk factors, thousands of companies around the world have adopted voluntary frameworks and metrics in recent years.

There are thousands of metrics in use, many are specific to certain industries. Common ESG metrics typically assess how well an organization is limiting pollutants and emissions, meeting renewable energy targets, upholding fair labor standards, adhering to transparency in accounting, corporate board selection, and more.

The Use of ESG Frameworks

Companies may be required to use certain metrics in their reporting and disclosures. Here too there is considerable variation.

For example, the Global Reporting Initiative (GRI), which has a voluntary governance structure, is a nonprofit organization that was established in 1999 to create a set of guidelines that help companies and governments disclose their efforts in light of climate change, human rights, and corruption.

More than three-quarters (78%) of the world’s largest corporations have adopted the GRI standards, making it the most common ESG framework at the moment.

In addition, there has been a rise in the number of organizations that are establishing mandatory standards and/or compliance rules that require standardized reporting and verifiable metrics regarding ESG performance.

For example, the Corporate Sustainability Reporting Directive (CSRD) began rolling out mandatory ESG reporting rules in January of 2024 in the European Union. The CSRD compliance rules impact non-E.U. companies, as well, about a third of which are based in the United States.

Similarly, some financial institutions have created screener tools that investors can use to evaluate certain securities, but these are typically proprietary and cannot be used to evaluate investments at a different institution.

SEC Climate-Disclosure Rules on Hold

Another widely watched set of reporting requirements was led by the Securities and Exchange Commission (SEC) over the last few years. The SEC adopted new rules in March of 2024, which established a higher bar for companies and required them to disclose ESG-related operational risks and expenses, as well as efforts to meet sustainability targets: e.g., emissions reduction.

But those rules were quickly challenged and remain on hold at the time of publication. Likewise, similar efforts in states like California and elsewhere have been stalled.

The Importance of ESG Metrics

Although the landscape of ESG frameworks and reporting standards is still evolving, and is largely in flux, ESG metrics are important because they help investors to gauge a firm’s impact on environmental issues, societal issues, and issues of corporate responsibility against a set of comparable peers.

Since many investors who are interested in ESG strategies are also committed to making an impact with their money, being able to benchmark outcomes is important.

The Limitations of ESG Metrics

However, it can be difficult to measure ESG policies across different industries, as no official regulations for standardized ESG reporting currently exist. For example, a financial institution might require different standards for energy efficiency vs. an agricultural company or an actual energy producer.

Finally, some of the existing standards are qualitative and may be prone to subjectivity, which can make the ESG evaluation process difficult to quantify. These can all present challenges when you’re trying to apply ESG principles to your investing strategy.

Having an awareness of some of the limitations around these metrics can help investors use the currently available criteria wisely.

9 Common ESG Metrics

Commonly employed ESG metrics consist of both qualitative and quantitative metrics across all three categories of environmental, social, and governance factors.

3 Common Environmental Metrics

Environmental metrics measure the long-term ecological sustainability of a firm’s actions. These can be related to emissions, finite natural resources, and the environment, among other things.

Many of these metrics can be tracked on an aggregate basis or relative to other operating metrics (per capita, per unit produced, etc.).

• Emissions: Quantifies how much a firm emits in greenhouse gasses, or whether it’s working to reduce carbon emissions through its operations.

• Waste: Measures how much waste a company generates or recycles in their operations. Can also reflect a company’s impact on its surrounding ecology: e.g., air or water pollution.

• Resource Usage: Tracks the efficiency and extent of a firm’s operations when it comes to using energy, water, or other key resources.

3 Common Social Metrics

Social metrics evaluate how a firm’s policies impact its workforce, the community, and society at large. Attempts to quantify these metrics have largely been implemented on a per-occurrence basis, or as a rate over time.

• Human resources: Evaluates how a company treats its employees, gender pay gaps, diversity, frequency/magnitude of any workplace litigation, and employee turnover.

• Labor safety: Tracks a firm’s commitment to safe labor practices via metrics like frequency of workplace accidents and lost productivity.

• Product development and safety: Examines a firm’s product quality and sustainability through metrics like number of recalls, complaints, or even frequency of litigation. Can also be linked to environmental standards when it comes to how product inputs are sourced.

3 Common Governance Metrics

Governance metrics pertain to issues relating to business ethics, mitigation of agency risks, and transparency in reporting. These can be measured in terms of how executives are compensated, board policies, and accounting choices, among others.

• Ownership structure: Reviews how faithful a firm is to its shareholders when it comes to metrics like the number of independent directors on the board, or how voting rights are distributed between management and shareholders.

• Executive compensation: Measures executive compensation relative to industry standards or company profitability. Can also be tied to social concerns when measuring how compensation structures vary for different genders/minorities.

• Financial reporting: Tracks a firm’s accounting policies and how comprehensive and accurate they are. Could involve reviewing a firm’s books for key disclosures or frequency of one-off exceptions.

How Do Firms Report ESG Metrics?

To some degree, how each firm reports its ESG metrics depends on its policies regarding disclosures. But now companies do have some standardization for reporting climate-related risk factors and mitigation efforts.

Keep in mind, the adoption of ESG frameworks can vary widely by firm and disclosure of these metrics is still largely voluntary. Additionally, certain metrics may be difficult to quantify and, in some cases, management, stakeholders, or shareholders may disagree on the impact of certain ESG factors.

As a result, professional money managers sometimes may solicit the assistance of third-party ESG consultants to obtain an independent assessment of how a company actually performs on ESG metrics.

How Can Investors Use ESG Metrics?

Investors want to be discerning when investing in specific firms or funds that offer an ESG approach.

Given the range of ESG frameworks and the inconsistency in how frameworks are applied, investors should be aware that some firms may cherry-pick which ESG metrics they use. Investment funds and ETFs that offer an ESG-based approach may use their own proprietary metrics when deciding how to allocate ESG investments; which may make them difficult to compare.

When using ESG metrics, you’ll want to examine a company’s ESG-related disclosures closely to ensure that there’s consistency in the data being reported. Depending on the metric you’re examining, you may wish to avoid making comparisons across disparate industries and focus on identifying “best-in-class” investments for a single industry.

The Takeaway

Broadly speaking, ESG metrics can offer investors a useful dimension for evaluating certain types of sustainable investment choices. Although a unified set of ESG standards and metrics is a work in progress, there has been a steady push among regulatory bodies to establish ESG reporting requirements, here and worldwide.

As with any investment strategy, investors will want to manage their expectations appropriately and employ ESG metrics as part of a larger toolbox for investment analysis.

Ready to start investing for your goals, but want some help? You might want to consider opening an automated investing account with SoFi. With SoFi Invest® automated investing, we provide a short questionnaire to learn about your goals and risk tolerance. Based on your replies, we then suggest a couple of portfolio options with a different mix of ETFs that might suit you.

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SOIN-Q324-006

Nov

2024

18 Mortgage Questions for Your Lender

By Alene Laney | Financial Independence, Home Ownership, mortgage | Comments Off

Signing on a knowledgeable mortgage lender is one of the first steps you’ll take on your journey to homeownership. A good lender could help you make a sound decision about a major commitment.

If you want to know what questions to ask a mortgage lender, these can help you feel more confident choosing a lender to navigate the complex homebuying process with you.

Key Points

• Lenders offer down payments as low as 3% for first-time homebuyers, but a 20% down payment avoids mortgage insurance.

• Interest rates and APRs differ; APR includes additional fees and is usually higher.

• Fixed-rate mortgages have stable payments, while adjustable-rate mortgages may start lower but can increase.

• Preapproval is more thorough than prequalification and helps show sellers you’re a qualified buyer.

• Closing costs typically range from 2% to 5% of the purchase price and include various fees.

1. How Much Can You Borrow?

How much you can borrow is the question most buyers have on their minds when they start dreaming about real estate listings online. You may have come across a mortgage calculator tool that estimates how much a mortgage is going to cost.

But that’s just a starting point. A mortgage lender will evaluate the entire spectrum of a homebuyer’s financial situation and find the true amount they’ll be able to borrow. The lender may also make recommendations for programs or loans for each buyer’s unique situation.

When you get a loan, you’ll receive a mortgage note, a legal contract between the lender and you that provides all the details about the loan, including the amount you were approved to borrow.

2. How Much of a Down Payment Do You Need?

Another key question your lender can help answer for you is how much are down payments? You’ve probably heard about the ideal 20% down, but a lender may be able to help homebuyers get into a home with a much lower down payment, such as 3% or 5%. The lowest down payment option is often available only to first-time homebuyers. But anyone who hasn’t owned a primary residence in the last three years is often considered a first-timer.

A 20% down payment will enable you to forgo mortgage insurance on a conventional loan (one not insured by the federal government), but lower down payment amounts can help homebuyers obtain housing sooner. There are plenty of options to explore with your lender.

3. What Is the Interest Rate and APR?

Your mortgage lender may explain the difference between the interest rate and annual percentage rate.

• Interest rate. The interest rate is the cost to borrow money each year. It does not include any fees or mortgage insurance premiums.

• APR. The APR is a more comprehensive reflection of what you’ll pay for the mortgage, which will include the interest rate, points paid, mortgage lender fees, and other fees needed to acquire the mortgage. It’s usually higher than the interest rate.

The interest rate and APR must be disclosed to you in a loan estimate with the other terms and conditions the lender is offering. Pay particular attention to how the APR changes from loan to loan. When you’re looking at APR vs. interest rates for an FHA loan and a conventional mortgage, for instance, you’ll notice the numbers come out very different. (This is just a recent example.)

30-year term	Interest rate	APR
FHA	6.750%	7.660%
Conventional	6.875%	7.031%

In this case, the interest rate on a 30-year FHA loan is lower than on a conventional loan; however, when accounting an upfront mortgage premium for the FHA loan and other fees, the APR is higher on the FHA loan than on the conventional loan.

4. What Are the Differences Between Fixed- and Adjustable-Rate Mortgages?

The main difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM) is whether or not the monthly payment will change over the life of the loan.

• Fixed-rate mortgages start with a little higher monthly payment than an ARM, but the rate is secure for the term.

• An adjustable-rate mortgage will start with a lower interest rate that may increase as the index of interest rates increases. This type of loan may be more appropriate for buyers who know they will not be keeping the mortgage for long.

Fixed-Rate Mortgages	ARMs
Interest rate is locked in for the term	Interest rate is variable
Monthly payment stays the same	Monthly payment is variable
Typically a longer-term mortgage, such as 15 or 30 years	Typically a shorter-term mortgage, such as five or seven years
Interest rate is determined when the rate is locked before closing the mortgage	When the index of interest rates goes up, the payment goes up

The key to an ARM is to know how it adjusts. How frequently will your rate adjust? How much could your interest and monthly payments increase with each adjustment? Is there a cap on how high your interest rate could go? A good mortgage lender will help you consider all these variables when selecting a fixed-rate or adjustable-rate mortgage.

5. How Many Points Does the Rate Include?

What are points on a mortgage? Mortgage points are fees paid to a lender for a lower interest rate. Asking your lender how many points are included in the rate can help you compare loan products accurately.

6. When Can the Interest Rate Be Locked In?

Rate lock policies differ from lender to lender. Check at the top of the first page of your loan estimate to see if your rate is locked, and for how long.

You’ll want to ensure that any rate lock agreement gives you enough time to close on your loan. Many lenders have fees for extending a rate lock.

7. How Much Are Estimated Closing Costs?

One of the most important documents you’ll receive from your lender is called a loan estimate. The loan estimate gives a detailed breakdown of the interest rate, monthly payment, fees, and closing costs on the loan you’re applying for. When you ask about closing costs, your lender can provide this document to you.

Common closing costs include:

• Appraisal fee

• Loan origination fee

• Title insurance

• Prepaid expenses such as homeowners insurance, property taxes, and interest until your first payment is due

Expect to see 2% to 5% of the purchase price in closing costs.

8. Are There Any Other Fees?

Lenders are required to disclose all costs in the loan estimate. They’re also required to use the same standard form so you can compare costs and fees among different lenders accurately. Be sure to ask lenders about other fees and watch for them on your loan estimate.

9. When Will the Closing Happen?

The time to close on a house will depend on your individual circumstances, but the national average is 43 days.

An experienced lender with a digitized process may be able to close a loan more quickly. The time it takes a lender to approve and process the loan are also factors to consider.

10. What Could Delay the Closing?

In the August 2024 National Association of Realtors® Confidence Index survey, 14% of real estate transactions had a delayed settlement. Previous surveys have shown that the main reasons for a delay included appraisal issues, financing issues, home inspection or environmental issues, deed or title issues, or contingencies stated in the contract.
An experienced lender may know how to bring a home to the closing table despite the challenges with financing and appraisals. Be sure to ask upfront how these challenges would be addressed.

11. What Will Fees and Payments Be?

The neat part about obtaining a mortgage since 2015 is that the information is included in a standard form, the loan estimate. The form is used by all lenders and allows borrowers the opportunity to compare costs among lenders quickly and accurately. All fees and payments are required to be clearly outlined in this form.

Recommended: Guide to Mortgage Statements

12. How Good Does Your Credit Need to Be?

You’ll typically need a FICO^® credit score of at least 620 to get a conventional mortgage, but lenders consider a credit score just one slice of the qualification pie.

With a lower credit score, a lender may steer you in the direction of an FHA loan, which requires a score of 580 or higher to qualify for a 3.5% down payment. Credit scores lower than 580 require a 10% down payment for an FHA loan.

Borrowers with credit scores above 740 may qualify for the best rates and terms a lender can offer.

13. Do You Need an Escrow Account?

Your lender can set up an escrow account to pay for expenses related to the property you’re purchasing. These may include homeowners insurance and taxes. An escrow account can take monthly deposits from the borrower, hold them, and then disburse them to the proper entities when yearly payments are due. In some locations and with certain lenders, escrow accounts are required.

14. Do You Offer Preapproval or Prequalification?

Lenders have different processes for qualifying mortgage applicants so it’s important to understand prequalification vs. preapproval. Preapproval is a much more in-depth analysis of a buyer’s finances than prequalification.

A preapproval letter provided by the lender specifies how much financing the lender is willing to extend to you, and helps to show sellers you’re a qualified buyer. Getting preapproved early in the homebuying process can also help you spot and remedy any potential problems in your credit report.

15. Is There a Prepayment Penalty?

A prepayment penalty is a fee for paying off all or part of your mortgage early. Avoiding prepayment penalties is easy if you choose a mortgage that doesn’t have any. Ask lenders if your desired loan carries a prepayment penalty. It will also be noted in the loan estimate.

16. When Is the First Payment Due?

A lender will be able to help you get your first payment in, which is typically on the first day of the month after a 30-day period after you close. For example, if you closed on Aug. 15, the first mortgage payment would be due on the 1st of the next month following a 30-day period (Oct. 1).

Each mortgage statement sent every billing cycle includes current information about the loan, including the payment breakdown, payment amount due, and principal balance.

17. Do You Need Mortgage Insurance?

Your mortgage lender will guide you through the process of acquiring private mortgage insurance, commonly called PMI, if you need it. Mortgage insurance is required for most conventional mortgages made with a down payment of less than 20%, as well as for FHA and USDA loans.

It’s not insurance for the buyer; instead, it protects the lender from risk. A good mortgage lender can also help advise borrowers on dropping PMI as soon as possible. A home loan help center can help you learn more about PMI or any mortgage question.

Recommended: What is PMI & How to Avoid It?

18. How Much Is the Lender Making Off of You?

Lenders are required to be clear and accurate when it comes to the costs of the loan. These should be fully disclosed on your loan estimate and closing documents. If you want to know how much the lender is charging for its services, you’ll find it under “origination fee.”

The Takeaway

If you’re shopping for a home loan or thinking about it, you might have mortgage questions — about down payments, APR, points, PMI, and more. Don’t worry about asking a lender too many, because many buyers need a guide throughout the homebuying journey. Asking questions is a great way to get to the lender and loan terms that make the most sense for your financial situation.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

FAQ

What should you not say to a mortgage lender?

The most important thing to remember when communicating with a prospective lender is that you should be truthful — about everything, but especially your finances.

What questions can a mortgage lender not ask?

Generally speaking, most of the topics that are off limits in a job interview are also off limits in a mortgage negotiation. A lender should not ask you about race, ethnicity, religion, or sexual orientation, for example. You also shouldn’t be asked your age (unless you are applying for an age-based loan), or about your family status (married vs. divorced, whether you are planning to have kids, etc.), or about your health.

Photo credit: iStock/Ridofranz

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

Nov

2024

How Soon Can You Refinance a Mortgage?

By Jody McMaster | Home Ownership, mortgage | No Comments

Are you ruminating about a refi? How long you must wait to refinance depends on the kind of mortgage you have and whether you want cash out.

You can typically refinance a conventional loan as soon as you want to, but you’ll have to wait six months to apply for a cash-out refinance.

The wait to refinance an FHA, VA, or USDA loan ranges from six to 12 months.

Before any mortgage refinance, homeowners will want to ask themselves: What will the monthly and lifetime savings be? What are the closing costs, and how long will it take to recover them? If I’m pulling cash out, is the refinance worth it?

Key Points

• The timeline for refinancing a mortgage depends on the loan type and refinance purpose.

• Conventional loans can be refinanced anytime, but refinancing with the current lender may require a six-month wait.

• Cash-out refinances typically need a six-month waiting period.

• FHA loans mandate a 210-day wait for a Streamline Refinance.

• VA loans require a 210-day interval between refinances, with some lenders needing up to a year.

Refinance Wait Time Based on Mortgage Type

How soon can you refinance? The rules differ by home loan type and whether you’re aiming for a rate-and-term refinance or a cash-out refinance.

A rate-and-term refi will change your current mortgage’s interest rate, repayment term, or both. Cash-out refinancing replaces your current mortgage with a larger home loan, allowing you to take advantage of the equity you’ve built up in your home through your monthly principal payments and appreciation.

Conventional Loan Refinance Rules

If you have a conventional loan, a mortgage that is not insured by the federal government, you may refinance right after a home purchase or a previous refinance — but likely with a different lender.

Many lenders have a six-month “seasoning” period before a borrower can refinance with them. So you’ll probably have to wait if you want to refi with your current lender.

Cash-Out Refinance Rules

If you’re aiming for a cash-out refinance, you normally have to wait six months before refinancing, regardless of the type of mortgage you have.

FHA Loan Refinance Rules

An FHA Streamline Refinance reduces the time and documentation associated with a refinance, so you can get a lower rate faster.

But you will have to wait 210 days before using a Streamline Refinance to replace your current mortgage.

VA Loan Refinance Rules

When it comes to VA loans, the Department of Veterans Affairs offers an Interest Rate Reduction Refinance Loan (IRRRL), also known as a “streamline” refinance.

It also offers a cash-out refinance for up to a 100% loan-to-value ratio, although lenders may not permit borrowing up to 100% of the home’s value.

The VA requires you to wait 210 days between each refinance. Some lenders that issue VA loans have their own waiting period of up to 12 months. If so, another lender might let you refinance earlier.

USDA Loan Refinance Rules

The Streamlined-Assist refinance program provides USDA direct and guaranteed home loan borrowers with low or no equity the opportunity to refinance for more affordable payment terms.

Borrowers of USDA loans typically need to have had the loan for at least a year before refinancing. But a refinance of a USDA loan to a conventional loan may happen sooner.

Jumbo Loan Refinance Rules

For a jumbo loan, even a rate change of 0.5% may result in significant savings and a shorter time to break even.

How soon can you refinance a jumbo loan? A borrower can refinance their jumbo mortgage at any time if they find a lender willing to do so.

Check out mortgage refinancing with SoFi and get
competitive rates and help when you need it.

Top Reasons People Refinance a Mortgage

If you have sufficient equity in your home, typically at least 20%, you may apply for a refinance of your mortgage. Lenders will also look at your credit score, debt-to-income ratio, and employment.

If you have less than 20% equity but good credit — a minimum FICO® score of 670 — you may be able to refinance, although you may not receive the best rate available or you may be required to pay for mortgage insurance.

Here are the main reasons borrowers look to refinance.

• Reduce the interest rate. Reduce the interest rate. Refinancing to a loan with a lower rate is the point of refinancing for most homeowners. Just calculate your break-even point, when the closing costs will have been recouped: Divide the closing costs by the amount to be saved every month. If closing costs will be $5,000 and you’ll save $100 a month, it will take 50 months to break even and begin reaping the benefits of a refi. If you purchased your home around 2020, it may be hard to capture a lower interest rate than you currently have, as that was a particularly low time for historical mortgage rates.

• Shorten the loan term. Refinancing from a 30-year mortgage to a 15-year loan usually results in a substantial amount of loan interest saved, as this mortgage calculator shows. Or you may refi to a 20-year term. If you’re years into your mortgage, resetting to a new 30-year term may not pay off.

• Tap home equity. Here’s how cash-out refinancing works: You apply for a new mortgage that will pay off your existing mortgage and give you a lump sum. A lower interest rate may be available at the same time.

• Shed FHA mortgage insurance. In many cases, the only way to get rid of mortgage insurance premiums on an FHA loan is to sell your home or refinance the mortgage to a conventional loan when you have 20% equity in the home — in other words, when your new loan balance would be at least 20% less than your current home value.

• Switch to an adjustable-rate mortgage or from an ARM to a fixed-rate loan. Depending on the rate environment and how long you expect to keep the mortgage or home, refinancing a fixed-rate mortgage to an ARM that has a low introductory rate, or an ARM to a fixed-rate loan, may make sense.

Mortgage rates are no longer at record lows. But they’re still pretty low by historical mortgage rate standards.

And rates are not the be-all, end-all. Home equity increased for many homeowners as home values rose. That’s attractive if you want to tap your equity with a cash-out refinance.

Closing costs can often be rolled into the loan or exchanged for an increased interest rate with a no-closing-cost refinance.

The Takeaway

How soon can you refinance? If it’s a conventional loan, whenever you want to, although probably not with the same lender within six months. Otherwise, if you must bide your time before refinancing or you’re waiting for rates to abate, that gives you a lull to decide whether a traditional refinance or cash-out refi might suit your needs.

SoFi can help you save money when you refinance your mortgage. Plus, we make sure the process is as stress-free and transparent as possible. SoFi offers competitive fixed rates on a traditional mortgage refinance or cash-out refinance.

A new mortgage refinance could be a game changer for your finances.

FAQ

Do you need 20% equity to refinance?

Some lenders will allow you to refinance with less than 20% equity in your home, but you may not get the best available interest rate, or you may need to pay for private mortgage insurance. You’ll want to do the math to make sure you’re saving money with the refinance.

Does refinancing hurt your credit score?

There may be a temporary dip in your credit score after a refinance, but if refinancing helps you lower your monthly debts you may find that it is actually helpful to your credit score over the long term.

SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

^¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
^†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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