Wall Street is hoping to enter the last full month of trading in 2023 on a high note. On Friday, all three major indexes rose for the fourth consecutive week. Investors are hoping that the softer-than-expected October inflation print will give the Federal Reserve ample reason to cut benchmark interest rates. Investors as of late are partial toward shares of Mastercard and Norfolk Southern , which ended the week with healthy gains. CNBC screened FactSet data to find the most overbought and oversold stocks, based on the relative strength index (RSI). The relative strength index measures the strength and velocity of stock price moves, and is a useful gauge of whether shares are overbought or oversold. A 14-day RSI reading below 30 indicates a stock is oversold and may present a buying opportunity. A reading above 70 suggests that a stock is overbought and could point to an impending pullback. Mastercard made the list, with a 14-day RSI of 92.11, while shares have climbed more than 18% from the start of the year. Roughly 74% of analysts polled by FactSet maintain a buy rating on Mastercard stock, while their average price targets imply about 8% upside moving forward. In late October, Mastercard beat third-quarter earnings expectations, posting $3.39 per share in adjusted earnings, while analysts polled by FactSet called for $3.21 per share. Revenue came in line with the Street’s forecasts, however. Telecommunications firm Motorola is also overbought, with its 14-day RSI reading of 94.77. Roughly 42% of analysts polled by FactSet rate the stock as a buy, while shares have added more than 24% from the start of the year. Motorola recently increased announced plans to increase its quarterly dividend by 11% to 98 cents a share, and also expanded the company’s stock repurchase program. Other overbought stocks on the list include credit reporting agency Equifax and financial services company Nasdaq Inc . Stocks that are oversold and could be due for a bounce include health-care giant Cigna and oil giant ConocoPhillips . Cigna has a 14-day RSI of 21.57, while ConocoPhillips has a 29.22 reading. Shares of Cigna have have been under pressure from the start of the year, slipping more than 13%. UBS added ConocoPhillips to its tactical picks for November, with the firm noting a potential bounce in oil prices could benefit the stock, given its strong roster of assets and healthy balance sheet. – CNBC’s Fred Imbert contributed reporting.
Tag: Equifax Inc
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The mortgage rate you get depends partly on your credit score. Here’s what to expect
Phiromya Intawongpan | Istock | Getty Images
Anyone who’s exploring homeownership may know that rising interest rates and elevated home prices are making that goal challenging.
The average rate on a typical 30-year, fixed-rate mortgage has been zigzagging between 6% and 7% for the last several months — down from above 7% in early November but roughly double the 3.3% average rate heading into 2022, according to Mortgage News Daily.
Yet the interest rate that any particular buyer is able to qualify for depends at least partly on their credit score — meaning you have some control over whether you’re able to get the best available rate, experts say. And the difference that a good or excellent score makes in terms of monthly payments — and total interest paid while you hold the mortgage — can be significant.
“The score impacts practically everything: loan approval, interest rate, monthly mortgage insurance premiums … and ultimately their payment,” said Al Bingham, a credit expert and mortgage loan officer with Momentum Loans.
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States have about $70 billion in unclaimed assetsThe median home price in January was about $383,000, according to Redfin. Although prices have been sliding since mid-2022, that amount is still 1.5% higher than a year earlier. In January 2020, the median was below $300,000.
While you may be able to negotiate on the price of the house to bring the overall cost of homeownership down, it’s also worth making sure you go into the process with as high a credit score as possible.
Lenders check three scores but use one number
Although things like steady income, length of employment, stable housing and other aspects of your financial life are important to lenders, your credit score gives them additional information.
The three-digit number — which ranges from 300 to 850 — feeds into a lender’s calculation of how risky a borrower you may be. For example, if you’ve always made your debt payments on time and you have a low credit utilization (how much you owe relative to your available credit), your score will benefit.
And the higher the number, the less of a risk you are to lenders — and therefore the better terms you can get on a loan.
Lenders check a homebuyer’s credit report and score at each of the three large credit-reporting firms: Equifax, Experian and TransUnion. For mortgages, the score provided by those companies is typically a specific one developed by FICO, because it is the score currently relied on by Fannie Mae and Freddie Mac, the largest purchasers of home mortgages on the secondary market. (In the coming years, this reliance on one score is poised to change.)
However, because that particular FICO score can differ among the three credit-reporting firms due to differences in what is reported to them and the timing, mortgage lenders use the middle number to inform their decision.
The higher your score, the lower the interest rate you’ll be charged. For illustration only: On a $300,000, fixed-rate 30-year mortgage, the average rate is 6.41% (as of Thursday) if your credit score is in the 760-to-850 range, according to FICO.
This would make your monthly principal and interest payment $1,878. On top of this amount typically would be property taxes, homeowners insurance and, if your down payment is less than 20% of the home’s sale price, private mortgage insurance.
In contrast, if your score were to fall between 620 and 639, the average rate available is 7.99%. That would mean a payment of $2,201 (again, for principal and interest only).
Most of your monthly payment goes to interest at first
Because of how loans are structured, most of your monthly payment would go to interest at the beginning of the loan instead of toward the principal.
For example, if you started paying on that $300,000 mortgage next month with a rate of 6.41%, in two years you would have paid $39,600 in interest and just $7,438 toward the principal, according to Bankrate’s mortgage calculator.
In comparison, a rate of 7.99% would mean that in two years, you would have paid $49,570 in interest and $5,455 toward the principal, according to the Bankrate calculator.
There are ways to boost your credit score
If you want to get your score up before applying for a mortgage, there are some key things you can do.
“Improving your credit score really comes down to the fundamentals,” said Ted Rossman, senior industry analyst for Bankrate. “You should aim to pay your bills on time, keep your debts low and show that you can successfully manage a variety of types of credit over the long haul.”
And, he said, there are some things you can do to improve your score fairly quickly.
“My favorite is to lower your credit utilization ratio,” Rossman said, referring to credit card balances. “This resets every month and it typically reflects statement balances, so you might have a high utilization ratio even if you pay your credit cards in full to avoid interest.”
You may want to consider making an extra mid-month payment or asking for a higher credit limit to bring the ratio down, he said.
“It’s often recommended to keep [the ratio] below 30%, although below 10% is even better, and your credit score should improve as long as you bring it down,” Rossman said.
He also recommends checking your credit report — which you can do for free at annualcreditreport.com — before applying for a mortgage. “Look for any errors and correct them as soon as possible,” he said.
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The credit scoring system has its downsides — here’s what a new credit scoring and reporting system could look like
In the U.S., credit scores can affect every aspect of someone’s life. This three-digit number can determine the interest rate you get on a mortgage, the APR you receive on a credit card and the rates you pay for car and homeowner’s insurance.
There are three major credit bureaus — Experian, Equifax and Transunion — which collect information on an individual’s credit use. This information is then recorded in a credit report, and a three-digit credit score is calculated using one of two major scoring models, FICO and VantageScore.
Most scores range from 300 to 850 with higher scores indicating that a borrower is lower risk and more likely to make on-time payments. FICO uses factors like payment history, amounts owed, credit mix, length of credit history and new credit.
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What credit scores don’t capture
Lenders have always needed a way to determine a borrower’s creditworthiness, and credit scores were a faster, easier way to do so.
Yet are these three-digit numbers really a foolproof way of figuring out someone’s creditworthiness? What happens to people who don’t have credit scores or those who have poor scores?
Barbara Kiviat, assistant professor of sociology at Stanford, explains that while credit scores are meant to predict whether or not someone will default on a loan, these scores don’t reflect why someone has defaulted.
For example, someone may fail to pay their credit card bill in full during an economic downturn or a job loss but this doesn’t necessarily mean they’ve been irresponsible with their credit. Credit scores are supposed to show how creditworthy someone is, but they can be a flawed measure of creditworthiness because they don’t account for the many factors that affect someone’s ability to repay their debt.
“If you look at credit scores from the perspective of other social actors, like policymakers or consumer advocates, why someone does or does not repay might start to have more bearing on how you make sense of credit scores,” says Kiviat.
The credit scoring system can also reflect and even worsen existing racial and wealth inequality.
As Kiviat writes, “it is harder to maintain good credit when one faces precarious work, has no wealthy family members to turn to in emergencies, is sold predatory loans, and otherwise experiences the disadvantages minorities in the U.S. disproportionately do.”
For racial minorities, a lack of a credit score or a credit file that’s too thin to be scored can mean a lack of access to credit. This leads many to rely on cash or loans with high APRs, creating a vicious cycle where people end up with high-interest debt that’s hard to pay off and which may ultimately hurt their credit scores.
A 2010 CFPB report found that a more significant percentage of Black and Hispanic individuals (15%) are credit invisible, or unscorable, compared to White and Asian individuals (9%). Furthermore, a larger percentage of credit-invisible individuals reside in low-income neighborhoods (30%) than in high-income ones (4%).
“It’s important to note that credit scores didn’t create some of the social economic disparities,” Sally Taylor, vice president and general manager at FICO, told CNBC. “They simply reflect the social economic disparities that are out there…”
Reforming the credit scoring system
One proposed solution to make more people’s credit visible is to include alternative forms of data on credit reports. For example, mortgage payments are included on your credit report while rental payments are typically not. Therefore, the system benefits homeowners but not renters.
Experian Boost was launched in 2019 and uses data not typically collected on people’s credit reports such as on-time utility, streaming subscription and telecom payments. It’s a free service and it only considers positive payment history, so late payments on added accounts won’t negatively affect your score. It also recently added the ability to include rent payments in the calculation of your credit score.
Experian Boost®
On Experian’s secure site
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Cost
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Average credit score increase
13 points, though results vary
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Credit report affected
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Credit scoring model used
Results will vary. See website for details.
However, the use of alternative data could come with drawbacks. Just as homeowners are prone to falling behind on mortgage payments during a recession, renters are too. If credit bureaus or policymakers aren’t careful, including alternative data could end up hurting the people that it’s supposed to help the most.
Another proposed solution is using cash-flow data from people’s bank accounts for underwriting, yet more research is still needed.
“Credit underwriting with cash-flow data involves using financial data insights from a bank account or other types of transaction accounts to evaluate consumers and small businesses for credit,” says Melissa Koide, CEO of FinRegLab.
FinRegLab looked at data from six non-bank financial services providers, such as Petal and Kabbage, and found that cash flow data for underwriting worked as well as traditional credit scores, and primarily benefited borrowers who were credit invisible or who had poor credit scores.
And of course, while the credit reporting system is error-free for the majority of people, many still have mistakes on their reports that could affect their credit scores, according to Aaron Klein, senior fellow in Economic Studies at the Brookings Institution.
How to check your credit score for free
A recent survey done by Consumer Reports found that more than one-third of people who checked their credit report found an error, the majority of which were related to an individual’s personal information, such as an incorrect name or address. This leaves consumers with the responsibility of checking their credit reports and scores for errors.
Credit reports became available to consumers for free in 2003. People can access one free credit report from each of the main credit bureaus once a year through annualcreditreport.com, which is authorized by federal law.
Consumers can also check their credit scores for free throughout the year using resources provided through credit card issuers. For example, people can use Chase Credit Journey or CreditWise from Capital One to find out their VantageScore® 3.0 credit score, even if they don’t have any credit cards.
Chase Credit Journey
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Cost
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Credit bureaus monitored
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Credit scoring model used
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Dark web scan
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Identity theft insurance
CreditWise® from Capital One
Information about CreditWise has been collected independently by Select and has not been reviewed or provided by Capital One prior to publication.
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Cost
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Credit bureaus monitored
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Credit scoring model used
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Dark web scan
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Identity insurance
Getting your FICO score can be a bit trickier. People can access it through Experian or a lender that partners with FICO. If you want to get it through a card issuer, you’ll need to be a Discover member in order to use Discover Credit Scorecard which provides free FICO scores.
And in Washington, there’s been some political appetite for reform but not enough for change.
Congresswoman Ayanna Pressley (D-MA) has spearheaded The Comprehensive CREDIT Act of 2021 which would reform the dispute process for mistakes on credit reports and would require that credit reporting agencies provide a free score to consumers once a year.
Bottom line
Credit scores provide an easy way for lenders to determine whether a borrower is creditworthy. However, the credit scoring and reporting systems can function imperfectly, leaving many of the most marginalized without credit scores or with poor credit scores. This can harm people’s ability to gain access to credit.
While there’s no consensus on how credit reporting and scoring can be more inclusive, some have proposed using alternative data or cash-flow data to underwrite decisions. Furthermore, policymakers have been considering how to make it easier for people to access their credit scores and resolve mistakes on their credit reports.
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Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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