Adjustable Rate Mortgages (ARM) - Just the Facts

Car Loans

Credit FAQs

Think Inside the Box (The Safety Deposit Box)

Understanding Debit Cards

What is Identity Theft?

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What is an ARM?
An ARM is a mortgage loan whose interest changes or fluctuates during the term of the loan. The interest rate charged is linked to an index. The interest rate—and your payments—are periodically adjusted up or down in accordance with the index.

ARM Terminology

Index
An index is a guide that lenders use to measure interest rate changes. Common indexes used by lenders include the activity of one, three, and five-year Treasury securities, but there are many others. Each ARM is linked to a specific index.

Margin
Think of the margin as the lender’s markup. It is an interest rate that represents a portion of their operating cost to make and service the loan. The margin is added to the index to determine your loan interest rate. The margin usually stays the same during the life of the loan.

Adjustment Period
The adjustment period is the period between potential rate adjustments.
    
You may see an ARM described with figures such as 1-1, 3-1, and 5-1.

• The first figure in each set refers to the initial period of the loan, during which your interest rate will be the same as it was on the day of closing.

• The second number is the adjustment period, showing how often adjustments can be made to the rate after the initial period has ended. The examples above are all ARMs with annual adjustments.

If my payments can go up, why should I consider an ARM?
The initial interest rate for an ARM is usually lower than that of a fixed rate mortgage—where the interest rate remains the same during the life of the loan. A lower rate means lower payments, which might help you qualify for a larger loan.

Other Issues to Consider

• How long do you plan to live there? The possibility of higher rates isn’t as much of a factor if you plan to be in the home for a relatively short time.

• Do you expect your income to increase? If so, the extra funds may cover the higher payments that result from rate increases.

• Some ARMs can be converted to a fixed-rate mortgage. However, conversion fees may be high enough to take away all of the savings you saw with the initial lower rate.

• When comparing lenders, consider both the index and the margin rate being offered.

• If the lender doesn’t plan to sell your loan on the secondary market, you might be able to avoid the Private Mortgage Insurance (PMI) that’s normally required when a buyer makes less than a 20% down payment.

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Are you shopping for a new vehicle? See PHFCU First!

Before you purchase a vehicle, which is one of the most costly purchases you can make, you should prepare and educate yourself.

Here are some tips to remember:

• Know how much you want to borrow and shop around for an acceptable Annual Percentage Rate (APR). Be aware of any hidden fees or restrictions on a loan.

• If you have been researching new vehicles, you've no doubt seen advertisements on television and in the newspapers promising rates as low as 0%. Not everyone qualifies for these rates. In truth, very few people do. For a new car, the 0% APR loans apply only to very few people with perfect credit and for loans with a 12 to 36 month duration. The monthly payments on a 12-month loan are typically much higher than what most of us can afford.

• Many dealerships offer a low APR and a rebate. Keep in mind that you can't get both- you either get the low APR or the rebate.

• Visit www.phfcu.com and use our loan calculator to determine what kind of loan would be suitable for your budget. We all would love to have a $40,000 vehicle, but how many of us can afford $1,200/month payments? If you can only afford $200/month payments, based on a 4.75% APR, how much does that qualify you for?

• Get pre-approved for your car loan before shopping. This way, you know how much you can spend.

• Don't assume you have a low credit score or you don't qualify for a loan because you have been denied before. Many factors contribute to your credit score and it can change regularly.

• On occasion, some banks and credit unions may approve your loan or give you a lower APR if you agree to have payments made via automatic drafts from your bank account.

• Visit a PHFCU Loan Service Representative and they can tell you what APR you do qualify for based on your credit score and help you workout a payment plan that fits your needs- without hours of negotiating and miles of red tape.

• Remember shopping for a vehicle or applying for a loan shouldn't be a nightmare. PHFCU is here to help you.

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What is credit scoring?
Credit scoring is a system financial institutions use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles.
A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points, a credit score, helps predict how creditworthy you are or how likely it is that you will repay a loan when due. Your credit score changes over time with your credit patterns.

What looks bad on my credit report?
There are basically 10 things that look the worst on your credit report: credit inquiries, credit rejections, late payments, past due and unpaid payments, court judgments, collections, loan defaults, repossession, foreclosure, and bankruptcy.

How does a lender decide that I am creditworthy?
When you apply for credit by filling out an application, you normally give permission to the lender to get your credit report from a credit bureau. Lenders use this credit report to work a short-term debt-to-income ratio, where they calculate your present short-term debt payments (excluding your mortgage), and divide the total by your total annual income. Lenders will refuse you credit if your short-term debt is more than 20% of your annual income. The second method lenders use is to add up your monthly bills (not including rent or mortgage and utilities) and divide the total by your gross income (before taxes). With this method, lenders are looking for a ratio of under 35%.

How does a lender qualify me for credit?
Most lenders look at the number of years you have worked at your present job, the number and nature of negative entries in your credit report, the amount of credit you currently have, savings and or checking accounts with the lender, length of time at your present address, or if you own your home.

How do I Improve My Credit Score?
Most people can significantly improve their credit in as little as one or two years, if they are willing to work on it. 

• Know what’s on your credit report Get your credit report from all three major credit bureaus (see below). Dispute any information that is wrong and take care of any accounts currently behind. For example, if you have unpaid collection accounts, negotiate settlements so you can get them paid off.

• Pay your bills consistently and on time Make sure you at least pay the minimum monthly balances on your credit cards. If you do this monthly, your credit score will slowly begin to rise. Credit bureaus weigh the events on your credit record from the last two years more heavily than events further in the past. For example, the fact that you paid your car bill late four years ago will matter less than the fact that you've paid the bills on time since then. Events dating back seven years or more are dropped from your record.

• Maintain only a reasonable amount of unused credit While it's good to have a cushion of credit available, having ready access to thousands of dollars of debt makes you a poorer credit risk.

• Have less debt Having less debt will improve your credit rating and make it easier for you to make monthly payments. One rule of thumb: for a good credit score, your account balances should be below 75% of your available credit. For example, if you have a $2000 credit limit, you should have a balance of no more than $1500.

• Avoid too many inquiries Inquiries are interpreted as a sign that you have been actively seeking credit, and may be in financial difficulties or in the process of overextending yourself.

• Pay off as much as you can from your savings account You're paying your debtors much more than you're earning on interest.

To get rid of credit card debt, pay off the card with the highest rate first, while paying the minimum on the rest—and then cancel that card. Then, move on to the card with the next highest rate. Consider consolidating to a low-rate card, but be careful of low "teaser" rates that will shoot up later. Sometimes, if you call or write your creditors and tell them why you are having trouble staying on top of things, they'll lower your rate.

Some debt is good.
Borrowing for a home or college usually makes good sense. Just make sure you don't borrow more than you can afford to pay back, and shop around for the best rates.

How do I obtain a Credit Report?
You can get a free credit report yearly from the Annual Credit Report website or by calling 1-877-322-8228 where you will go through a simple verification process over the phone.

It is important that you obtain and review a copy of your credit report once a year to make sure your information is accurate.

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Why should I rent a PHFCU Safe Deposit Box?
PHFCU’s Safe Deposit Box is a convenient place to store items that would be difficult or impossible to replace, offers privacy (only you know what is inside), and security.

What items should go inside?
Important items to consider include:

• Originals of your insurance policies
• Family records such as birth, marriage and death certificates; original deeds, titles, mortgages, leases and other contracts
• Stocks, bonds, and Savings Certificates
• Videos or pictures of your home's contents for insurance purposes (in case of theft or damage)
• Other valuables could include special memories, jewels, medals, collectibles, and irreplaceable photos
• You may also want to keep a list of your account numbers and online passwords

Please remember to keep photocopies of your records at home.

So ... what shouldn't go inside?
Items you may need in an emergency. Possible examples include a power of attorney, passports, your will, medical-care directives if you become ill and incapacitated, and any funeral or burial instructions you make. You may want to consider making copies to go in your safe deposit box and giving the originals to your attorney, close friend, or relative.  

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PHFCU’s MasterCard is both a debit and credit card, giving you the
convenience you need without worrying about high interest rates or paying a
bill.

A Debit Card ...

• is easy. You don't have to carry cash or write checks.
• is secure. There is no liability for any unauthorized transactions.
• gives you all the benefits of an ATM card, plus the added bonus of using it to make purchases anywhere MasterCard is accepted.
• makes it simple to manage your money. You can track your purchases and ATM withdrawals on your statement.
• has no service fee for credit card transactions.
• has no interest charges* because your purchases are automatically deducted form your account.

* An interest charge will be applied if you access an overdraft line of credit

Here's what you need to do to safeguard your debit card:
To safeguard your debit card, follow these measures.

• Sign your card as soon as you receive it.
• Report a lost or stolen card immediately.
• Always review your statements and report any unauthorized charges immediately.
• Keep the phone number and name of your card issuer in a safe, secure place.
• Choose a PIN that no one else could possibly know or guess.
• Memorize your PIN and never give it out or write it on the card, the card sleeve or on anything else you keep in your wallet or purse.
• Shield the screen and keyboard when you are entering your PIN.

The debit card is a quick, "pay now" product; the amount of your purchase is
directly deducted from your bank account. Make sure you have the money
available to cover the full transaction amount at the time of sale. Using a debit card saves you from carrying cash or writing checks.

Debit cards are very secure
In light of recent media reports, it is important for debit users to know that
incidents of fraud are very rare when compared with the volume of
transactions. Debit card fraud cannot occur without both a card and a
cardholder's PIN--which is a cardholder's electronic signature and the key to his or her account.

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Identity theft occurs when someone uses your personal information to commit fraud.  Identity theft can happen to anyone and is quickly becoming a major problem in our nation.  Being a victim could cost you substantial time, money, and resources to clear your name.  There are various ways fraudsters steal identities: steal your mail with personal information on it, call you pretending to be from your financial institution, or falsifying change of address documents.

Another form of identity theft commonly used is "phishing".  "Phishing" is a new scam where e-mail is sent from a seemingly legitimate financial institution asking for personal and financial information.  Information provided to these sources will be redirected to the fraudsters.

What are a few things you can do to prevent identity theft?

• Never reply to an e-mail or click on a link from within an e-mail asking you to update your account information unless you confirm the e-mail actually originated from your financial institution. You should call your financial institution using commonly used telephone numbers, found in the telephone book or a monthly statement, to confirm the authenticity of the e-mail message.

• Unless you initiate the call, you should never provide account or personal information to someone claiming to be an employee of Pearl Harbor Federal Credit Union or any other financial institution.

• Use different passwords for online banking, e-mail, PIN numbers and other online accounts. Refrain from using easily guessed passwords, such as your name, your pet's name, or your spouse's birthday.

• Regularly update antivirus software and operating system updates to reduce computer threats.

• Drop mail off at U.S. Postal Service collection boxes rather than leaving your mail in your mailbox overnight or over the weekend.

• Tear up or shred mail and documents with personal information before throwing it away. Fraudsters have been known to steal information from household garbage, commonly called "dumpster diving".

• Promptly review monthly statements and bills for suspicious transactions and large or unexplained purchases. Review your credit report annually.

• If you don’t receive your monthly statement or bill for the month, call the financial institution or company to inquire if it was sent out and verify your mailing address with them.

What is Pearl Harbor Federal Credit Union doing to prevent identity theft?

• PHFCU will never give account information to a requesting person without proper identification.

• PHFCU will electronically store picture identification and signatures. Visit any PHFCU branch for more information.

• PHFCU does not save passwords for our online banking and member telephone service. PHFCU will reset passwords only after you have sufficiently answered a series of questions to verify your identity.

• PHFCU’s online banking system is secured with 128-bit data encryption to provide a secure transfer of information between your computer and PHFCU’s online system.

• PHFCU will never request personal and/or account information via e-mail or telephone. If you receive an e-mail or phone call from PHFCU requesting account information, please forward the e-mail to fraud@phfcu.com or call (808) 73-PHFCU (737-4328) to report incident immediately.

A fraud alert is an indicator placed on your credit report record by the major credit bureaus.  When you or someone else attempts to open a credit account (credit card, loan, etc.) and you have a fraud alert in place, you will be contacted to verify your intent to open this account.  If you cannot be reached by phone, the credit account will not be opened.

Once the fraud alert is established, your name is removed from all pre-approved credit and insurance offers for two years and a credit report will be mailed to you within two weeks.

You should also let your financial institutions know about the fraud and change all account numbers, ATM/Debit cards, and credit cards.

For additional tips on how to prevent identity theft or what to do if you're a victim, you can contact a Postal Inspector at the United States Postal Inspection Service.

Additionally, download the ID Theft affidavit at the Federal Trade Commission's "Fighting Back Against Identify Theft" website. The affidavit will help you report the fraud to other institutions with one form. You can also contact the Federal Trade Commission to report the fraud at 1-877-ID-THEFT (1-877-438-4338).  They will process your complaint, help clear fraudulent activities, and guide you with further steps to stop the fraud.

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