Archive for March, 2009

You Could be Over-Limit on Your Credit Card – Even if You Haven’t Used it!

Wednesday, March 18th, 2009

You already know that credit card companies are lowering credit card limits right and left – and we’ve warned you that before you go shopping you need to go on line and make sure you really do have the available credit that you think you have.

But now, credit card companies are pulling an even dirtier trick!

According to an article provided to Yahoo finance by, some card issuers are now slashing credit card limits to less than your outstanding balance.

You read that right. Many consumers have had their available credit cut to a mere $2 or $3 over their outstanding balance – making them over-limit when the interest was added at the end of the month. Smart consumers called immediately and asked to have the over-limit fee removed, and were successful in doing so, as long as they hurried to make a payment and get the balance low enough to avoid triggering another over-limit fee the next month.

That tactic was outrageous enough, but at least the new credit limit was within range so that consumers could comfortably pay enough to get away from over-limit fees.

But now consumers are reporting cuts that could put some in a position of not being able to bring their balance low enough to avoid future over-limit fees.

The SmartMoney article quotes Paul Pensabene of New York – he received a statement from HSBC on December 8 showing that he had a credit line of $9,000 and owed $359.99 – so his available credit was $8,640. Luckily, he didn’t go shopping, because when he went on line a few days later to pay his bill, he found that his credit line had been reduced to $300 and he had been charged an over-limit fee of $35.

Another woman reported that she had caught the reduction to within $100 of her $3,000 balance on a Discover card when she went on line just days after it had happened. The letter notifying her of the change didn’t arrive until 3 weeks later.

This practice has the potential to bring thousands, if not millions of dollars in over-limit fees to the card issuers who are using it. Consumers who are unaware of the changes may innocently use their cards to charge purchases, while not having any idea that they are exceeding a credit limit. After all, if your statement says you have $8,000 in available credit, you really wouldn’t worry about charging a tank of gas.

Because the new regulations are taking effect in July 2010 and legislation currently in congress could move the time up by a year, card issuers are pulling every trick out of their hats to increase their revenues before these tactics are banned.

The advice for consumers: Be careful. Check every statement, read every piece of mail, and go on line to check available credit each and every time you use your card. If your credit limit is suddenly slashed from $8,000 to $300 and you make an expensive purchase, you could find yourself scrambling for the cash to pay for it – or face over-limit fees each and every month until you do.

My question: When this crisis is over and credit card issuers once again want our business, will we remember the names of the companies who hurried to fleece us while they had the chance? I hope so.

Author:Marte Cliff your resource for free credit reports, credit cards, loans, and ground breaking credit news

Ex-Countrywide Leaders Profit From the Housing Crisis

Wednesday, March 18th, 2009

A dozen former Countrywide executives are now cashing in on the crisis that many feel they caused.

A new company – the Private National Mortgage Acceptance Company, commonly known as PennyMac – is led by Stanford Kurland, Countrywide’s former president.

He and his team have raised hundreds of millions of dollars – from selling their own stock in Countrywide and from big investors. They’re using those millions to buy delinquent residential loans – at a staggering discount rate. They now hold $800 million in loans and hope to increase that to $15 billion over the next year and a half.

PennyMac’s largest deal to date has been with the Federal Deposit Insurance Corporation, which held $560 million in loans left over after the failure of the First National Bank of Nevada. Most of these loans were adjustable rate mortgages whose interest rates had suddenly ballooned, leaving the homeowners unable to meet the new high payments.

Penny Mac purchased those $560 million in loans for only $43.2 million – or 38 cents on the dollar. Under the terms of the agreement with the FCIC, PennyMac can keep 20 cents on every dollar it collects from those loans – with the balance going back to the government.

This can turn into nothing short of a miracle for homeowners whose loans were purchased, because PennyMac is more than willing to re-structure those loans to keep the borrowers in their homes. Under restructure, the homeowner might exchange an 8% interest rate for a new low rate of 3%. That means a cut of about 50% in their monthly payment – and PennyMac still makes a good profit.

After all, collecting 3% on $100,000 amounts to a lot of money when you’ve only invested $38,000.

When homeowners are unwilling or unable to take part in restructure, PennyMac begins foreclosure proceedings. Those homes can then be resold at fair market value – and at fair market interest rates.

For some, this new venture smacks of executives profiting as a direct result of their own mis-management at Countrywide. Margot Saunders, a lawyer with the National Consumer Law Center, was quoted in the New York Times as saying “It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it.”

Several pending lawsuits against Countrywide accuse Mr. Kurland of being a major player in promoting the kinds of loans that his new company is now buying for cents on the dollar. And he admits that he pushed Countrywide into the kinds of high-risk loans that have now gone into default.

On the other hand, homeowners who are desperate and about to lose their homes say they don’t care who profits. Keeping their homes is top priority for them, and PennyMac is making that possible.

Author: Mike your resource for free credit reports, credit cards, loans, and ground breaking credit news

Student Loans and buying a home Q & A

Friday, March 13th, 2009

Hello, We are at our wits’ end about what to do with Sallie Mae and my husband’s student loans. He never defaulted but was delinquent for a good amount of time. Since we started our house hunt (over 2 years now and not able to get anything) we have done consolidation , lowered our payments to something we can afford and have been current for over a year now. The delinquency still shows up on all 10 accounts on his credit report. We have spent many hours on the phone trying to get an answer as to why nothing is upgraded on the credit report , not even to show we consolidated. They never give us an answer. They say it’s the credit bureaus’ fault. Because of this his credit score is too low to qualify us for an FHA loan and we are getting desperate about not being able to get a home and having to shell out $1000 in rent every month.Any tips/help/information would be greatly appreciated it.

Thank you, Ana Ortiz

Hi Ana,
I see how this could be frustrating. It is very typical for debt consolidation companies to blame the credit bureau for not showing what debts are in debt consolidated. I personally don’t see any advantage in them showing anything is in debt consolidation. I would not worry about that, typically what you need to worry about is them paying your creditors late. This is very common with debt consolidation companies.

The previous late payments will be on your credit report for seven years from late payment date. So you will have to wait seven years before that is removed. In order to get your credit scores up, I hope you have other credit on your credit report. Typically you need a couple of credit cards along with other types of credit. You also need to make your credit balances well below your allowed credit limit. This needs to be at least 20% of the allowed credit limit. If its higher, you will be considered a credit risk, which will lower your overall credit rating. Here is a good article we wrote, and it discusses what determines your credit score. You might need to work on other ares to increase your husbands score.

I hope this helps,and gets you in the correct direction. Its hard to say exactly what the issue without looking at your credit report.

Mike Clover

Fixing Credit Report Error during Mortgage Loan Process Q & A

Monday, March 9th, 2009

We are in the process of buying a house (closing this Friday). Perhaps this question is too late, but I still would like to know:

When we were in the process of getting approved, we learned we needed a co-signer. No problem, my father-in-law signed on. Upon obtaining credit scores, his came in lower than ours. (His was 699, ours in the mid 700s). Because he is our co-signer we were told the rate would have to be based on his score. Furthermore, the rate would be higher because he came in at a more “risky” score of 699.

However, while looking at our credit reports in front of the lender (broker, actually) – my father-in-law noticed a credit card statement that was not his, and it had a balance of over 10K. His son has the same name, so we’re pretty sure that the credit report had his son’s info on there in error. We brought this up to the broker, and she suggested we take care of it someday, but not now, as we wouldn’t want to mess with the credit score while going through the process of trying to buy a house.

Hi Jim,
This is very common out there. When getting loan lenders always take the lower middle credit score out of everyone involved. This is the case even though someone else might have a higher credit score. The lender did direct you correctly, since SOMETIMES when removing credit from your credit report, could TEMPORARILY have a negative affect on your credit score. There is no Legal recourse that I can think of. Not sure what type of loan you got approved for, and what your terms are, but I always recommend checking with a couple of good lenders just to make sure you are not getting ripped off. I am a lender and I know that everything is negotiable.
I hope this helps.

Mike Clover

Author: Mike your resource for free credit reports, credit cards, loans, and ground breaking credit news.

Why Are Secured Credit Cards Becoming Harder to Find?

Sunday, March 8th, 2009

Secured credit cards have long been the method of choice for building or re-building credit. Consumers with no credit or bad credit could simply pay the deposit for a secured card and begin proving their ability to make payments on time by using the card wisely.

As that wise use was reported to the credit bureaus, the consumer began to build a good credit score. They’ve been easy to get because they present zero risk to the card issuers.

So why, all of a sudden, are banks discontinuing them?

Two reasons:
• They don’t provide a high revenue
• They no longer want to associate with people who need them

That sounds a bit harsh, doesn’t it?

We know that card issuers are all about making money – that’s why they’re in business. It’s just become more apparent over the past few months while we’ve been watching them raise rates and fees in an effort to rake in more dollars.

Some of us have wondered about their new policies of reducing credit limits for even customers with good credit and stellar payment histories.

It almost looks as if they are using some kind of secret scoring system to determine which of their good customers could possibly become defaulting customers. And of course, they’re not very interested in consumers who pay their bills in full each month – because there’s no profit in that for them. That part makes sense.

Secured cards are generally low limit cards, so while the interest rate is high – usually at about 18 – 20% – the revenue from a small balance is still not much revenue. Often the card’s largest revenue is from the annual fee, the set up fee, the processing fees, and the usage fees.

Since the new regulations set to go into effect next year will limit those fees, many card issuers are hurrying to get out of the secured credit card business now.

HSBC, New Millenium Bank, and Bank of America do still offer secured cards – but all of their offers are not alike. So if you want one, check all the details before you apply.

Here’s what you need to look for:
• Make sure the card reports to the credit bureaus
• Comb the terms and conditions for disclosures about fees you may not expect
• Check the rates – I’ve seen from 7.99% to over 20%
• Be sure there’s a grace period – 20-25 days interest free after you make a charge if your previous balance was paid in full.
• Look for a “graduation” provision – to ensure that you can move on to a larger, unsecured credit limit after a set period of favorable use.

Author: Mike Clover your resource for free credit reports, credit cards, loans, and ground breaking credit news.

Disclaimer: This information has been compiled and provided by as an informational service to the public. While our goal is to provide information that will help consumers to manage their credit and debt, this information should not be considered legal advice. Such advice must be specific to the various circumstances of each person's situation, and the general information provided on these pages should not be used as a substitute for the advice of competent legal counsel.