Archive for May, 2009

Credit Scores May or May Not be Harmed by Utility Bill Charge-Off

Sunday, May 24th, 2009

While most creditors do report to the credit bureaus when a bill is charged-off, you may get a free pass if you’ve had a utility bill charged off.

Something most of us don’t realize is that credit bureaus charge a fee to take in data. That’s right – you pay a fee for your credit report with FICO scores when you apply for credit, but they also collect from the companies who supply the information.

That being the case, many utilities don’t want to pay the fee, so they don’t report. You may find the same thing to be true with local businesses where you hold accounts.

If you aren’t sure, get a copy of your free credit report and check to see if the charged-off account is listed.

If it is, then yes, it is hurting your credit scores. But if it happened more than 2 years ago, it still may not prevent you from getting a mortgage or other credit, especially if you have since repaid the debt.

In fact, you may be able to negotiate with the utility company to remove the item from your credit report in exchange for payment in full. If so, get their commitment in writing before sending the payment.

If they refuse, it’s still to your benefit to repay the debt. Lenders look at your credit scores, but they also look at the credit report itself. If your report shows that you’ve paid the debt and have had good payment history since then, it may not hurt your chances of getting new credit.

Remember that negative information stays on your credit report for 7 years, but its impact on your credit lessens with each year that you show good payment history.

While you’re working to restore your credit after a problem, do be sure to pay all your accounts on time and as agreed. Work hard to keep your credit usage below 30% of the credit available to you, and check your credit report often to assure that it doesn’t contain mistakes. If you do find mistakes, take action to correct them immediately.

If you’re working on building credit in order to purchase a home, don’t make any large purchases such as a car or a house full of furniture within the few months prior to your application for a mortgage. And, since lenders are now returning to the “old rules,” don’t decide to change employment unless the new job is a move up in the same line of work. This is not the time to switch from a secretarial work to truck driving or to strike out as a freelancer.

Author: Mike Clover

Divorce After Chapter 13 Bankruptcy

Saturday, May 23rd, 2009

Often, divorce precedes bankruptcy, and is, in fact the “last straw” that pushes an individual into bankruptcy. While in many cases the financial hardships caused by divorce are legitimate, prior to the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 bankruptcy was often used as a way to completely sever ties with an ex-spouse and avoid financial obligations.

Couples contemplating both bankruptcy and divorce should probably complete the divorce prior to the bankruptcy rather than wait until later. They will not be allowed to proceed with both at the same time.

One reason why couples should divorce first and file second is that their financial status will be clear from the outset. They may be allowed to file Chapter 7 rather than Chapter 13.

Chapter 13 is a bankruptcy that includes a repayment plan of some or all of a person’s debt over a three to five year period. It is generally chosen in order to save a valuable asset – such as the family home. In some cases it is the only option available because a couple’s income is too high to qualify for Chapter 7.

If you have already filed Chapter 13, your divorce could permit you to alter the terms of your bankruptcy and allow you a lower payment or even a grace period with no payments while you work things out. It could also qualify you to convert to Chapter 7 – in which all debt is wiped out.

Any change in financial circumstances can grant you this leeway. Other instances could be loss of employment or illness.

The important thing to remember is to notify your trustee immediately – especially if the pending divorce means you don’t have the money to make the scheduled Chapter 13 payment. Whatever you do, don’t just ignore the payment without first notifying the trustee of the reason.

In order to have your case reviewed and possibly alter the terms of your bankruptcy you will have to file appropriate documents, which include proof that one party has moved out and is paying rent and/or utility bills at another location. So it is important to determine that the divorce really will take place and you really will be maintaining separate households.

The increased household expense would be the determining factor in deciding whether the bankruptcy terms can be altered.

Author: Mike Clover

The Credit and Financial Risk to a Car Purchase

Wednesday, May 20th, 2009

Purchasing a new car has always been a game. Negotiating the price of the car and then negotiating the value of your trade in usually leaves consumers feeling like they probably could have “gotten a better deal.”

Now, because so many Chrysler and General Motors Corporation dealerships are closing, the game has taken on new risks.

First, your routine maintenance and warranty work may not be so routine. As dealerships close in small towns, consumers will be required to drive long distances to find authorized repair centers. Additionally, if part of your purchase negotiation included perks like free car washes or free lube and oil changes for a year or two, those will disappear with the dealership.

More serious is the fact that the records of your routine maintenance could be lost – and without those records your warranty will not be honored.

If your local dealership is about to close, go now and get a print-out of all maintenance done on your car. Then keep your own records of any future maintenance work.

But loss of warranty is only one of the risks. Something even worse is happening, and it can affect your good credit as well as your bank account.

You know that when you trade in a car that you haven’t paid off in full, that debt is a factor in deciding how much equity you have in the car – and thus how much credit you will receive toward the purchase price of your new car.

You know that the dealership “has” to pay off that old loan before they can re-sell the car.

But this isn’t always happening!

In the wake of poor sales and financial troubles for the dealerships, some of them simply didn’t do it. But they did re-sell the cars.

So now both you and the person who purchased your old car are facing trouble.

Until that old loan is paid off, you are still the one responsible for payment. So while you’re happily driving your new car and making payments on it, your credit report is showing month after month of unpaid debt on your old loan.

You know what that can do to your credit scores.

The person who purchased your old car has yet a different problem – since the car wasn’t paid off, he or she can’t get clear title.

If you’ve purchased a new car recently and traded in a vehicle that wasn’t paid for in full, check your credit report today. This could be a tough one to solve, but you do need to get started immediately.

And if you’re buying a used vehicle, demand proof of clear title before you part with your money.

Author: Mike Clover

Judgement Case Won Q & A

Tuesday, May 19th, 2009

Hello Credit Guru,

I had a court judgment against me for $2500. When I found out about it, I had the case reopened and eventually had the judgment overturned in my favor. I have collected payment. The problem is that I don’t know how to contact Experian, Equifax and Trans Union to have them remove the information and adjust my score. Any suggestions?

Thank you for your help.


Saji Miller

Hi Mr Miller,
This is a easy fix. Here is a step by step process to get this resolved. I wrote a article a while back, and there are a couple of ways to get this resolved. I would recommend mailing in proof you won the case.

Go here:

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

Should You Consider Bankruptcy?

Sunday, May 17th, 2009

Fact: Not everyone who files for bankruptcy does so because they’ve been irresponsible.

The vast majority of bankruptcy filings occur as a result of illness, death of a provider, job loss, business failure, divorce, or some combination of life-altering events that the consumer certainly didn’t plan for. Irresponsibility accounts for only a fraction of the filings.

Between 1.2 and 1.5 million Americans use the bankruptcy courts each year to get out from under unmanageable debt.

Thus, you need not feel hesitant or ashamed if this is the right option for you.

The primary drawback is that filing for bankruptcy is expensive. It not only costs money to file, but it negatively affects your ability to borrow – and the interest rates you’ll pay if you do borrow – for the next 7 to 10 years.

Consumers have two options: Chapter 7 and Chapter 13.

Under a Chapter 7 filing, consumers walk out of the courtroom debt free. In order to qualify, however, those consumers must have a modest or limited income.

Those wishing to file for Chapter 7 must provide:
1. A list of all creditors and the amount and nature of their claims;
2. The source, amount, and frequency of the debtor’s income;
3. A list of all of the debtor’s property; and
4. A detailed list of the debtor’s monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

In addition, he or she must provide a list of “exempt” property, because the bankruptcy trustee will dispose of all non-exempt property and use the proceeds to pay debtors. The definition of exempt property varies from state to state, and there is a Federal list as well. Debtors can choose to use the list most favorable to them.

Chapter 13, also known as the “Wage earner plan,” is actually a debt consolidation program based on the consumer’s ability to repay debt. Payments are made to a trustee, who then distributes funds to creditors.

Depending upon the consumer’s income, these payments are set for 3 to 5 years, after which time the bankruptcy will be discharged. Creditors may or may not have been paid in full.

Under the terms of Chapter 13, consumers must live on a limited budget and contribute all “disposable income” to the repayment plan. A “Hardship Discharge” may be granted in the event the wage earner is no longer able to work as a result of illness or accident.

Both plans require the consumer to complete a course of financial/credit counseling. Both types also negatively affect your credit scores. Bankruptcy remains on your credit report for 10 years.

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

Credit Card Loss Not Damaging to Credit Scores

Tuesday, May 12th, 2009

By now you know your credit score will suffer if you close a credit card account, but what about those times when your account must be closed because your card was lost or stolen – or because of an incident such as the Heartland Payment System’s security breach?

Don’t worry – this action won’t affect your credit scores at all.

When an account is closed due to one of these causes, your credit card issuer will close your account and transfer all of your information to a new account, which is opened simultaneously. This includes your payment history, the date your account was opened, and your interest rate and credit limit.

The card issuer may report this to the credit bureaus as one closed account and one new account with identical information, or they may simply report a change in account numbers.

Either way, as long as your history remains with the new account, it won’t affect your credit score. Remember the length of time you’ve had a credit card does affect your scores. The other reason why this action has no effect is that it doesn’t trigger a hard inquiry.

A change that can affect your credit score is a user-generated upgrade to a currently held credit card. This generally results in the closing of one account and the opening of a completely new account. Since your history is then lost, this move may harm your scores.

With this in mind, it might be wise to research credit card offers and apply for a completely different card – while keeping the old card and retaining the history and the credit limit you have established.

Additionally, when you ask for an upgrade you are generally asking for a credit line increase, and this generates a hard inquiry into your credit report. As you know, the more hard inquiries are made, the lower your scores. The good news is, if you are granted the higher credit limit, the additional available unused credit will offset the damage done by the inquiry.

When the upgrade is credit card issuer generated, it is the result of their own soft inquiry, and won’t affect your scores.

Before asking for a credit card upgrade or making application for a new card, check your own credit scores. Then research the cards and programs available to make sure that your current scores will qualify you for the card you want.

If they won’t, then work at raising your scores before you make an application. That hard inquiry that’s turned down will set you back in your efforts to raise the score.

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

Rent Parties Making a Comeback

Monday, May 11th, 2009

Rent parties were first documented in Harlem in the 1920′s – and they’re making a comeback all over New York as citizens struggle to meet rent payments.

Young adults, accustomed to good paychecks and moderately affluent lifestyles, were used to spending week-end evenings socializing at dance clubs, concerts, cocktail lounges, and bars.

Now their incomes have shrunk due to layoffs and the reduction in consumer spending. Commission sales people who once brought home nearly $2,000 per week from their jobs at upscale clothing stores are now lucky to see $500. Those who relied on tips are seeing their incomes plummet as consumers order less expensive meals – and thus tip less.

In response to these reduced circumstances, they’re inviting their friends to party in their homes – and charging them to get in the door.

The cover charges vary with what is offered. If the party-giver supplies the booze and food, or brings in some live music, the fee is higher. Others charge a minimum, and tell their guests that it’s strictly BYOB (bring your own bottle).

Typically, party-givers reap between $250 and $400 for their evening’s efforts – but some parties bring in much more.

For their friends, the “evening out” with a cover charge of $5, $10, or $15 is far less expensive than “hitting the bars” where they may also pay a cover charge, and one drink can cost upwards of $5. They also get to socialize with the crowd they know.

Organizing a rent party takes some special skill – and charm. Not everyone has the nerve to ask friends to help pay the rent, even though most friends are more than willing – unless they’re in the same boat.

The New York Times interviewed one party giver who sent out invitations entitled “Rob’s Help Me Make My Rent Recession Extravaganza.” The tag line on his invitation said: “because if I can’t pay, on your couch I’ll stay.”

Not everyone gives parties for themselves – sometimes it becomes a collaborative effort to help a friend in trouble. One such party, featuring entertainment by well known hip-hop artists who donated their talents, brought in over $2,000.

This trend toward friends helping friends seems like a good sign in a society that has become known for self-centeredness.

One young entrepreneur is talking of turning this movement into a TV show, or opening a club where membership dues would create a party-based insurance against eviction.

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

Beware Loan Modification Scams

Wednesday, May 6th, 2009

Homeowners in financial trouble make an easy target for scammers, and right now they seem to be coming out of the woodwork.

Some legitimate loan modification companies do exist, and they offer a beneficial service to those who may not speak English well enough to understand the steps and requirements of loan modification.

However, the legitimate companies are outnumbered by scammers.

These companies not only fleece worried homeowners – taking money that could be better spent on bill payments – they can actually get those homeowners into deeper troubles.

The truth is, as long as you can speak English and have fair comprehension skills, you can do everything they can do for you. No need exists to have a 3rd party “negotiating” for you.

Your success in having your loan modified will depend entirely upon the facts surrounding your loan – not on “knowing the right people,” “knowing what to say,” or any other phrase the scammers might use to part you from your money.

Modification rests on your current income, current obligations, and the mortgage payment – along with your ability and willingness to pay the modified mortgage payment. Contrary to what these crooks will tell you, you don’t need to pay an up front fee to be considered for modification.

Yet, hundreds, if not thousands of unwary homeowners have forked over $250, $500, $750, and even $1,000 to these companies under the promise of help.

The worst of this, according to one source at Bank of America, is that these companies are advising people to stop making their mortgage payments.

That’s the worst thing you could do if you want a loan modification under the Making Home Affordable program. In fact, it could render you ineligible for help.

If you’re having trouble keeping up with your payments, call your lender and ask what help is available. Many have special lines set up to handle such calls – check the lender’s website to find that number.

You may be as fortunate as one couple I know who merely filled out a few forms to get their payment reduced by nearly half. If your lender is using a different system, you may have to wait for an answer. But either way, you definitely don’t need to pay a 3rd party to help you.

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

Home Mortgage Modification – do You Qualify?

Tuesday, May 5th, 2009

If your income has dropped and you’re struggling to keep up with payments, you may qualify for a mortgage loan modification. However, you need to take the first steps.

I’ve heard reports of consumers getting current payments reduced by almost half, just by contacting their mortgage lender and filling out some paperwork. But not all lenders are offering the same solutions, so you do need to call.

One caution: If you do call and tell your lender that your income has fallen, that will become public knowledge and it could affect your ability to borrow from other sources, as well as the interest rate and credit limit on credit cards you now carry.

So think it over before you act.

Loans that are backed by Fannie Mae are now being scrutinized to find homeowners who may need help. Fannie Mae, along with three 3rd party vendors, is flagging loans in which the payment exceeds 31% of the homeowner’s gross income – as reported to the mortgage lender.

Thus, if your income used to be $10,000 per month, your $1,500 house payment won’t alert them of your need for help. You’ll have to call and update your financial information, and you should do it soon because this scrutiny will be taking place over the next 6 weeks or so.

Once the loans are examined, homeowners can expect to get a letter from Fannie Mae, from their lender, or from one of the three vendors. The letter will say you are not eligible, you are eligible, or will contain documents ready for you to sign in order to proceed with a loan modification.

Once approved, homeowners will be put into a 3-month “probationary period” during which they must keep their payments up to date. Once that has passed, the loan modification will be finalized.

The program is set to run for 5 years, after which time the terms will revert to the terms (and payment) the loan carried at the time of the modification.

The person I interviewed today was with Bank of America – who just bought out Countrywide. So while they are in a period of transition, they are still working with Fannie Mae to help consumers keep their homes.

I learned that once approved, consumers will be put on a 3 month probation. I assume, with the lower payment. If all payments are made on time during that 3 months, then the modification will be finalized.

One of the requirements of modification is that the homeowner sign a 4506 T form – authorizing the lender to access their IRS returns. If those returns show a dramatic increase in income – so that the homeowner could easily pay the old rate and stay within the 31% range – the modification will cease and the terms will revert to the original agreement.

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

Can Obama Keep Young People Out of Debt?

Monday, May 4th, 2009

Credit card companies have been marketing aggressively to college-age consumers, and President Obama would like to rein in their practices.

Today’s average undergraduate student now carries over $3,000 in credit card debt – the highest it’s been since researchers started tracking data in 1998.

Since this much debt – without the benefit of large credit lines plus a long history of prompt payment – can bring credit scores down, new graduates are beginning their “financial lives” with a handicap. This debt, added to school loans, means that college graduates may be beginning their careers without the ability to purchase a car or rent an apartment. Since potential employers also check credit, the debt even adds to the challenge of landing that first job.

Credit card companies targeting college students not only rent lists from the schools and market through the mail, they enter into agreements allowing them to set up tables in areas where students congregate. In order to lure these students into filling out applications “right now,” they offer everything from cash, to teddy bears, to CD’s, to free pizza.

What they don’t offer – or encourage – is time for those students to study the fine print on their offers. Most, if not all, come with annual fees, so the student is in debt before he or she buys the first concert ticket or CD. They may offer low introductory rates – but don’t prominently reveal the rates that will come into effect once that introductory period ends.

Congress is now considering legislation that will “clean up” many deceptive practices in the credit card industry. One of those provisions will make it harder for card issuers to extend credit to anyone under the age of 21.

In response, the American Bankers Association, and others, joined in sending a letter to Congress – warning that the new regulations will force them into raising fees and interest rates to a wide range of consumers and small businesses. In other words, if they cannot charge young people rates that were once considered “usury,” they’ll have to make up the lack of revenue by collecting more from everyone.

While we all should read the fine print before entering into any agreement, President Obama may have been correct when he was quoted as saying that “People have been deceived into paying extraordinarily high rates that they wouldn’t have paid if they knew what they were getting themselves into.”

If the new regulations make it through Congress, those deceptive practices will come to an end. However, at last report, lawmakers were in favor of allowing credit card companies more than a year to make the changes.

Author:Marte Cliff 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.