Archive for April, 2010

Great Payment Record But Low Credit Scores – What Gives?

Wednesday, April 14th, 2010

iStock_000008479774XSmallDo you pay your credit card balance in full each month, refrain from adding new cards, and have a squeaky clean record – yet still have credit scores lower than you’d like?

Your use of rewards credit cards may be the culprit.

Rewards cards can get you all sorts of benefits. And whether it’s travel “miles” you’re after or the cash back, using the card for all your everyday purchases gains you benefits that you wouldn’t get by paying cash.

There’s just one problem. Your credit report only shows the balance on your statement at the end of the month. It doesn’t show that you paid that balance in full and this is a new balance. Thus, it appears that you’re carrying a large balance from month to month.

The amount of credit you use in relation to the amount you have available on each card accounts for about 30% of your total FICO score. And if that balance – on even one card – amounts to more than about 30% of your credit line, your credit score is suffering for it.

When you come close to maxing out a credit line, it can drop a 680 FICO score by as much as 30 points.

When you order your free online credit report with scores, you’ll be advised as to the reasons why your scores are lower than they might be. If your credit card balances are too high, the report will tell you.

Be sure to read your report carefully, because mistakes could be a second reason. If so, correcting them will improve your scores.

So what can you do about it? First, you can attempt to have your credit line increased to allow for a nice cushion between your spending and your available credit. That might not be as easy as it once was because the guidelines are stricter since the passage of the CARD Act of 2009. Card issuers are required to consider your ability to pay if you utilized the entire new credit limit. Thus they’ll be looking at your debt to income ratio as well as your current credit score.

You can also spread your spending between 2 or 3 different rewards cards – which could very well be wise if you’re after cash rather than travel miles. Different cards offer higher rewards for specific kinds of purchases, so you could earn more cash back by keeping track of which card to use where.

If your credit scores aren’t high enough to allow for an increase or a new card, try not charging for a few months to allow your scores to increase naturally. Then go back and add one thing at a time. Remember that requests for new credit can lower your scores, so if you want to add a card, do your research ahead of time and only apply for the card that will serve you best.

Author: Mike Clover your online credit resource.


How to Get the Lowest Mortgage Interest Rates

Wednesday, April 14th, 2010

First and foremost, you need  good credit scores. So if you don’t know yours, order your free credit report with scores and see where you stand.

If you see a number lower than the high 700’s, carefully note the reasons why given with your online credit report and get to work on making necessary changes. Be sure to go over it carefully to find any errors that could be affecting your credit scores. If you find one or more, contact the credit bureau to correct them.

If you have any late payments in your history, start making all payments on time and wait for 6 months before making a home mortgage application.

Begin paying down your credit card debt, and shift your liabilities so that no card shows more than 50% usage. Meanwhile, don’t apply for any new credit cards or consumer loans.

While you’re doing this, work hard to build at least a 20% down payment.

The higher your credit scores and the larger your down payment, the better mortgage interest rate you’ll be offered.

But that’s not all… once you become a “most desirable borrower,” you’ll also be in a position to shop around and to negotiate.

Most consumers don’t realize that different mortgage lenders offer different programs, and very few realize that yes, you can negotiate with lending institutions.

Make the necessary calls so you know what the best deal really is, then use that information to negotiate with the lender you prefer.

Lenders who want your business are likely to negotiate on the interest rate, the points, and various fees that are routinely tacked onto your loan closing costs. For instance, some banks ask you to pay their attorney’s fees. Tell them about another lender who doesn’t charge this fee and ask that it be removed.

Document preparation fees are included in most loans, but a lender who wants to keep you can drop it all the way to zero.

If you’re required to pay a loan application fee, ask that it be credited back if you accept their loan. Note that not all mortgage brokers charge an application fee.

Remember that the interest rate is just one part of the big picture and every dollar you pay in fees is a dollar you can’t put toward the down payment. But do pay attention to the interest rate and the points. Ask how many points you would need to pay to bring your interest rate down. Then have the mortgage broker show you the real numbers. Compare their figures to rates/points quoted by other lenders.

The first step is knowing your credit scores, so order your free credit report with scores right now and get started.

Debt Collection Tactics Can be Downright Terrifying

Tuesday, April 13th, 2010

iStock_000004812893XSmallThe economic crisis shows no favors to those who have always been responsible. Between job losses and the ever upward spiraling costs of basic necessities such as food and heat, thousands of citizens who have always paid their bills find themselves unable to do so.

Enter the debt collector.

These come in three varieties:

  • The collector representing your original debtor
  • The collector representing a third party who has purchased your debt
  • The collector trying to bully you into paying a debt you do not owe

    The collector representing your original debtor will probably be the least frightening. He or she may offer to help you set up a repayment plan, or offer to settle the debt for a lesser amount if you can pay it off in a lump sum.

    To many, that offer seems ridiculous. If they had the money to pay a lump sum, they would have kept up with the payments!

    These collectors can become aggressive, however. They can file for a court judgment against you, which could result in money taken from your bank account, a garnishment of your wages, or a lien placed on your property.

    State rules vary with regard to property, so you should check with your state’s Attorney General’s office to see which of your assets is safe. And remember, debt collectors aren’t allowed to touch bank accounts if the only money in them is your Social Security Retirement or Disability, or Veteran’s Disability.

    Third Party and Bogus Collectors are the ones who often become vicious.

    While non-payment of debt is a civil matter, not a criminal matter, they may even threaten to have you thrown in jail.

    This is a completely false threat and consumers who act quickly to get a name and contact information from their caller can use it to get them thrown in jail. Fraud and harassment are criminal offenses. Report any such contact to the Federal Trade Commission or the State Attorney General.

    Other illegal tactics include talking to your friends about your debt, publishing your debt, threatening bodily harm or using profanity, and calling you before 8 a.m. or after 9 p.m. Some collectors have even threatened consumers with loss of child custody or deportation. These threats are also false and illegal.

    What could be worse than this behavior? Using it to try to collect debts you don’t owe.

    Some bogus collectors search old records and will try to collect debts that were never yours, debts that were discharged in bankruptcy, or debts that have passed the statute of limitations in your state.

    If you think such a debt is valid and you want to settle it, first demand written proof that the debt is yours. your resource for credit reports, credit cards, loans and credit news.

    When a Pre-paid Credit Card is Better Than a Secured Credit Card

    Thursday, April 8th, 2010

    iStock_000000174965XSmallWhen you choose the right prepaid credit card, it can be a better choice than a secured card. It all depends upon your purpose in getting the card, and as with all credit cards, the benefits to you depend upon the card you choose.

    One reason why you might want a pre-paid credit card is that you can have your paychecks deposited directly to your account – eliminating the wait for mail time and eliminating check-cashing fees.

    The pre-paid card is essentially a debit card that isn’t tied to a checking account. So you may have access to all of your money. Some cards do require that you maintain a minimum balance.

    While a secured credit card is a benefit in that helps you build your credit scores, in order to do so you must treat it just as you would any other credit card – by using only about 30% of your available credit. And since your own money is the security for that credit, it means your funds are tied up.

    And, with a secured credit card, any charges you make and don’t repay immediately begin collecting interest. In addition, you may be required to pay an annual fee.

    The difference:

    If you want a credit card that helps you build your credit scores and allows you the convenience of Internet shopping, reserving a rental car, or purchasing gas when the stations are closed, you need a secured credit card.

    If you want a credit card that you’ll use as a substitute for a checking account with a debit card, you need a re-loadable pre-paid credit card.

    But don’t just apply for the first card you see. That can lead to paying the kind of fees that eat your money faster than you can deposit it.

    Before you make application: Do your research.

    Each seems to have a different mix of features, so compare the various offerings and decide which features will offer you the greatest convenience and the lowest cost.

    We here at have chosen a handful of prepaid cards that we feel offer the best benefits. Compare them and see which card is the best choice for you.

    Here are the features to compare before making your choice:

    The application fee

    The monthly fee

    ATM withdrawal fees

    Transaction fees

    Re-load fees

    Transfer fees

    Minimum balance requirements

    Inactivity fees

    Customer service inquiry fees

    Statement fees

    Account closure fees

    Protection from unauthorized transactions – or not

    Line of credit availability your resource for credit reports, credit cards, loans, and credit news.

    Buying a home in 2010

    Wednesday, April 7th, 2010

    If you are in the market to buy a home in 2010, you might find it quite a bit tougher than previous years. The banks are not lending to buyers with low credit scores and no down payment money. I hear realtors complaining all the time about this, but that is the current market. It only makes sense to lend to those whom are creditworthy. Our financial mess was the result of bad lending to begin with. Here are the current credit and down-payment requirements as of 4-07-2010. This all could change in a matter of months though.

    FHA Mortgage Loan:

    • 620 Credit Score
    • 3.5% down payment
    • 3 lines of credit reporting in good standing for the last 12 months

    Conventional Mortgage Loans:

    • 660 Credit Score
    • 5% down payment
    • Typically no collections

    This is just a bird’s eye view of what mortgage companies are requiring to get you financed in today’s lending market. Everyone is always looking for a miracle and I promise you there are none in 2010.

    If you find that your credit scores are too low to get financing, you can use our self help credit repair guide. This guide works if you follow it and actually do what is says. Free Credit Repair. I promise, if you follow this Free Credit Repair guide, you will get your scores up. With my background of helping lots of families get there scores up so I can get them financed, I know what works. When I say Free Credit Repair, there is no fee from us for this advice, but it does cost money to negotiate your collections and charge offs. Keep this in mind; if you don’t have any money to fix your credit report, then no one can help you anyways.

    Good Luck.

    Mike Clover

    Prepaid Credit Cards – Smart For the Issuers, But How About for You?

    Wednesday, April 7th, 2010

    iStock_000011983257XSmallCredit card issuers are pushing the concept of prepaid credit cards for those consumers whose credit scores are too low to qualify for a conventional card.

    But are they a smart alternative? Only in certain circumstances.

    It’s true that a prepaid credit card offers the same convenience as a regular credit card in terms of being able to order on line, reserve a rental car, or pay for your gas at an all-night pump.

    But in terms of improving your credit scores, a pre-paid card will do you no good. Since you aren’t borrowing any money to get these cards, their use isn’t reported to the credit bureaus. The only difference between them and the cash in your pocket is convenience.

    They even carry the same security level as cash – if you lose the card you’ve lost the money, just as if you lost your cash.

    Meanwhile, the cost can be high.

    Banks that issue pre-paid credit cards aren’t content with the fees they collect from merchants when you use the card – and since they aren’t collecting any interest from consumers, they add on fees.

    You might first pay an application fee, then an activation fee, an annual fee, an ATM withdrawal fee, and perhaps even a transaction fee.

    And, since these re-loadable cards branded by MasterCard and Visa are not covered under the consumer protection terms of the CARD Act, card issuers are free to impose short expiration dates and monthly fees for non-use.

    From this standpoint, they’re far less safe than cash. You can stuff a wad of cash under the mattress and expect to find the same amount there if you come back a year later. Your pre-paid credit card stuffed under the mattress can lose value each month until it gets to zero – or it can become worthless because it reached an expiration date.

    So who should invest in a pre-paid card?

    • A prepaid card might be a good choice for a consumer who has no checking account or whose checking account does not offer a Visa or Mastercard check card.
    • It can be a convenience for those whose credit scores are too low for a traditional card.
    • It is a safer choice for parents who need to send money to a child who is away from home, and can be a useful tool in teaching teens about budgeting and money management.
    • Employers can feel more secure when giving an employee a pre-paid card for such things as travel expenses than they might if they gave that employee a regular credit card.

    But in general, most consumers are better off working at improving their credit scores so they can qualify for a traditional credit card.

    Author: Marte Cliff your resource for credit reports, credit cards, loans and credit news.

    CARD Act Regulations on Gift Cards to Kick in on August 22

    Tuesday, April 6th, 2010

    Prior to the CARD Act, retailers who sold gift cards could earn big profits from consumers who failed to use the gift cards quickly. They would simply state that the card expired after a set number of months, or almost immediately begin deducting a monthly fee for every month the card was not used – until the balance was entirely used up.

    Now, under the CARD Act, gift certificates, store gift cards and general-use prepaid cards which are usable at multiple merchants and branded by Visa or MasterCard, will be prevented from this practice.

    As of August 22, when this part of the CARD Act kicks in, cards can’t begin to lose value for non-use until they have been dormant for 12 months.

    However, you don’t need to worry about the gift card issuers profit margins. They have found a variety of other ways to make sure selling gift cards remains profitable.

    Experts say there are as many as 50 different fees that card issues can impose – all of which effectively reduce the spending power of those gift cards.

    For instance, the issuer may charge a fee for issuing the gift card – which is what I found when I wanted to use the Internet to electronically send a Wal Mart gift card to an out of state family. The same card purchased in the store, however, carried no fee. So rather than pay $5 or so to have it electronically delivered, I paid for an envelope and a postage stamp to mail it.

    Fees can also apply to making a transaction, checking the balance, or calling customer service. And if you need a replacement card, you’re sure to pay a fee.

    Gift card issuers aren’t exactly happy with the CARD Act’s provision that gift cards cannot expire for 5 years after issuance, or since last loaded with money. In the past, they have expired after one or two years.

    Aside from the ability to make these gifts disappear, another reason that gift card issuers don’t like the new rules is that keeping track of the gift cards issued and their potential for use is an added burden to bookkeeping departments.

    In keeping with the general confusion and loopholes inherent in new government regulations, not all gift certificates and cards are subject to the new regulations. Paper gift certificates, reloadable prepaid Mastercard® or Visa® credit cards, and telephone cards are exempt from the restrictions.

    Loyalty, award or promotional gift cards are also exempt, so if you’ve received such a card – use it quickly before it dissolves.

    When Low Credit Scores Prevent a Home Mortgage Loan, Consider This Option

    Tuesday, April 6th, 2010

    iStock_000003050733XSmallWe all know that the mortgage crisis came about partially because home mortgage loans were extended to home buyers who shouldn’t have purchased. But their credit scores were not the only reason. More to the point was their income, and the reasons why their credit scores were so poor.

    Today, we have consumers with good incomes and responsible payment histories whose credit scores have tumbled because of actions taken by the big banks. That included closing credit accounts that were unused and reducing credit lines for consumers who had wisely used less than half of their available credit lines.

    Thus, thousands of potential home buyers who once enjoyed high credit scores and could have qualified easily are now being turned down for home mortgage loans.

    But those consumers don’t have to wait to secure a home. They have another option to consider: Rent to Own

    It’s true that their choices will be limited – bank owned properties won’t be sold this way, nor will short sale homes.

    However, they can probably rent to own a home with a mortgage, so the real qualifying condition is that the seller doesn’t immediately need his or her equity from the sale.

    Rental properties and second homes are good candidates for a rent-to-own contract.

    The rent to own contract nails down the eventual purchase price, which could be a bonus for a buyer in an appreciating market. It also states how much of the monthly rent will be credited toward the purchase, and the final purchase date.

    It does carry some risk for the seller, because the “tenant” can decide to opt out of purchasing. But in the meantime, the tenant will be responsible for all upkeep on the house, freeing the owner from that responsibility.

    Usually the tenant will make a larger than normal deposit upon taking possession of the house. This may also apply to the down payment at closing, and will usually be forfeited if he or she doesn’t complete the purchase.

    The closing date should be set far enough out to allow the buyer/tenant time to improve his or her credit scores and qualify for a home mortgage.

    And there lies the second risk for the seller. If the buyer fails to raise his or her credit scores during the rental period, the seller will either have to extend the closing date or evict the tenant.

    This eventuality should be addressed in the contract – which should be drawn by a real estate attorney.

    Author: Mike Clover your resource for credit reports, credit cards and credit news.

    Trying to Improve Your Credit? Beware of Scams

    Monday, April 5th, 2010

    iStock_000001520756XSmallCredit card debt that has gone unpaid for a long period of time is “charged-off” by the credit card issuer and usually sold to a debt collection company for cents on the dollar.

    This charge-off will remain on your credit report for 7 years and will negatively affect your credit scores. However, if you pay the debt, the collection company will report to your original creditor that the account was paid and they will then add a notation to your credit report that the account is a “paid charge-off.”

    While this won’t automatically raise your credit scores, lenders who read the credit reports will view it in a favorable light. Thus, paying the account can help you when you want to borrow money in the future.

    If you pay off such an account you should wait for 60 days, then check your credit report to make sure that the account is now correctly listed as a “Paid charge-off” rather than just as a “Charge-off.”

    But now for the danger…

    Some debt collectors are on the up-and-up and some are not. In fact, you could even be contacted by a bogus debt collector who does not own your debt and has no claim to any payment you might make.

    Even though you want to improve your credit, don’t jump at the first chance to make things right by paying this old debt.

    First, ask the company for verification that this is actually your debt. Next make them prove that they have purchased that debt and have the right to collect from you.

    Do not send any money – not even $1 – until you see a complete payment agreement in writing – with all terms and dollar amounts clearly specified.

    You want an assurance that if you perform as agreed, the account will be marked “paid in full” rather than “settled in full.” Some of these “agreements” leave the door open for them to ask for fees or additional interest, even after you’ve paid the full amount requested.

    Finally, since anyone can type out a document and make it look legal, and since anyone can dream up a company name and sign as an authorized officer, you should do some research. Google the name and see what others have to say about them. Call the Better Business Bureau in the town where they’re located. Ask your attorney if he or she has ever heard of them.

    Make sure you aren’t about to send money to someone who gained access to your account information by illegal means and is now trying to “shake you down.” your resource for credit scores, credit cards, and 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.