Archive for July, 2010

New Financial Reform Law Creates More Government Jobs

Thursday, July 29th, 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act has been signed into law by the President. Hidden inside that Act are tidbits that many will see as beneficial, but which all add to the cost of running both the government and the banks.

In addition, many of these new provisions assume that consumers are incompetent, and unable to understand or deal with their own finances.

For instance, the law requires banks to inform homeowners that their adjustable rate mortgage is due to reset in six months. Lenders will have to include a good faith estimate of the new monthly payment, inform them of financial options, and give them contact information for credit counseling agencies.

This provision assumes that borrowers didn’t pay attention when they took out an adjustable rate mortgage – and that the reset will come as a surprise. Unfortunately, that seems to be the case in many instances. But is it government’s role to protect us from ourselves?

Another provision calls for the creation of a new Office of Financial Education. This new office will offer financial counseling and publish consumer information to improve consumer’s financial literacy.

With many non-profit, free counseling opportunities already available, and with the wealth of consumer information available on sites such as this one, do we need a new government bureaucracy to educate consumers?

Because consumers pay outrageous interest rates for Payday Loans, the new law provides grants for experimental small loan programs that could be a less expensive alternative to payday loans. To obtain these loans, consumers must take advantage of financial literacy and education opportunities such as free debt counseling.

Next, the new law seeks to protect consumers from foreclosure rescue scams through an intensive awareness campaign. Granted, many such scams are proliferating as the credit crisis deepens. They range from bogus counseling services to fake loan modification assistance, to tricks that have caused homeowners to sign over their homes entirely.

And for low and moderate income homeowners facing legal action from mortgage lenders, taxpayers will now be providing grants to cover legal assistance. Tenants involved in legal disputes with landlords will also be eligible for assistance.

One provision that even I can agree with is a new ability to report lender misdeeds. The financial reform act establishes a single toll-free number to call should you encounter unfair or deceptive landing practices. Complaints will then be routed to the appropriate agency and “must” be responded to in a timely fashion.

In addition, the law calls for the establishment of an Internet site for the submission of complaints.

Author:Mike Clover

Will FICO® 8 Hurt You or Help You?

Wednesday, July 28th, 2010

The new FICO® 8 Score is fast becoming the new standard. According to a release on July 27, it has now been adopted by more than 2,500 banks and other financial institutions. Forecasts are that it will improve credit risk predictions by up to 15% over earlier FICO Score models – and result in millions more in profit to credit issuers.

But is it good news or bad news for you as a consumer?

Under the new scoring model, small slip-ups will carry much less weight than in the past. This model recognizes that one late payment could be the result of events beyond the consumer’s control – such as an accident or illness.

However, multiple late payments will now carry a heavier penalty than in the past.

FICO 8 also ignores debts and public record items that have an original balance of $100 or less. This is good news for consumers who are in dispute over a small bill. It will no longer be necessary for a consumer grit his teeth and pay a small bill he feels he does not owe in order to get a better interest rate on a car or home loan.

Another change is that the penalty for using too much of your credit lines will be higher. We’ve long said that the best plan for keeping high scores is to use 30% or less of your available credit. This now becomes even more important. A maxed out card will cost more points under FICO 8.

The new score also deals differently with the “piggybacking” issue that has come under fire in the past. At one time, parents or other family members could add someone as an authorized user on a credit card and that person’s credit score would receive the benefit of the parent’s good credit rating.

Then opportunists saw a money-making opportunity and began selling “authorized use” on seasoned credit card accounts. It became a business in itself. In reaction to that, FICO scores stopped recognizing authorized use at all.

Now, under the new model, authorized users will benefit, but only if they have a legitimate relationship to the primary cardholder.

Consumers may well be confused when reading their reports, as each of the credit reporting agencies is giving it a different brand name. TransUnion calls it Classic 08, Equifax calls it Beacon 09, and Experian calls it the Experian/FICO Risk Model v08.

Right now the FICO 8 model is not available for sale to consumers, but that may change within the next few months.

Active Military Collection Account Q & A

Monday, July 26th, 2010


While I was deployed I was unable to pay a credit card because of Soldiers passing away and all communication were turned off until the Soldiers family were contacted.  I’ve tried to correct this matter with the business and I was told I would not be able to have them erase the negligence due to a law.  The account is old and has been paid in full.
The credit bureaus will not fix the negligence until the business does.
Is there any way I can have my credit fix from this problem?  You can contact me via email or phone.



Hi Jesse,

this sounds like a tough situation.The collection still falls under the 7 year rule. The rule is the collection will be on your credit report for 7 years form collection date. Its is great that you paid the collection, because usually that will cause your credit score to increase. Contrary to popualr belief its better to pay off a collection .vs do nothing.You will have to wait until that 7 year expiration date arrives. Once it does make sure the collection gets removed from all credit bureaus.

Here are collection expiration dates.

Derogatory expirations guidelines:
• Chapter 7 – 10yrs
• Chapter 13 – 7 yrs
• Tax Lien – Until paid off
• Child support – Until paid off
• Collections – 7yrs
• Chare Offs – 7 yrs
• Late payments – 7yrs
• Inquires – 24 months
• Foreclosure – 7 yrs
• Repossession – 7 yrs
• Judgments – 7yrs

*Expirations date starts ticking from the original collection date.

Mike Clover

Monday, July 26th, 2010

FTC sends warnings to following sites about Free Credit Report offers.

The FTC warned the following sites that they are in violation of improper disclosure of the FACT that Free Credit Reports are available at with no strings attached. On April 2, 2010 this new FTC law went into affect. The new law states that any site offering a free credit report offer, must properly disclose at the top of the site where to go under law to get your free credit report.

Companies in Violation

Company Name Website
National Credit Report.Com LLC
Quinstreet, Inc.
MyCreditCenter.Com, Inc.,,
Vertrue, Inc.,,,,
ConsumerTrack, Inc.,,
ConsumerDirect, Inc.,
Mighty Net, Inc.
Amie Nguyen
Amanda Raab

Some of these sites are being warned because of affiliate traffic. Affiliates are companies that push traffic to these companies for a commission. I talked to Jeff Barlett at ConsumerTrak and he confirmed my suspicions. Nether less the FTC is watching out for any violators to make sure the consumer is protected and aware of where to go for a free credit report.

You can go to: to read about this matter.

Author: Mike Clover

Better Credit calls for Better Education

Monday, July 26th, 2010

Attain Financial Freedom by being Educated about your Credit.

Typically most problems could be avoided with a little more education. We all have been in the boat of making the wrong decision which resulted with issues down the road. I personally believe life is like following grandmother’s recipe for your favorite peach cobbler. If you leave something out of the recipe, the end result will be less favorable.

Being educated about a particular topic is going to be more favorable .vs not being educated. Credit is the same way. Had you known what to do, you may have taking a different route. Now you have found yourself in the same situation so many others are in. You have financial problems, low credit scores, and the stress is mounting.

Here is some tips to start implementing immediately……

The first step to better credit is to avoid impulse buys. This is one of the hardest parts of money management. How in the world can you save, if you are impulse buying all the time? Stop buying stuff you don’t really need and start saving your money. Any financial advisor will advise you on this matter.

The second step is to save 6 months of income in the bank. If you make $5,000 a month, you will need $30,000 in your money market account. This is a must. You need savings for emergencies.

The third step is to know your credit rating. How do you get your credit rating? Well there is only one source on the web where you can get your free credit report. However this source does not provide your credit score with each credit bureau for free. is the site that provides your credit report for free once a year by law. If you want to see your credit scores you will need to pay for them. Pull your credit report and make sure everything is accurate. I recommend getting a copy of your credit report with scores. Being educated about your credit rating will help you get better rates and terms on loans. Make sure you check your credit report with scores every 3 months or so.

The fourth step is to keep your debt low. Don’t charge more on your credit cards than you can pay off the following month. Credit Cards are not for buying stuff you don’t need. They are for small necessity purchases and emergencies. When buying something on credit, make sure you can pay that debt off in full within a couple of month’s minimum. Debt accounts for 30% of your overall credit rating. So it’s very important to keep your credit card debt at a minimum.

The fifth step is to build credit if you don’t have any. There are a couple of ways to do this. You can get a secured credit card or get a family member to add you to their credit card as an authorized user. You will need a couple lines of credit on your credit report. This will help establish credit scores.

The 6th and final step is to repair your credit report. If you find you are in need of credit repair, make sure you repair your credit report yourself. Don’t pay someone money to do so. You can use our Help Yourself Credit Repair guide.

Here are some more online resources for “Do it Yourself Credit Repair.”

These are all good resources to repair your own credit. There is no easy or quick way to repair your credit. Depending how bad your credit is, the process could take 12 months or so.

Being educated about money management will make life a lot easier. Good money management will result in good credit as well.

Author: Mike Clover

Buying a Home married but separated- Community Property State Barriers

Friday, July 23rd, 2010

Community Property State Barriers for Married but Separated couples.

Over the years I have dealt with all kinds of situations. One particular situation is someone trying to buy a home but the other half is gone to “who knows where.” They are not legally divorced for what ever reason. I will get calls to buy a home, but that individual is still married and to make matters worse the other half is nowhere to be found.

In some states this can be a huge problem when trying to buy a home. Currently there are 9 states that are community property states.

They are:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

A community property state is where the law requires all assets you acquire while married be split 50/50. When trying to purchase a home in a community property state and you are separated but married, you will not be able to buy without your spouse. When buying a home even if your spouse is not on the loan, the lender will require your spouse to sign the “Deed of Trust” at closing. This is where you run into issues with mortgage loans. The Deed of Trust gives the ownership a 50/50 scenario of all proceeds after a sale. There is no way to get around this other than both parties showing up for closing or legal divorce.

Author: Mike Clover

Credit Score Requirement for FHA loans

Thursday, July 22nd, 2010

FHA Credit Score Requirements 2010

Your credit score is definitely being held to higher standards these days. When applying for a FHA loan you will discover that FHA has its own credit score requirements. You will also learn that the banks have a set of their own credit score requirements. This can be confusing and misleading at times. This information will be different depending on who you talk to. So what are the credit score requirements for 2010?

FHA requirements

FHA currently will insure loans down to a 580 credit score as long as you have the credit criteria to do so.


  • No Foreclosures during the last 3 years
  • At least 3 lines of good credit on your credit report for 12 months
  • Good Rental History
  • Ne recent collections or Charge Offs

Bank Requirements

The credit score requirement with most banks currently to get a FHA mortgage is 620. Even though FHA will insure loans down to a 580 credit score, the banks still have to finance them. FHA is not a loan; it is a government insurance department that insures bank loans. This is why there is so much misinformation about FHA loans. A bank in this particular market will not finance a FHA loan if that loan is not sellable. All banks sell their loans on the bond market. This market is also called secondary market in the mortgage world. This is where mortgage loans are bought and sold daily.

So bottom line is most banks will require a 620 middle credit score to get financed even though FHA will insure a loan below a 620 credit score. Also take note that you could get denied with a 620 credit score if the bank does not like your credit history. A 620 credit score does not guarantee an approval.

Tips for getting approved

  • No late payments during that last 12 – 24 months on credit report
  • Keep your debt low
  • No Chapter 7 bankruptcies during the last 2 years
  • No Foreclosures during the last 3 years
  • You will need 3.5% down payment
  • Good 12 month rental history
  • 2 year work history
  • No judgments
  • No Defaulted student loans
  • Must be current on child support payments
  • Need  a credit score of 620 to get approved with the (Banks) not FHA

FHA resources on the web:

Author: Mike Clover

Rebuilding Credit Scores After Bankruptcy

Thursday, July 15th, 2010

first step is to get your free online credit report with scores and see exactly where you stand.

Then take two important steps:

  • Pay every bill on time
  • Establish new credit

A first step in re-establishing credit is to get a credit card and begin using it well.

But, if credit cards are what caused your financial meltdown, first take a hard look at your attitudes toward spending.

If poor money habits were responsible for your bankruptcy, you need to create a budget. List all of your current obligations – such as the rent, the power bill, the insurance payment, etc. Then add a realistic figure for food and gasoline.

Next, get a calendar and write each item and amount on it’s due date. Now look at your income and when it comes to you. You’ll see that some weeks you have “excess” money and some weeks you may be a bit short. Earmark enough of that excess to cover the short weeks.

Budgeting so that you can pay every bill on time will go a long way toward rebuilding your credit scores, and the late fees you won’t pay will help build your bank account – so discipline yourself.

One of your budget items should be savings – so that you will have a cushion in case a paycheck is short due to a holiday or an illness.

Once you have two months’ salary saved, it’s safe to get a new credit card. But use it only for items you would buy anyway – or for emergencies such as the transmission going out when you have to have the car to get to work.

Credit cards should be considered a convenience, not a means to buy what you can’t afford /don’t really need. So, except in a case such as the transmission going out, use them only for items you know you can pay for when the bill arrives. Once you begin carrying a balance forward you’ll create a drain on your finances through interest, and it will become far too easy to let that balance grow.

Before you apply for any new card, do your research. You may have to settle for a secured card at this point, so look for one that pays interest on your security and offers the option to switch to unsecured once you’ve proven yourself to them.

Whether secured or unsecured, choose a credit card with an annual fee of $50 or less, and the lowest interest rate you can get. You won’t plan to carry a balance, but there’s always that darned transmission. Make sure the card doesn’t have application fees or transaction fees, and do choose one that will charge no interest when the bill is paid in full each month.

Once you’ve chosen a card you want, apply for only one. Multiple applications will harm your credit scores.

Turn Raising Credit Scores Into a Game

Sunday, July 11th, 2010

Some folks right now are in a financial crisis because they used credit cards to give themselves instant gratification. Others are struggling due to illness, divorce, job loss, or cutbacks in pay.

Whatever the reason, their credit scores have dropped to the basement.

If you’re in this situation, you know that having low credit scores is expensive. From the interest rate you pay when you borrow to the premiums on your insurance, you’re penalized when your scores are low. And because of those added costs, it can seem impossible to get ahead. If your credit scores have dropped and you have outstanding credit card balances, the bulk of your monthly payment is going to interest.

But feeling sorry for yourself never helped anyone, so the best course of action is to adopt a new attitude, set a goal for success, and turn raising your credit scores into a game.

How can this be fun? Because the outcome is so positive. And because regaining your financial status can feel like a way to “get even” with the banks who raised your interest rates. Sad but true, many consumers today see the banks as greedy giants trying to suck away their money. Preventing that can feel mighty good, and keeping all the money you’re now paying in interest will feel good too.

First, order your free online credit report with scores, so you can see exactly where you stand right now. Watching your scores go up will be part of the fun. Then, create a budget and a payment timeline – so that you never, ever, waste money on another late payment.

Then find ways to can pull a few dollars here and there from your monthly spending – and use those dollars to get rid of your debt.

Finding many small ways to cut expenses can turn into a game if you approach it with the right attitude. And one dollar here and five dollars there can really add up over the course of a month. Once you get started you’ll probably be shocked at how many dollars you can keep in your wallet when you pay attention.

When you use the “found money” to eliminate debt, you will feel like a winner – especially when you watch your credit scores rising  - and when you know that you will never pay another dime in interest on the debt you’ve eliminated.

Using Credit Cards to Boost Your Credit Scores

Tuesday, July 6th, 2010

Learn how Credit Cards can help your Credit Score.

About 10% of your credit score is based on the variety of credit that you use. For the best results you need to show that you’re capable of handling more than one credit account, but does the kind of credit matter?

Yes, it does. Creditors like to see a home loan or a car loan in addition to a credit card. And the type of credit card does matter.

The FICO scoring algorithm treats bank cards as being more important than retail store cards. It doesn’t matter if your credit card is issued by a big bank or a credit union, however.

As long as you do have some kind of revolving account – such as a department store card – you can still earn a score in the 700’s. But wise use of a credit card that can be used everywhere cards are accepted will gain you a few points in this scoring category.

If you’re trying to build or rebuild your credit, the good news is that secured credit cards count as much as unsecured cards. These credit cards are all treated equally on your credit report. So if that’s all you’ll qualify for at this point, it will still help you.

Another 10% of your score is made up of new credit and new credit inquiries. If you’re working toward higher scores, you should refrain from asking for more than just the one bank card that you need to raise your scores in that category. Additional inquiries will lower your scores.

Next in importance, at 15%, is the length of your credit history – so never cancel an old credit card. Keep it, use it occasionally, and pay the balance when your statement arrives.

The amounts you owe relative to the credit available to you makes up 30% of your score. This is why we stress never using all your credit. Experts say to keep your use under 30% – and staying under 10% is even better. That excess credit available to you should be kept in reserve for emergencies only!

Finally, the largest factor is your payment history, at 35% of your score. Paying every bill on time is the single most important thing you can do to assure a high credit score. So create a budget system for yourself that ensures that you have the money available when those bills are due.

Planning ahead for those due dates will not only help you raise your credit scores – it will save you money. At $39 every time a payment is late by even 10 minutes, penalty fees can create a serious drain on your bank account.

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.