Archive for August, 2010

Yes, Some Can Buy a Home With No Money Down

Tuesday, August 31st, 2010

For many months we’ve been hearing how difficult it is to get a loan. According to news reports, the standards have been tightened, you need more money down, you need higher credit scores, etc. etc. etc. Real estate agents across the country say it isn’t hard to find buyers, but it’s darned hard to get those buyers qualified to buy the homes.

But all that is not necessarily true for all people in all places.

It has always been possible for veterans to buy with no money down. And while vets were once required to pay the funding fee up front, current regulations allow for this 2.15% to 3.3% fee to be rolled into the loan amount. The fee varies depending upon the veteran’s service.

Since there is no mortgage insurance on VA loans, this has always been an attractive choice for members of the military.

However, Navy Federal Credit Union may be an even more attractive choice.  Members of military families, and some civilian employees of the military and the U.S. Department of Defense are also eligible, with membership in the credit union.

Navy Federal Credit Union suspended zero down financing following the mortgage crisis, but it has been reinstated this year with the HomeBuyers Choice Mortgage. Their program is similar to the VA’s – but their funding fee is only 1.75%. No Private Mortgage Insurance is required and seller concessions of up to 4% are allowed. This loan is intended primarily for first time buyers and is available for purchases up to $650,000.

The next zero-down opportunity comes from the Department of Agriculture.

Contrary to popular belief, their Rural Development loans are not confined to farmland, or even to borrowers living in rural areas. Indeed, the USDA is granting loans in cities and subdivisions. A quick check of the “eligibility” map on their website indicates that USDA loans are available in the low-income, “depressed” areas in each state.

The USDA program places restrictions on household income, and is intended for first time buyers, although others may qualify. No mortgage insurance is applied, and the 2% loan guarantee fee may be rolled into the loan amount.

This program, which is administered through banks, has become so popular that it ran out of money for a period of time last spring. Until the extension was announced, that situation caused a panic among first time buyers who were hoping to meet the deadline on the tax credit.

Buyers who can’t qualify for “No-down” can look to FHA for “Low-down” mortgages.

During the housing boom only about 3% of all borrowers used FHA loans. Now that number is up to about 30%. Borrowers with FICO scores as low as 580 are eligible to purchase with only 3.5% down. For those with scores under 580, 10% down is required.

FHA loans are, however, the most expensive of the choices. The FHA charges an upfront mortgage insurance premium of 2.25% plus an annual fee of 0.55% of the mortgage amount.

So why are so many still unable to buy a home?

They don’t fall into the right occupational or income categories – or the right geographical categories. They’re self-employed or have recently taken a new job or moved to a new location.

Or perhaps, just because the banks can make these loans doesn’t necessarily mean they will. Under some new Fannie Mae guidelines, an underwriting mistake can now come back on the bank. And banks don’t want to risk their own money.

Author: Mike Clover

Top 5 reasons to pay your collections.

Tuesday, August 31st, 2010

Top reasons to pay your collections.

Speaking with a collection company about a debt you owe is like dealing with a school yard bully. These guys are programmed to collect debts so they can get their commission check. If you are getting ready to clean up your credit here are top reasons for paying off your collection accounts.

1. Stop Collection Calls

You will discover that collection calls will not go away until you settle up on the debt you owe. Some professionals recommend that you dispute a collection. Some recommend sending a cease & desist letter. A collection will be on your credit report for 7 years from collection date. The collection will be sold around to other collections companies. Don’t waste your time with disputes and cease & desist letters. Call the collection company work out a payment arrangement or settlement.

2. Keep from getting sued

Some assume that a collection company will make calls and then give up if you don’t pay. This is not always the case. In some situations the collection company will take you to court and get a judgment against you. A public record will be on your credit report for 7 years.

3. Increase your credit scores

The older a collection is the less it will affect your credit score. Since collections stay on your credit report for 7 years, a paid collection is better than a collection not paid. You will find after paying off your collections your credit score will increase.

4. Get approved for loans and credit cards

Some banks will not approve you for a loan if you have outstanding collections on your credit report. In some cases they will require you to pay off the collection and to provide proof you did so. You will not be able to get a car loan, mortgage loan, etc…. A collection on your credit report could also affect certain type of job applications that require employment screening.

5. Debt Free

Settling up on collections you owe means you are one step closer to being debt free. Paying off collections is better for your overall financial health in the long run. If you can afford to settle on your collection accounts, this is the best practice.

Author: Mike Clover

Credit Score Confusion

Monday, August 30th, 2010

Everyone talks about credit scores these days, but they aren’t all talking about the same thing.

“Credit score” has become a generic term that covers all the various kinds of credit scores. It’s no wonder consumers get confused.

When you apply for a mortgage loan, your lender will probably order a traditional FICO score. This score will be based on the scoring method developed by FICO (the Fair Isaac Corporation) using the credit data supplied by each of the 3 major credit reporting bureaus.

But… it might not be a traditional FICO score. FICO has now come out with the FICO 8 scoring model, and is encouraging lenders to switch over. On top of that, the 3 credit bureaus got together and created their own scoring model, called the Vantage Score. Your lender may be ordering a report based on that model.

The next area of confusion is that different industries get custom credit scores based on what matters to them. For instance, your score in making a home loan application could be different than your score when you want a car loan.

All creditors want to see that you’re a responsible consumer, intent on paying your obligations on time. However, a bank giving you a car loan will want more weight given to your history with regard to car loans than with house payments.

You might say they’re looking at your credit report to see what matters most to you… what obligations you will pay even if you get into a financial bind.

Another point of confusion lies in the score ranges. FICO scores start at 300 and go to 850. Others start at 330 or 350 and go to 830 or 850. But the Vantage score doesn’t start until 501 and goes to 990. So if you’re looking at a score of 660 – you may be rated “good” using a FICO score, but not so good using the Vantage score. If you have doubts, ask what scoring model was used.

All the scoring models use much the same information, but they give different weight to the categories. That’s another reason why your scores could be different coming from two different sources.

In general, the various scoring models use information that includes:
• Payment history
• Amounts owed
• Length of time you’ve had credit
• New credit or new credit applications
• Types of credit used
• Credit available to you

This is true whether you pay for a FICO score or get a free credit report from a site such as this one. And rest assured that if a free credit report says your credit is “excellent” it won’t suddenly fall to the “poor” category on a FICO score.

Since you can’t dictate the scoring model used to “judge” you, what can you do?

Pay attention to all the categories. Pay every obligation on time, keep your credit card utilization at 30% or less of available credit, keep all of your old accounts open, and avoid making numerous credit applications. When store clerks urge you to “Get 15% off today” for opening a new account, say thank you… but don’t do it.

On the flip side of that – do try to use different forms of credit. When you can successfully handle a credit card or two, a car loan, and a mortgage payment, it shows creditors that you’re a responsible money manager… and it improves your credit scores.

Do monitor your credit scores.

Don’t wait until you want a new car or a home loan to find out if you’re making damaging mistakes in your use of credit. Get your free online credit scores, or go to FICO or one of the credit bureaus and purchase your score. It won’t be the exact score your lender will see, but it will be close enough to let you know how you’re doing and if you need to take steps to raise those scores.

5 Tips to the Perfect Prepaid Credit Card

Sunday, August 29th, 2010

This guest post was contributed by Elizabeth C. She helps run FindSecuredCards, a secured / prepaid credit cards portal helping those pick out the best card for their wallet.

Prepaid credit cards are great cards to consider for your wallet. They are going to help you control your spending, as well as manage a budget properly each and every month. The best thing overall is that they really aren’t that much different than your typical credit card.

So, what happens when you’re in the market to get a card that is best for yourself? What are some things that you should look out for? I’ve been working in the credit industry for a few years now and by following these tips, you should be able to get a great card that suits you best.

#1 Watch the fees: Most cards on the market have reloading fees, start up fees, and more. While finding a card with no fees at all is rather slim, they are out there. What you’re going to want to do is make sure that you compare apples to apples and know what fees you’re going to have to pay.

#2 Get interest: Since a prepaid card is going to have money loaded on it, you’re going to want to make sure that you have a bank account that is going to give you interest on your deposit. Why give a bank some money and they give you nothing in return?

#3 Major logo: Don’t sign up for a card from no name banks. The problem with this is that you’re not going to be able to use it anywhere! I would recommend that you get a card from major carriers such as MasterCard, as well as Visa. That way, you can be comfortable knowing that you can use your cards at a bunch of merchants.

#4 Features: Every card is going to claim to be different, but the features that are most important to me are no fees, no minimum balance required, free ATM withdrawals, as well as online bill pay. If your card has all of these features, consider it golden.

#5 Reviews: The last thing that you’re going to want to do is check out reviews online. Read up a little bit about the card and see what people have to say about it. Sure, there are always going to be negative reviews, but see why people give that negative review.

By following these tips, I can ensure you that you can find a card that works rather well. Compare a few cards before you apply, just to ensure that you’re getting a card that is going to work for you, rather than the banks.

Credit Experts, who do you Trust?

Sunday, August 29th, 2010

During tough economic times credit experts are popping up everywhere. It’s not hard to find a website with someone giving advice about credit reports, credit scores, financing, or stock market advice.

All of these topics are hot and everyone claims to be knowledgeable. But I have often wondered; what classifies someone as a “Credit Expert?”

I recently got in touch with John Ulzheimer about his knowledge of credit reports and credit scores. John, who has been classified as a Credit Expert by the media, replied that  his expertise comes from the fact that he worked for Equifax and Fair Isaac. He also claimed that one’s opinion is a matter of perspective when it comes to “Who is a credit expert.”

That’s partially true, but the whole reason I started was because of all the misinformation on the web from all these so-called credit experts.

During my years as a lender, prospective buyers have come to my office or called on the phone with all types of misinformation about credit.

The number one issue was credit report disputes. Everyone that had late payments or collections on their credit report had read somewhere on the web that if you disputed these negative items they would fall off your report.

Some also told me that they’d been advised to close out any credit cards they weren’t using.

The list goes on and on….

One reason I mistrust self-appointed experts is my experience with a former business associate. He owned a credit reporting company for banks, and like John, had previously worked for Experian.

He considered himself an expert, but consistently argued some of the methods I was using to help borrowers increase their credit scores and get their loans financed. When someone tells you “That won’t work” but you’re doing it and it’s working, you have to wonder about their expertise.

That made me believe that having worked for one of the bureaus didn’t necessarily qualify a person to be called an expert.

That said, here is who I consider a “Credit Expert.”

  1. An individual who deals with credit reports daily.
  2. Someone who can actually read a credit report.
  3. Someone who can point out credit report problems along with solutions to fix the problem.
  4. Someone who has a track record of helping individuals achieve better credit scores.
  5. Someone who can teach credit education.
  6. Someone who knows Fair Credit Reporting Act (FCRA)
  7. Someone that knows Fair and Accurate Credit Transaction Act of 2003 (FACTA)

I think there are two problems with looking for advice on the web today.

One is that anyone can call themselves an expert – and in order to make a buck, these false experts prey on people that are in financial trouble. These are the “experts” who recommend shady practices that can actually get consumers into legal trouble.

The other is that some very sincere people don’t possess the knowledge they believe they gained from working for one of the bureaus. As is typical with the red tape that accompanies the corporate process, these big corporate companies work their employees with blindfolds on. Each employee learns their small part of the process, but doesn’t get the entire perspective that they might get if they were working face to face with consumers on a day to day basis.

So if you’re looking for advice on the web, don’t believe everything you read.

Get some references about a company or double check with 2 to 3 other sites. Google their name and company name to see what others have to say about them.

Author: Mike Clover

Your Credit Report – Who is Looking?

Friday, August 27th, 2010

You might think your credit report is privileged information – to be given only to those individuals and businesses who have gained your permission. But that isn’t so.

Under the Fair Credit Reporting Act, many entities are allowed to access your credit report.

Potential creditors, of course. You expected that. When you apply for a loan or a credit card, you hand over your Social Security number and give permission. In some cases, you give permission for them to go back for another look at any time.

Credit card holders who were penalized by the universal default provision know all too well what can happen when your credit card issuer decides to check up on you and sees that you’re in arrears on some other credit card or loan.

Employers and potential employers also need your permission to access your credit report. And no, they aren’t given your credit scores. Employers have to review the report and come to their own conclusions.

And then we come to the entities that don’t have to ask for permission…

Collection agencies that are trying to collect a debt from you have the right under the Fair Credit Reporting Act to access your credit report without notification to you. They’re checking to see if you’ve paid off some other account or have a large credit line on an unused credit card. These are factors that would indicate that you’ve got money to pay them. They also use your credit report to check for a current address or a new employer.

Utility providers check your credit when you open a new account. They use the information to decide if you’ll need to pay a deposit before they turn on your utilities. Utilities get a “utility score,” which is different from the FICO score used to rate you for a mortgage loan.

Insurance companies get yet another report – one with an insurance score. This practice is being eliminated or severely limited in some states. Insurance companies aren’t happy with that change, as they do believe that consumers with good credit are a safer risk than consumers with poor credit. Policy premiums reflect the belief.

Landlords may not only check your credit report, but may order a more complete background check before handing over the keys. They want to gauge the risk of you running out with unpaid rent due – and they want to assure themselves that their property won’t be used for illegal activities.

Licensing bureaus – Some states allow professional licensing bureaus to check your credit before issuing a license.

While we are all most familiar with FICO scores or some variation of them, credit reporting bureaus actually have a wide variety of credit scoring models. The utility credit score and insurance credit score are but two. Each model is used for a different purpose and gives weight to different factors in your credit history.

Author: Mike Clover


Friday, August 27th, 2010

It’s been a tough couple of years for anyone wanting to get credit and even those with good credit ratings may have had their credit card and overdraft limits gradually whittled down as lenders have looked to adopt a more austere approach.

And with an estimated 50 million Americans ineligible for credit, it’s no wonder that the popularity of prepaid cards is on the rise.

So what is a prepaid card?

A prepaid credit card is simply a card that looks very much like a credit card and can be used in much the same way, the main difference being that you need to load the card with money before you can use it.

What are the advantages of a prepaid card?

Don’t get into debt!

Once you have exhausted the funds that you have pre-loaded onto your card it won’t let you spend any more until you load it with more cash.

This means that you cannot get into debt as you would with a credit card or a debit card with an overdraft facility as you can only spend what you’ve got.

Build your credit rating.

Prepaid cards offer a great way to build up your credit rating as you have many of the benefits and convenience of a credit card but none of the risk associated with running up large amounts of debt.

In addition, many of the banks that offer prepaid cards will be likely to offer credit once you have proved you are no longer a high credit risk.

Identity theft protection.

Identity theft linked to credit and debit cards has become an increasingly worrying phenomenon over the last few years and prepaid cards could be one way to protect against this.

If a fraudster did manage to steal the details of your prepaid card, they would not be able to run up credit at your expense as the card is not linked to any bank account.

Foreign travel.

Prepaid cards offer a convenient alternative to carrying around traveller’s cheques and offer the same level of protection if they are lost or stolen.

In addition, exchange rates are fixed at the time of loading your card so you won’t fall foul of any fluctuations in the exchange rate as you may when purchasing money abroad.

Furthermore, as long as the local currency matches the currency loaded on to the card, there will be no foreign-exchange fees for goods bought with the card.

So what are the disadvantages?

The banks need to make money out of prepaid cards somehow and, as they can’t charge interest because it’s essentially your own money that you’re using, they claw back the money through a series of fees related to the card.

Application fees

Some lenders will charge you a fee when you first take out a prepaid card with them else they will charge you a renewal fee once the card expires.

Loading fees

Although it’s your own money you are using, you’ll often be charged every time you load your card up with funds and this can come in the form of a flat rate or as a percentage of the amount you have added.

The fee may also vary depending upon which method you use to top up the card.

Transaction fees

With credit and debit cards, the transaction fees are passed onto the trader, but with prepaid cards you foot some of the bill.

Again, this can come in the form of a flat fee or as a percentage of your total spend.

In addition, prepaid cards carry a charge for money withdrawn at ATM machines, even from machines that don’t charge for withdrawals, so it’s best not to withdraw cash on a prepaid credit card.

Inactivity fees and monthly charges

Some issuers will charge a fee if the card is not used for a certain period of time and some also charge monthly fees just for carrying them so always read the terms and conditions before signing up.


Whilst purchases made on credit cards are protected against loss or theft, this is not the case with prepaid cards.

So, if, for example, you make an online purchase but never receive the goods, you will not get your money back as you would have if you had paid with a credit card.

Article written by Les Roberts finance writer for

Employers Don’t check your Credit Scores

Friday, August 27th, 2010

Video prepared by Greg Fisher at a consumer watchdog……..

Debunking the myth that employers check your credit scores.

You’ve probably heard that you could be hired or fired based on your credit scores. This is a myth – one that has been perpetuated even in interviews with people who should know better.

The truth is, when an employer asks a credit bureau for information about you, the credit bureaus do not provide your credit scores, nor do they provide your date of birth. They provide a report showing your credit payment history and other facts about your use of credit. From that information, the employer can draw his or her own conclusions.

Since small, insignificant mistakes in credit usage can bring your scores down, this fact should be good news to job seekers.

Your employer or potential employer must obtain your permission before asking for this credit report, and if you are denied employment as a result, you must be given a copy of the report. This falls under Federal Trade Commission regulations. You can see details of the required steps at:

Employment inquiries are not treated as credit inquiries in compiling your scores. So don’t worry if you’ve made application at several businesses, all of which have gotten permission to see your credit report. These inquiries don’t have an adverse effect.

Your credit report could be just one section of a more complete background check. But again, before purchasing any background information about you from a third party, your potential employer must have your permission.

This background check can be extensive – including everything from your medical history to incarceration records to workman’s compensation claims. Background researchers can even interview a job applicant’s neighbors in an effort to determine their character.

Some of this comes under Federal law, and some under State laws. You can get a complete overview of Federal regulations, along with advice on how to prepare for a background check, by visiting The Privacy Rights Clearinghouse

Why do employers conduct background checks?

In some cases, because they’re required. For instance, most states require criminal background checks for anyone who works with children, the elderly, or the disabled. Federal law requires background checks for certain Federal positions that require security clearances.

In other cases, the employer simply wants to be assured that he or she is hiring a person who can be trusted with money, or who is likely to be a stable employee. Others want to avoid the kind of employee who is habitually “hurt on the job” – filing claims for disability compensation.

Note that employees who are denied employment or fired due to background checks do have a right to see the reports that resulted in adverse action. However, employers sometimes avoid this requirement by claiming different reasons for not hiring someone. Especially in today’s climate, there are many applicants for the same job. They can merely say that someone else had better qualifications.

This disclosure is required under the federal Fair Credit Reporting Act (FCRA), which sets national standards for employment screening. However, the only background checks covered under the FCRA are those for which an employer has paid a third party.

Now that information is readily available on the Internet, some employers conduct their own informal research, and they aren’t required to get your permission.

Websites such as Facebook and MySpace are of interest to employers. A survey done in 2007 revealed that 44% of employers checked these social sites prior to hiring new employees and 39% used them to check up on current employees.

Job applicants should remember that everything they post on line is there for all to see, and doesn’t go away. It’s a bad practice to gossip about work or to make negative remarks about an employer – and a foolish mistake to post photos you wouldn’t want them to see.

It’s not just “formal” employers who check. I read recently about a real estate agent who was passed over for a house listing because the homeowner checked her Facebook page and determined that she “was a drunk.” Apparently, all the photos she had posted showed her with a drink in her hand.

Author:Mike Clover

Home Sales are Down – How to get buyers off the fence….

Thursday, August 26th, 2010

Sales of new single-family houses in July 2010 were seasonally adjusted annual rate of 276,000, according to estimates released jointly today yesterday by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.4 percent below the revised June rate of 315,000 and is 32.4 percent below the July 2009 estimate of 408,000

The median sales price of homes sold in July 2010 was $204,000; the average sales price was $235,300. The seasonal adjusted estimate of new houses for sale at the end of July was 210,000.  This represents a current rate of 9.1 months at the current sales rate.


One might be wondering what in the world is going on? Well, there are a few big factors that are affecting our potential buyers currently. The first factor is uncertainty in the market place. When consumers are not sure whether their job will be around next month, this has a profound affect on buyers moving forward with home purchases.

The second factor is rate movement. I personally believe that some are on the fence waiting for rates to drop even more. Let’s face the facts here, if you are getting a rate of 4.25%, the last time you saw rates this low was 60 years ago. This was before I was even born…..

So what is next….? We have an election coming up which affects rates. Interest rates being this low are typically connected to the 10-year Treasury bond, also known as mortgage backed securities. This typical indicator for mortgage rates has really not been the best indicator for rates this year, especially currently.

With all the uncertainty, the outcome of this upcoming election will affect mortgage rates. Just keep in mind that rates typically drop before any big election and will rise after the election.

I would tell your potential buyers that the low interest rate party could be over. History will show rate trends, and we are seeing a little of bit of history repeating itself.

Get those buyers off the fence…….

Author: Mike Clover

Say “No” to Late Fees, Overlimit, and Overdraft Charges With a 30-day Money Diet

Tuesday, August 24th, 2010

There’s no doubt about it – late, overlimit, and overdraft fees are an expense nobody needs. The final provisions of the Credit CARD Act means those fees are going to be lower – if you’re late with a $15 minimum payment on your credit card, they can only slap you with a $15 fee. And in most cases, credit card companies and banks will both be limited to charging $25 per incident. Still… they’re still a money drain you can do without.

Why do they happen in the first place? Because sometimes paychecks are a bit short, or they arrive on the wrong day of the month to pay those bills on time.

What you need is a cushion, so when the due date arrives before the paycheck, you can still pay your debts on time.

A 30-day money diet can give you that cushion.

You may not enjoy it, but anyone can do without a few things for 30 days. And, it may be hard to admit, but almost everyone spends money on things they don’t actually need.

For instance: Beverages. How often do you stop for a coffee, or grab a soft drink from a machine at work? Maybe you have a hot dusty job and stop for a beer on your way home from work. Do you deserve it? Yes, you probably do, but to get off the merry-go-round you can do without for a few days. Even at $1 per working day, saying “no” means saving $20.

Tobacco is another huge drain on a budget… and I’m not going to tell you to quit if you don’t want to. But cut back.  See if you can change a pack-a-day habit to a 5-packs-a-week habit. You’ll save about $40 a month.

Do you treat yourself for a hard week at work by going out to dinner or a movie – or dancing at a night club? You may deserve it, but stop for 4 weeks. Instead, plan something fun to do at home, or get together with friends.

Next, look at your grocery budget. If you’re buying any kind of snack foods or soft drinks, you’ve got a place to cut. Buying one less bag of chips a week would save about $20. While you’re at it, why not plan one or two “meatless” meals per week?

What about gasoline? That stuff is like liquid gold, and yet most of us waste it without a second thought.

For one month, plan your errands to avoid unnecessary trips. Go over that grocery list before you leave home, and then check it twice before you leave the store so you won’t have to go back because you forgot the bread.

See how many things you can accomplish while you’re out instead of making one trip for groceries, one to drop off the dry cleaning, and another one to pick up the kids from school. If there’s an errand you can put off until the next time you’re going that way – put it off. The bonus: more time for you.

Clothing is one item you can cut completely for 30-days. Unless a big hole just popped in your last pair of sox, you probably have plenty of clothes to keep you covered for 30 days. If you have kids, they probably do too. So just because those tank tops are on sale for $3 doesn’t mean you need one. Even if you can just put it on your credit card, walk on by.

Now plug another huge hole: Impulse purchases. When you go to a store, go with a list in your hand, and don’t buy anything that isn’t on that list. Unless, of course, you forgot to write down milk and your family can’t do without it.

Retailers are expert at placing impulse items in strategic spots. But you don’t need that candy bar or that magazine. You’ll get along fine without that little mini-lint roller or the cute lighter shaped like a fishing pole. Honest.

Keep track of your savings each day and week – then tally it up at the end of the month. And don’t forget to give yourself credit for any fees you used to pay. Then give yourself some kind of (inexpensive) reward for getting off the merry-go-round.

You might just find that it’s so much fun to have money left at the end of the month that you’ll want to keep at it until you have a whole month’s worth of money ahead… wouldn’t that feel good?

Author: Mike Clover

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.