Archive for August, 2010

Have Banks learned from their past mistakes?

Saturday, August 14th, 2010

Before the recent real estate meltdown, banks were lending to anybody with a pulse. The reason was during the Clinton administration banks were being pressured to make riskier loans. This pressure came particularly from Andrew Cuomo the youngest Housing and Urban Development Secretary in history. Cuomo pushed for equal housing opportunity for low income families. For some strange reason this information was hardly talked about in the news. Everyone was blaming the banks for the melt down which was only partially true.

During 1997 – 2001 Cuomo made a series of decisions with Freddie Mac and Fannie Mae that promoted lenders to plunge into risky subprime investments. This pressure lowered the bar on credit score and down payment requirements for mortgage loans. This was the beginning of a subprime and a- paper loan disaster.

So who is to blame for this? I blame the banks and the government. I particularly blame the Clinton administration for pressuring banks to lend to people who really did not have the financial strength to buy a home. On the other hand banks are to blame as well. They know what type of borrower will default on a loan and should have never given in to the government pressure.

Now most Americans are forced to save their money and work on their credit. This is the case especially for families that want to buy a home or get some type of credit.

During 1997-2006 we were in a false economy that was stemmed from government pressure towards banks to lend to low income families. I believe everyone has a right to home owner ship as long as they qualify.

As a result of this disaster we now are faced with a long road to recovery. The banks I believe have learned not to give into government pressure. The American people have learned that you will need better credit scores and money in the bank to qualify for a mortgage loan.

You have to admit that we have been extremely spoiled over the last 15 years. Now lending is back to the basics. You need good credit scores, money in the bank and a job with provable income.

Like the famous singer Shirley Bassey, said…. “It’s all just a little bit of history repeating……” I hope she is wrong…..

Author: Mike Clover

Use Your Own Savings to Build Your Credit Scores

Tuesday, August 10th, 2010

If you’ve never established credit or if past financial troubles are still haunting you, and you need to rebuild your credit, using your own savings to do so is a simple route to follow.

One way to get started is with a secured credit card.

With this method, you deposit a set amount into an account that is held for security against your line of credit. The credit card issuer will not be concerned with your credit scores, because if you don’t pay, they’ll simply keep the money in your security account.

By using the card wisely you will demonstrate that you are once again a good credit risk. You should be careful never to use more than 30% of your line of credit, and should, of course, pay every statement when it arrives. As long as you make at least the minimum payment, carrying the balance is fine – but it might be expensive. These cards are known for high interest rates. Use the card as a convenience and as a credit building tool, and do your best to pay each statement in full when it arrives.

Before you go this route, shop around and compare offers. Each card will carry an annual fee and the interest rates vary. Also, some cards offer interest on the money you’ve deposited into the security account, while others do not.

In addition, be on the lookout for application fees, transaction fees, statement fees, etc. Because the CARD Act limited some sources of income, credit card issuers are looking for other ways to increase their profits.

Be wary of offers in the mail or in your email in-box, as these will probably carry the highest interest and fees. Instead, take the time for comparison shopping. Choose a card with reasonable rates and fees, and look for one that will pay you interest on the money in your security account.

Another means to accomplish this – and to establish a second form of credit – is to borrow against a CD in your own bank. This is a less expensive method – generally you’ll pay 2 or 3% over the amount being paid to you on the CD.

Since credit scoring models give “extra credit” for managing different kinds of debt, you might want to consider using both a secured credit card and a bank loan. Credit cards are considered revolving debt, while a loan is an installment debt.

Credit Scores Explained

Sunday, August 8th, 2010

What is a credit score and what is it used for?

Not all that many years ago, if you needed a loan you went to see the local banker. The banker would decide if you were credit-worthy based on what he knew about you – and maybe even what he knew about your parents and siblings. Your reputation was the deciding factor.

Now, if you go to the local bank you’ll be handed over to a loan officer, and even if that loan officer knows you well and likes you, you’ll get the loan based on your credit score. If your credit score is too low, you either won’t get the loan or you’ll pay an extremely high rate of interest.

That’s because, to a lender, a low score signifies that you’re a greater credit risk.

Most banks and other lending institutions use a FICO scoring formula, although several similar formulas are also in use. FICO stands for Fair Isaac Corporation – the company that developed the scoring system.

A credit score is a distillation of all the information in your credit report, plugged into a formula that calculates a single number to indicate your credit worthiness. Scores range from 300 to 850 – with most consumers falling into the 600’s and low 700’s. A score of 740 or higher should get you the best rates on any loan.

What factors go into the calculation?

  1. Your record of making payments  – making them on time every time gives you a higher score. Late payments, collections, bankruptcies, and foreclosures all lower your scores.
  2. The Way you use credit – if your credit cards are at or near their limit, you’re considered a greater risk.
  3. The age of your existing credit. If you’ve had and used credit for many years, you’re considered a safer risk than someone who is just starting out with credit usage.
  4. The number of inquiries on your file. If you have multiple inquiries from possible credit issuers over a short period of time, you’re considered to be a greater risk. Note, however, that inquiries from creditors for the purpose of soliciting your business do not count against you – nor do inquiries you make on your own credit file. Only inquiries resulting from a credit application count.
  5. Your mix of credit. Credit issuers like to see a mix of installment loans and revolving lines of credit. That somehow proves to them that you are able to handle multiple kinds of debt.

How lenders use the information does vary…

Two consumers with identical credit scores can be offered different interest rates for a similar purchase. That’s because these two people had different pluses and minuses that factored into their final scores – and certain things matter more to one type of lender than another.

Credit card issuers, for instance, will place more weight on your credit card payment history, while auto lenders are apt to focus on factors such as the down payment, your debt-to-income ratio, and your length of time on the job. They also look at your history regarding auto payments. To an auto lender, a missed car payment is more damaging than a missed credit card payment.

Mortgage lenders focus on your overall scores, and your score will determine the interest rate you’ll be offered.

However, mortgage lending standards have tightened considerably, and borrowers must once again meet several requirements. An underwriter will consider your down payment, your income, your length of time on the job, your overall debt-to-income ratio, and even the likelihood of you remaining on that job in the foreseeable future. High scores and a “stated income” are no longer enough to secure a loan.

If you’re planning a major purchase, get your scores now…

Credit reports reflect information that has been reported – and entered in a database. Often that information contains mistakes, and those mistakes can lower your scores.

So if you’re planning a major purchase, get your credit report and scores and check it for errors. They are not difficult to correct, but they do take time. In addition, your credit report will offer advice in the form of reasons why your score is lower than it might be. You can use that advice to make changes in the way you use your credit.

So don’t wait until you’re ready to make an offer on a home, drive off the lot in a new car, or apply for a credit card.

Get your free online credit report with scores right now from Or, go to to request your free credit report from each of the bureaus. The report will be free, but you will pay a fee for the scores.

If you want to purchase your credit report and credit score, shop around first. The prices vary between the three credit bureaus. Here are the costs and contact information for ordering your own.

Credit report and credit score — a price comparison
Company Credit report Credit report
with credit score
from all three credit bureaus with score

P.O. Box 740241

Atlanta, GA 30374


$9 (Maximum.
Price varies by state and by credit circumstances.)
$14.95 $39.95

P.O. Box 1000

Chester, PA 19022


$9.95 (Maximum.
Price varies by state and by credit circumstances.)
$14.95 $29.95

PO Box 2104

Allen, TX 75013


$9 (Maximum.
Price varies by state and by credit circumstances.)
$14.00 $34.95
If you’ve recently been turned down for credit, you may be entitled to a free report. Contact the credit bureaus to find out more.

The prices, pulled from the Web sites, can change at any time. Visit the Web sites for a more complete description and pricing.

Credit Repair & Credit Reporting Resources

Sunday, August 8th, 2010

Credit Repair is the process of negotiating collections, charge offs, establishing credit, lowering debt, and disputing inaccuracies. Save yourself time and money by repairing your credit yourself.

As a consumer you have rights in regards to what is being reported about you. There are laws that protect your credit rating. However there are various issues with the current credit reporting process that affects the accuracy of credit reporting.

You’re Rights as a Consumer:

  1. Fair Credit Reporting Act (FCRA)
  2. The Fair Credit Reporting Act (FCRA) and the Privacy of Your Credit Report
  3. Equifax FCRA
  4. FCRA

There are many helpful sites to repair your own credit report. These helpful links are from the government and consumer advocate sites. These sites charge no fee for this advice.

Credit Repair Links:

  1. How to help yourself (FTC)
  2. Credit Repair Tips
  3. Building a better credit report
  4. 5 Steps to do-it yourself credit repair
  5. Step by Step Credit Repair guide
  6. Law in Plain Language: Credit Repair
  7. FDIC on Credit Repair
  8. Frequent Credit Repair Q & A
  9. Credit Repair Software – This is a great resource for creating credit dispute letters.

Credit Reporting Facts

  1. Credit Score Facts & Fallacies
  2. Credit Report Facts Freddie Mac
  3. Credit Score how it all adds up
  4. Consumer Facts FTC
  5. Debt Collection

The Failed Stimulus Known as HARP

Saturday, August 7th, 2010

HARP – the Home Affordable Refinance Program – was supposed to help Americans refinance their homes into a more affordable payment. The goal was to refinance from 4 to 5 million mortgages by the end of June 2010. Instead, according to the latest reports, fewer than 300,000 homes have been refinanced under HARP.

The program has been extended for another year – through June 2011 – but so what? Is there any reason to believe that the program will more successful in the coming year?

HARP could have saved many homes from going into foreclosure when their adjustable rate mortgages reset – pushing the monthly payment to a level that consumers hit with the failing economy simply could not meet.

For others – it would have freed up a few hundred dollars per month that would supposedly have stimulated the economy through increased spending on consumer goods.

But this giant stimulus to the economy simply didn’t happen.

Homeowners tried, but for many the limit of refinancing at 125% of value shut them out. In hard-hit areas like Florida, California, Nevada, and Arizona, homes are now worth less than 50% of their mortgage balances.

For others, it was program guidelines and lack of cooperation from the banks that prevented the refinance. For instance, a homeowner with private mortgage insurance is limited to refinancing with their current mortgage company – a company that has zero incentive to help them reduce their interest rate.

Remember that this refinance program was (is) available only to homeowners who have not missed a mortgage payment. So why should a bank reduce their interest from 6.5% to 4.5% when they are able to make the larger payment? From the bank’s point of view, that’s like taking money from their pocket so the consumer can spend it somewhere else.

Like HAMP, which was supposed to have modified 4 to 5 million loans by now but has actually helped fewer than 400,000 homeowners, the big problem is lack of cooperation.

The banks, while being “encouraged” to participate, have no real incentive to do so. Thus, homeowners who want these programs must be persistent and insistent.

One homeowner who was successful in obtaining a lower interest refinance at 125% of value cited 6 months of sending and re-sending documents as they were either lost or his file was transferred to a new servicer. He began with weekly calls and emails and finally ramped it up to more than one a day.

He said that it was easy to see why some homeowners would give up before getting to the finish line. People with jobs that prevent them from making phone calls and sending emails during business hours on a daily basis simply get ignored, and the many setbacks and mistakes on the part of the bank can make it seem impossible to reach the goal.

In his case, the “squeaky wheel” finally did “get the grease.” He advises other homeowners who want and need a lower payment to never give up.

2 Unusual Ways to Pay Down Debt & Increase Credit Scores

Friday, August 6th, 2010

Owing less money will not only build your credit scores, it will reduce your stress levels. Here are 2 ways that consumers have found to spend less and gain more.

1. Get rid of your car…

Owning and maintaining a car drains $6,000 to $10,000 from your income each and every year – more if you’re also making a car payment or paying to park.

In areas where public transportation is available, it makes good sense to get rid of the car and rent one only when its needed for a long trip, a special occasion, or for those times when shopping means coming home with a bulky purchase.

Major car rental companies are now offering hourly as well as daily car rentals, because they’re now competing with a growing new business: Car sharing companies.

Car sharing is fast taking hold in major cities along both coasts and the Midwest – with 75,000 already using the service and an estimated 2,500 new members signing on each month. At present, the two major car share providers are Zipcar and Flexcar.

Consumers who have gone this route say they get a triple benefit – they’re walking and bicycling more, and feeling more fit, and they don’t have to spend the time involved in maintaining a car. Rentals and car shares come to them clean and ready to go – eliminating hours as well as dollars spent on filling the tank, getting the oil changed, washing the car, etc.

The drawback: You can’t take pets unless they’re in carriers, and you can’t leave all your “stuff” in the car, handy for when you need it.

Removing that car debt from your credit report will also give your credit scores an instant boost.

2. Rent out a room in your home.

This is a common practice in college towns, where homeowners offer their extra bedrooms to college students. But it’s now a growing trend in cities, as young people joining the workforce seek affordable housing. The safety and security of living with a family is attractive, and the cost is less than that of a clean apartment in a good neighborhood.

For the homeowner, it can mean having someone in the home to keep an eye on things while they’re away, or to help with yard work, housework, or even child care – as well as extra cash to help pay down debt quickly… and raise those credit scores.

Before you try it, check the local zoning ordinances, and be sure to draw up a tenancy agreement that specifies both the payment terms and the sharing of common areas.

Credit Report Dispute Q & A

Thursday, August 5th, 2010


I have a dispute against Verizon Telephone (not wireless) that I can’t seem to get rid of. I was charged for 6 months of a bundle service from May of 2008 to Jan 2009. I though this was settled when I had a phone hearing with the public utilities people. The Problem is in a nut shell, I moved out on June first 2008. Never had Installation, and Verizon has the records that show that the installation never happen. The original bill was something like $850.00, they (Verizon) said they never received a payment.  My question was what phone co,. would continue service for 7 months without getting the first payment, to say nothing about no payment at all. They say I owe them 2 diff. bills for a total of around $350.00. I have over the past 5 years had payed off 4 car loans. I have 3 ongoing loans at present. Out of all the payments in the past 5 years I was late 60 days 1 time on 1 loan, I have been making payment on time not a day late on all the others. Still only have a score of around 600. Can you help me?

Phillp G.


Hi Phillip,

When having collections on your credit report, this will drag down your credit score until resolved. My recommendation would be to get that resolved with Verizon. I am not sure if I understand completely about the continued service situation. If they show the installation never happened, then there should be no charges. I would recommend disputing this on-line at our on-line dispute section. When there is an error on a creditors part, the bureaus will verify that error and remove if the error can be verified.

Mike Clover

Retailers Get a Break from the Durbin Amendment – Will it Benefit Consumers?

Tuesday, August 3rd, 2010

Section 1075 of the Dodd-Frank Wall Street Reform and Consumer Protection Act addresses the fees that merchants pay every time we hand over a credit card to make a purchase.

Over the next nine months, the Federal Reserve will be required to establish “reasonable and proportional” standards for these fees – called “interchange fees.”

At present, these fees cost merchants an average of 1 to 2 percent of each debit card transaction and 2 percent of each credit card transaction. However, smaller merchants have been subjected to fees as high as 4%.

Part of this fee is in the form of a fixed charge every time a consumer swipes a card. Thus, retailers who accept cards for a small purchase may actually be losing money on that purchase, as the card fees eat up more than the profit on a low-markup item.

The National Retail Federation estimated that retailers in the U.S. paid $48 billion in such fees in 2008 – which was triple the amount paid in 2001. This is not surprising, considering the number of consumers who now use debit cards rather than taking the time to write a check for a purchase.

Of course retailers aren’t going to pay these fees without rolling them into the cost of the merchandise they sell. The NRF estimates that the average household pays about  $427 per year in these “hidden” fees.

Retailers are prohibited from adding a surcharge at the till for use of a debit or credit card, so all consumers pay – whether they pay by cash, check or plastic.

They’ve also been prohibited from refusing to take cards for small purchases or from giving discounts to consumers who pay with cash. That is about to change.

Under the new rules, retailers still won’t be allowed to impose a surcharge, but they will be allowed to refuse cards for purchases under $10 and to offer discounts to consumers who use cash or checks.

But are the banks going to take this sitting down? Of course not.

Just as banks raised fees to credit card holders to make up for losses they suffered through the CARD Act, they’re now considering how they’ll make up for this loss.

One way will probably be the imposition of higher fees for the right to accept credit and debit cards. What else they’ll do to retain profits remains to be seen – they have a few months tofigure it out.

Telemarketing Provisions of The “Final Rule” Become Effective September 27, 2010

Monday, August 2nd, 2010

While we doubt that any rule is the “final” one when it comes to government regulations, this Final Rule is good news for consumers who need debt relief services.

This rule, which comes to us from the Federal Trade Commission (FTC), goes into effect in two steps. The first, effective September 27, requires debt relief companies that sell their services over the telephone to make specific disclosures to consumers, and prohibits them from making misrepresentations. But perhaps the most important provision is that the Telemarketing Sales Rule will now be extended to incoming as well as outgoing calls.

The second portion of the Final Rule, which takes effect on October 27, 2010, clearly prohibits debt relief companies from charging an up-front fee for settling a consumer’s debt.

Telemarketing debt relief companies have preyed on consumers in distress with false promises of reducing credit card debt by half or more – in exchange for large up-front fees. When it was impossible to reduce the debt, the consumer was simply out the money paid to the company.

Under the new rules, debt relief companies may not collect any funds up front, and the fee they do collect must be clearly agreed upon in advance.

Before the debt relief company is paid, they must successfully change the terms of at least one of the consumer’s debts. This change must be reflected in a written settlement agreement or debt management plan between the creditor and the consumer. And finally, the consumer must have made at least one payment to the creditor as a result.

If a consumer has several debts, but the company is able to negotiate only one or two, the fee must be in proportion to the total debt relief provided. If the fee is percentage based, the percentage must be the same for each debt – and charged only when negotiations have been successful.

Under another provision of the Final Rule, debt collectors may require consumers to set aside debt repayment funds in a dedicated account. However, that account must be maintained in an insured financial institution and remain under the consumer’s control at all times. The debt relief provider may not have any affiliation with the financial institution nor may they exchange referral fees.

Legitimate debt collectors who want to be sure they are in compliance with the new rules can find the FTC compliance guide at:

There is no doubt that in spite of past regulations and this “Final Rule,” some companies will still attempt to defraud consumers – and not just with regard to debt relief. Should you become a victim of fraudulent, deceptive, or unfair business practices, you can file a complaint by calling 1-877-382-4357 or by visiting

Understanding Your Credit Report

Sunday, August 1st, 2010

Everyone now encourages you to get your free online credit report and to read it carefully. We agree.

You can get it free each year from – but those reports don’t include your credit scores, and the scores are important for you to monitor. In order to get your credit scores, you need to get your free credit report from this or a similar site, or you can purchase your credit scores from each of the bureaus separately.

Much of the information on your report is self-explanatory. The first few sections give an overview of your credit history and your personal information. They list your employment information, your address, etc.

You need to check that section to ensure that no one has stolen your identity and transferred one of your unused accounts to a new address – and that they haven’t used your work history and experience to land a job that they couldn’t get using their own information.

But what does the rest of it mean? The payment history section of your credit report will include codes that mean nothing to you.

First understand that Equifax, Experian, and TransUnion use different codes – and that the free online credit reports you can get are following different scoring models. Experian uses the FICO scoring model, while TransUnion uses Empirica, and Equifax uses Beacon.

This is one of the reasons that the credit scores will not be exactly alike. The other reason is that some of your creditors may report to one credit bureau and not another. Thus, the information they’re using to compile your score will not be identical.

Your payment history code will include a number from 0 to 9. 0 indicates up-to-date payments while 9 indicates a collection or bankruptcy. Numbers 1 through 8 indicate varying degrees of financial difficulties. Each of the credit bureaus offers a free online tutorial to let you know what each of those numbers indicates.

Next, look at the letters. On your Equfax and Experian report, C will indicate an account in good standing while G means collection and K means repossession. H indicates a foreclosure and J reveals a voluntary surrender. TransUnion uses more numbers rather than letters.

Your credit score will range between 300 and 850. Most consumers who are not in serious financial trouble will have scores between 650 and 750. These are considered good and they can usually be made even better with a little financial planning. Very few consumers attain a score of 850, but you should strive for the highest score you can get. The higher the score, the lower the interest you’ll pay on homes, cars, and credit cards.

Scores below 450 will generally mean that you need to do some work to rebuild credit before you can get a loan. Secured credit cards can help you accomplish this, as can becoming diligent about making every other payment – such as utilities – on time and in full.

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.