Q: We are in the process of buying a house (closing this Friday). Perhaps this question is too late, but I still would like to know:
When we were in the process of getting approved, we learned we needed a co-signer. No problem, my father-in-law signed on. Upon obtaining credit scores, his came in lower than ours. (His was 699, ours in the mid 700s). Because he is our co-signer we were told the rate would have to be based on his score. Furthermore, the rate would be higher because he came in at a more “risky” score of 699.
However, while looking at our credit reports in front of the lender (broker, actually) – my father-in-law noticed a credit card statement that was not his, and it had a balance of over 10K. His son has the same name, so we’re pretty sure that the credit report had his son’s info on there in error. We brought this up to the broker, and she suggested we take care of it someday, but not now, as we wouldn’t want to mess with the credit score while going through the process of trying to buy a house.
A: Hi Jim, This is very common out there. When getting loan lenders always take the lower middle credit score out of everyone involved. This is the case even though someone else might have a higher credit score. The lender did direct you correctly, since SOMETIMES when removing credit from your credit report, could TEMPORARILY have a negative affect on your credit score. There is no Legal recourse that I can think of. Not sure what type of loan you got approved for, and what your terms are, but I always recommend checking with a couple of good lenders just to make sure you are not getting ripped off. I am a lender and I know that everything is negotiable. I hope this helps.
Secured credit cards have long been the method of choice for building or re-building credit. Consumers with no credit or bad credit could simply pay the deposit for a secured card and begin proving their ability to make payments on time by using the card wisely.
As that wise use was reported to the credit bureaus, the consumer began to build a good credit score. They’ve been easy to get because they present zero risk to the card issuers.
So why, all of a sudden, are banks discontinuing them?
Two reasons: • They don’t provide a high revenue • They no longer want to associate with people who need them
That sounds a bit harsh, doesn’t it?
We know that card issuers are all about making money – that’s why they’re in business. It’s just become more apparent over the past few months while we’ve been watching them raise rates and fees in an effort to rake in more dollars.
Some of us have wondered about their new policies of reducing credit limits for even customers with good credit and stellar payment histories.
It almost looks as if they are using some kind of secret scoring system to determine which of their good customers could possibly become defaulting customers. And of course, they’re not very interested in consumers who pay their bills in full each month – because there’s no profit in that for them. That part makes sense.
Secured cards are generally low limit cards, so while the interest rate is high – usually at about 18 – 20% – the revenue from a small balance is still not much revenue. Often the card’s largest revenue is from the annual fee, the set up fee, the processing fees, and the usage fees.
Since the new regulations set to go into effect next year will limit those fees, many card issuers are hurrying to get out of the secured credit card business now.
HSBC, New Millenium Bank, and Bank of America do still offer secured cards – but all of their offers are not alike. So if you want one, check all the details before you apply.
Here’s what you need to look for: • Make sure the card reports to the credit bureaus • Comb the terms and conditions for disclosures about fees you may not expect • Check the rates – I’ve seen from 7.99% to over 20% • Be sure there’s a grace period – 20-25 days interest free after you make a charge if your previous balance was paid in full. • Look for a “graduation” provision – to ensure that you can move on to a larger, unsecured credit limit after a set period of favorable use.
Many homeowners facing foreclosure have been in limbo now for several months – being assured by their mortgage companies that work-out options were in the offing and that they shouldn’t worry.
Some, who had missed so many payments that their mortgage companies rejected payments they attempted to make, were told to keep putting that mortgage money in the bank. The idea was to have funds available when options for keeping their homes were announced.
Now, less than 3 weeks before the foreclosure moratoriums were set to end, those consumers still don’t know what solutions might be available to them, or whether they will qualify for the programs. Right now the end date is set for March 13, but that could be extended if mortgage lenders are still unsure of the details of President Obama’s home loan relief plan.
In fact, Bank of America announced recently that it will not engage in any foreclosure sales until the details of the Homeowner Affordability and Stability Plan are released.
Bank of America officials stressed their desire to use any and all tools available to help borrowers with sufficient income and the desire to keep their homes.
Wells Fargo, Countrywide, and subsidiaries of Merrill Lynch have also extended their moratoriums on foreclosure, pending details of the plan.
An announcement by Obama last week indicated that a large part of his plan is aimed at homeowners who are in default or at risk of default.
While he stressed that the measure is not intended to bail out borrowers who have acted irresponsibly, he said that those who meet eligibility requirements could see a drop in monthly payments. It is possible that through a home-loan modification, up to 4 million borrowers could qualify to have their monthly payments lowered to 31% of their pre-tax income.
This reduction will likely come via a reduction in interest rates, with the Federal Government making up the difference between the mortgage lender’s stated rates and the rate the homeowner is able to pay.
In another part of the plan, homeowners whose mortgage loans are guaranteed by Fannie Mae or Freddie Mac may be able to refinance at a lower rate. Any loan up to 105% of the home’s current value will be eligible – not as a cash-out refinance, but as a refinance of a home that has lost value in today’s housing market.
Everyone is wondering what effect the American Recovery and Reinvestment Act of 2009 – otherwise known as the stimulus package – will have on their own lives.
We’ve heard that some folks on social security and/or disability will receive checks for $250 each – but haven’t heard when that will happen, or exactly who will be eligible.
We also heard that “everyone” will get a $400 tax credit – whether they owe any tax or not. Now we’ve found a few more details. “Everyone” only refers to those taxpayers earning under $75,000 per year – or couples earning under $150,000. Those earning more may get a small credit.
Most expected that this would show up as a tax credit at year end, but now the plan is to put it into paychecks throughout the year. New tax tables will be mailed to millions of employers in mid-March, resulting in about $13 per week more in eligible workers’ take-home pay.
Self-employed individuals who pay quarterly estimates are reminded to take the credit into consideration when depositing their taxes.
Other breaks apply to those citizens who have good credit and some money in the bank.
For instance, $2.3 billion is earmarked for encouraging you to buy a new car. If you buy a new domestic or foreign car by December 31, and pay $49,500 or less for that car, you can deduct the sales tax you paid at the time of purchase.
That is, you can if your earnings are $125,000 or less ($250,000 for couples.)
This deduction will be “above the line,” which means you can take it even if you don’t itemize deductions. If you purchased a $40,000 vehicle and paid 6% sales tax, your deduction would be $2,400. But remember, this is a deduction, not a credit. It reduces your taxable income, so the actual savings will be dependent upon your tax bracket.
U.S. car sales were down 37% in January compared to January 2007, and lawmakers are hoping this extra incentive will push consumers to new car lots.
This deduction might not be enough to convince you to buy a new car in this troubled economy, but car manufacturers are doing their part to convince you as well. As long as your credit is good, you can get extremely low interest – especially if you choose one of their less popular models.
If this does get you dreaming of a new car, be sure to check your credit scores before you go out to shop. If they’re a bit low, work on improving them before you buy. (You do have until the end of the year, remember.) Your credit scores can and will make the difference between paying a lot and paying a little when it comes to interest.
Representative Carolyn Maloney (D-N.Y.) has been fighting for credit card holders rights since she first introduced the Credit Cardholder’s Bill of rights Act of 2008 to the House of Representatives.
In September, the bill passed the House with an overwhelming vote of 312 to 112, but then died in the Senate. She felt that while Senators recognized the need, other issues in the larger economy took attention from this legislation.
Then in December, regulators, including the Federal Reserve, passed rules to crack down on credit issuer abuses and strengthen consumer rights. As we’ve all heard, these new rules aren’t set to go into effect until July 2010.
That’s not good enough for Representative Maloney, so she introduced a revamped Bill to the House on January 15. Along with further strengthening consumers’ rights, her bill would speed implementation of the rules. If passed, the Bill would go into effect 90 days later.
When asked why legislation was needed when regulators have already agreed to impose rules, Representative Maloney noted that regulation does not carry the force of law that legislation does. It is too easy to change regulation, whereas changing legislation is more difficult.
In addition, consumer groups are concerned that the time delay granted with the regulations will be harmful to consumers. It gives credit card issuers time to re-vamp their policies and impose both higher interest rates and higher fees, while they reduce credit limits on even their most reliable customers.
We’ve been reading about some of the new rules – the requirement that card issuers must notify cardholders 45 days in advance before raising interest rates, ending the practice of double-billing, preventing interest rate increases on current balances, and ensuring that cardholders receive credit card statements well in advance of due dates.
In addition, Representative Maloney’s bill would prevent card issuers from granting cards to people under 18 years of age, and would allow consumers to set hard caps on their credit limits to prevent accidental over limit charges.
While credit card issuers defend their actions by pointing to the worsening economy and the high rate of credit card default, there are those who believe they are partially to blame for that high rate of default.
When a card holder has been making payments regularly and carrying a cushion of unused credit, he wasn’t likely to default. But when he suddenly opens a statement to find an overdraft charge because his interest rate has doubled and his credit limit lowered without his prior knowledge, his attitude and dedication to making those payments begins to change. If he’s unable to meet the new minimum payment due to the high interest rate, it deteriorates even faster.
You know that one reason why you need to keep your credit scores high is to keep your insurance premiums low. Companies that issue insurance on your home and your car have been using low credit scores as an excuse to raise your premiums – or to completely deny you access to insurance.
Even long-term customers may find their rates skyrocketing as a result of financial difficulties that have affected their credit scores.
In Florida, at least, this practice may soon come to an end. Consumer advocates say a person’s credit has nothing to do with his or her driving abilities, and that insurers should only be able to use a person’s driving record in determining automobile insurance rates.
Insurers, including Allstate, Geico, Progressive, Nationwide, and State Farm, testified in hearings last week – saying that credit information does help them determine a customer’s risk.
They compared use of credit data for car insurance to use of health data for medical or life insurance. If a person smokes, they’re at a greater risk for ill health, so in their eyes, it seems to follow that if a person has poor credit, they’re at a greater risk for an automobile accident. So their belief is that in spite of having no tickets and no accidents, a low credit score makes a person a higher risk for an accident claim.
Although not stated in the report, perhaps the real issue is that insurers feel that consumers with poor credit are a greater risk for insurance fraud. If that is the case, they should present the statistics to back the belief.
Some consumer advocates believe that there is yet another hidden agenda: Thinking that use of credit rating data enables insurance companies to discriminate against certain groups – by either charging them excessive rates or denying insurance altogether.
If Florida changes this law, it will be a step forward for consumers. But there’s a long way to go before all states adopt similar rules. That means it is still in every consumer’s best interests to keep their credit scores in the high ranges.
The first step is to check your own credit report, with scores, and see how you stand. Almost everyone can find some room for improvement, so begin making adjustments to your spending and bill-paying habits in an effort to raise the score.
Be sure to also check your report for errors – even credit bureau representatives say that 25% of all credit reports have at least one mistake. Fixing those could give your score an immediate boost.
Obama announced a rescue plan for homeowners that are in trouble with there current mortgage payments. This new mortgage policy is a multi-faucet of policies to help out struggling home owners. Some of the key components include refinancing mortgages that are upside down, restructuring delinquent loans, and delivering money to federal housing agencies to keep mortgage rates low.
With this new plan a estimated 4 to 5 million homeowners will be help in some for or fashion. Obama says this new policy will also provide a opportunity for sub-prime loans that are underwater or the amount owed is more than the house is worth to be part of the plan as well. Often the homeowners that are in loans like these are subject to a maze of rules and regulations as opposed to resolutions “says Obama.”
This type of policy will help out 12% of the crumbling real estate sector. This policy will subsidized some of the cost through the government so mortgage companies can help out homeowners in trouble.
The new rescue plan will not help out homeowners that were investors looking to flip homes for profit, nor will it help those who bought homes they cannot afford.
Refinancing for people that got in trouble with there mortgage because of ARM loans, declining value or job loss was almost impossible for them to obtain. Since all loans are based on risk this sounds like a possible solution for 4 to 5 Million Homeowners.
Being a lender this has been a mess, especially when you get a call from a past homeowner wanting help. There has not been a whole lot lenders could do since bad credit paper was not sellable on the secondary market.
Maybe with this new mortgage rescue bill lenders will in a sense allow the government to take on the high risk of bad paper loans, especially since the Federal Government is buying up Freddie and Fannie back loans.
In the end, we as tax payers will foot the bill. There also is no guarantee that this will work either.
During challenging times like now, it can feel very frustrating when your debts have gone to collection due to job loss, or even the company you are working for files for bankruptcy. What ever your situation is there is no quick resolution to repairing your credit report. Lots of credit repair companies will sell you on quick fixes, but depending on how bad your credit report is littered with collections and how much money you have to work with, will determine how long the process will take. Don’t get trapped into quick credit repair schemes. There is no such thing. I assure you of that. I wanted to discuss the process in this article about how to repair you credit and the FACTS about the process.
Here are the proper steps………..
Step 1: Credit Education The first step is to be aware of what will destroy your credit while you are trying to repair your credit. Collections and late payments are the ultimate death of good credit scores. If you are in the process of trying to figure out how to fix your credit, that would be a good start. Make sure you don’t have any late payments ever, and definitely make sure nothing goes to collection. It does no good to work on your credit if you continue to have obligations go to collections and / or late payments on stuff. This is the first step before you start any type of credit repair.
Step 2: Pull your credit report Don’t be scared; pull a recent copy of your credit report to determine what you need to work on. Pulling your own credit report does not hurt your credit scores.
Step 3: Review your credit report Determine what is accurate and inaccurate. If you find stuff on your credit report that is not yours, dispute it with CreditScoreQuick.com’s on-line dispute process. These are links that take you to each credit bureau so you can dispute inaccurate information.
Step 4: Negotiate collection accounts After you have determined what collection accounts you have acquired, you will need to figure out what your budget is to pay off these collections. Most collection companies will take pennies on the dollar for debts owed. Phone numbers for these creditors will be on your credit report somewhere. You will need to look for the collection company’s number. The number is usually on towards the back of your report. For example: If your credit report says you owed $300.00 to so and so collection company, you will offer them $150.00 dollars to settle. You may offer less, depending on what your budget is. You need to start with the most recent collections and the smallest collections on your report. Once you come to a agreement with a collection company whether its payment arrangements or settlement, make sure you follow through on the agreement.
Step 5: Get letters from Collection Company of agreement terms Once you have paid a collection, the collection company is suppose to mail you a letter stating what you did, and report that to the credit bureaus. Make sure you get these letters from these collection companies. Put those letters in your file cabinet and remember where they are. You may need them if the credit bureaus don’t update properly. That is your proof to cover yourself.
Step 6: Re-Establish your credit In order for your credit report to score you, your credit report needs credit reporting on that report. If all your obligations went to collection, you will need to re-establish credit. The quickest way to establish credit is to apply for a secured credit card. These types of cards usually require a deposit from you in the amount of $200.00 to $300.00 in an account of the banks choice. The terms and fees are usually not good, but it is what it will take to re-establish your credit. Make sure you are not late on any payments, and pay off the card as soon as possible, even though it was your money that secured the card. Ideally you need a couple of these cards, so get two. While you have this card, charge small purchases on these cards, and pay it in full every month. With good payment history these credit card companies will extend credit to you over time. You will need at least 3 lines of credit on your credit report. Get a couple of secured credit cards, and if you don’t have a third, apply for a small personal loan that reports to all 3 credit bureaus.
Step 7: Re-check your credit report After you have paid off collections and/ or re-established your credit, pull a copy of your credit report to see the progress. This is not a quick process and can take up to a year or so. The timeline depends on how much negative information is on your credit report. Don’t get frustrated, this process that I have discussed will work. Eventually your credit report and credit scores will progress depending on how quick you pay off your obligations and re-establish new credit. If you see inaccuracies on your credit report, especially for those obligations you have paid, use our “Fix credit report errors” article.
I have been reviewing your site and I am interested in improving my credit. Your site is very informative and discredits the misconceptions of deleting debts. I have a better understanding and would like to repair what is inaccurate and old. I would like to do settlement offers for what is accurate. I do not know what to do when old debt continues to transfer from company to company. What can I do?
A:
Hi Tamika,
In regards to the collections being sold, I would recommend pulling a recent copy of your credit report, and call the recent collection that is being reported. It will show recent reported date, and that is the collection company you call to negotiate for pennies on the dollar.
Investors with high FICO scores and a little money in the bank are right now living in the land of opportunity.
With prices in many areas plummeting, good homes can be purchased for pennies on the dollar. Add the Fed’s decision to keep interest rates at an all-time low, and investors willing to stay in for the long haul can expect high profits in years to come.
Not everyone has the personality to deal with investment real estate – it involves hard work and persistence, and a good dose of patience when dealing with tenants who don’t always uphold their end of agreements.
But consider the rewards, as compared to an investment in the stock market.
With $50,000 you can buy $50,000 worth of stocks – or use the magic of leveraging to buy a $200,000 home. Assuming that both appreciate at 5% per year for the next 30 years, the stock will have grown to $197,000. That’s not bad. But look what the house will have done…
Appreciation will have affected the entire $200,000 – not just your $50,000 investment, so your house is now valued at $784,000. In the meantime, your tenant has been furnishing the money for payments, and hopefully, a bit of cash flow on top of it.
AND – you’ve been able to depreciate the house, which has lowered your tax on other income.
Even more impressive – at the end of the 30 years the only way you’ll see a cash return from your stocks is to sell them, but your now “paid for” house can keep right on giving you rental income every month. And, since rents are tied to value, those rental payments will be 3 or 4 times higher than they were when you first purchased the house.
On the other side of the coin, investors need to remember that real estate is not a liquid investment. While they could sell their stocks in a day if need be, a house may take many months to turn into cash.
Also, as we see in this housing crisis, real estate has its up and down cycles. That makes it an investment for the long haul, even though some ambitious entrepreneurs do have the ability to “fix and flip” houses when the market is right.
Experts say that money is made in real estate at the purchase – not the sale. That means finding the best bargains on the most problem-free homes and not buying a house just because you fell in love with it. Smart investors are extremely knowledgeable about construction issues and know the red flags that say “stay away” from some houses.
Investors who are persistent and patient in hunting for bargains can find properties that offer a large cash flow – and in those cases can escape the day-to-day management by hiring a rental manager. This is often the best choice for investors who own large portfolios of homes, especially when they are located over a large geographic area.
The first key to becoming a profitable real estate investor is to have the credit scores to qualify for low interest loans. Without that, all the real estate knowledge in the world won’t get you a bargain. So check your credit scores today, and push them to the top before approaching a bank or mortgage lender for your first purchase of investment real estate.
Disclaimer: This information has been compiled and provided by CreditScoreQuick.com 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.
