Now that the market is flooded with more job seekers than there are jobs, employers are using credit reports as a way to eliminate some applicants.

At one time credit checks were only required for government jobs or positions that could involve handling significant sums of money. Now, according to a 2004 survey, more than 40% of all employers use credit checks. This is up from 25% in 1998, and it’s likely to be higher today. As the pool of job seekers gets larger, more employers may have turned to this method to thin down the applicants.

Some believe that employers are using this method as a thinly veiled manner of discrimination – calling it “proxy discrimination” Employers claim that it is merely due diligence on their part. If a person has poor credit it could signify poor judgment, unreliability, and a greater threat of on-the-job theft.

In reality, people are being turned down for jobs that have nothing to do with handling money. Job counselors argue that poor credit does not diminish a person’s skills.

Whatever the reason, using credit checks against potential hires creates a lose-lose situation. Those who have been jobless the longest are the ones most likely to have gotten behind on payments. They won’t be able to improve their credit scores without a job, and can’t get a job without a good credit report.

Federal law requires potential employers to get permission before obtaining a credit report on a potential employee, so those faced with diminished credit scores might want to check policies before making a fruitless application.

The good news, at least for the jobless in some States, is that lawmakers are starting to recognize the problem and take action.

In Washington, under a law that took effect in 2007, the applicant’s credit history must be substantially related to the position. Last month Hawaiian lawmakers approved a similar measure. Hawaii also restricts employers from checking credit prior to making a job offer. Meanwhile, in California Governor Schwartzenegger vetoed a similar law.

Lawmakers in Michigan and Ohio have not taken action yet, but have proposed prohibiting employers from using credit history against a job applicant. At this rate, it could be a long time before all employers are prohibited from using poor credit scores as a way to deny jobs, but at least they’re moving in the right direction.

On a Federal level, the Equal employment Opportunity Commission is likely to issue guidelines on the proper use of credit checks. The bad news is that they’re merely guidelines. Employers aren’t required to comply.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

Identity theft is a growing business, and it results in losses for both consumers and creditors. Why, then, are banks and other credit issuers resistant to implementing the rules?

Apparently the cost and bother of compliance is more expensive than the losses they might incur if they extended credit to identity thieves. Resistance has been so great that enforcement of the rule, which was originally issued in November 2007, has now been delayed three times. The new deadline for compliance is November 1, 2009.

Under the Red Flag Rules, any entity that extends credit will be required to develop and implement written identity theft prevention and detection programs to protect consumers from identity theft.

Who objects most strongly? One of the strongest opponents is the American Medical Association. Under the new law, the FTC classifies physician practices are “creditors” when they accept insurance and bill patients after services are provided or if they allow patients to set up payment plans after services have been provided. Thus, they will be required to comply with the Red Flag Rules.

The AMA wants physicians to be excluded from the law, stating that they should not be classified as “creditors” and that compliance will place too great a burden on medical practitioners. However, lawmakers are particularly concerned with “medical identity theft.”

Using someone else’s identity to obtain medical services under an insurance policy is fraud, and the resultant fictitious medical records placed in a victim’s name could be medically dangerous.

Banks and other creditors also object. Some are already planning ways to override the process.

What’s the problem? Smaller businesses may not have the manpower to comply and will need to hire third-party companies to ensure red flag rule compliance. This will be an ongoing financial burden. Banking associations are calling the rules “excessive and overly burdensome.”

Perhaps they’re right, because the law does list 26 red flag triggers that must be monitored. These include obvious red flags such as a fraud alert or a freeze on a credit report, or inconsistent addresses from one document to another.

Other red flags will require more care. For instance, credit issuers will be expected to conduct careful scrutiny of identification cards to detect alteration or forgery. Others, such as a change in spending patterns, use of the same address or phone number by multiple applicants, or duplicate social security numbers, will require research. Another red flag that creditors will be expected to notice is a lack of correlation between Social Security number ranges and dates of birth. Hopefully there’s a handy chart somewhere to make that quick and easy.

If all credit issuing entities come into compliance with these rules, identity thieves are going to have to come up with new ways of doing business. And of course, they will.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

When a consumer is desperate to get out from under a huge mortgage payment, he or she may consider many options. Each has a different effect on credit scores.

The choices include:
• Letting the house go to foreclosure
• Signing a deed-in-lieu of foreclosure
• Bankruptcy
• A short sale
• A refinance, or
• A loan modification.

A foreclosure and a deed-in-lieu of foreclosure both have a significant impact on your credit scores, but taken by themselves are not as damaging as a bankruptcy.

If all of your other accounts are current, the foreclosure is a serious blot on your credit report, but is just one blot. And, while it will stay on your credit report for 7 years, your scores can begin to improve in about two years if you are steadfast in keeping all your other accounts current.

A deed-in-lieu of foreclosure is the same – you’re just spared the time and cost of the foreclosure process. In both cases, the lender may obtain a judgment against you for the deficiency – the difference between your loan amount and the price the home sells for after foreclosure. This judgment is another serious hit to your credit scores.

A bankruptcy may allow you to keep your home, but since it means you are defaulting or wiping out many other accounts, it can affect your credit score even more negatively than a foreclosure. A bankruptcy may remain on your credit report for ten years.

Short sales may or may not impact your credit scores – it all depends upon how the lender reports the transaction to the credit bureaus.

In many cases, it is reported just like a foreclosure – It can be reported as a “settled debt,” which will damage your scores. However, in some instances, and if you ask for the concession as part of the short sale negotiation, lenders will report it as “paid in full.”

If you do ask for the concession, be sure to have the bank’s commitment in writing. You should also ask for a written agreement saying that the short sale represents a “total satisfaction of debt.” Otherwise, they can come back later and ask you to pay the deficiency.

Refinance or loan modifications don’t hurt your scores. In fact, they may improve your scores because your monthly debt to income ratio will go down. Of course, that improvement will be wiped out if payments on the new or modified loan are not made on time.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

You hear a lot of talk about the Making Home Affordable plan pushed through by the Obama administration, but you don’t meet too many people who have had success in getting their mortgage loans adjusted.

Why? It’s not lack of money. This is a $75 billion program designed to prevent foreclosures and give relief to troubled homeowners whose incomes have plummeted in recent months.

The answer lies in conflict of interest. Mortgage companies that service loans are paid $1,000 from the Federal Government when they modify a loan. Then they are paid an additional $1,000 per year for the next three years. Treasury officials believed that these payments would be enough incentive to loan servicers to assure their cooperation, but it isn’t so.

Mortgage loan servicers collect a percentage of the value of every loan they service – year in and year out. Then, when a loan goes into default, they begin collecting fees, beginning with late charges which can equal 6% of the monthly payment. When the loan finally gets to the foreclosure stage, they get to collect even more.

According to a New York Times report, Owen Financial reported that almost 12% of it’s 2007 income came from fees paid by borrowers.

The good news for homeowners struggling to get back on track after missing a few payments is that loan servicers don’t seem to be in a hurry to push those loans as far as foreclosure. The longer they stay on the books, the more dollars keep coming in. Thus, while the number of mortgage loans showing 90 days late nearly doubled from June of 2008 to June of 2009, the number that transferred ownership to a bank declined by almost 1/3.

It seems almost as if the loan servicers are using these delinquent loans as a sort of interest-bearing savings account, because once a mortgage loan does go to foreclosure the revenues become even higher.

Management fees charged to investors for taking control of the property, getting it ready for resale, and handling the sale can be extremely lucrative. In addition, they are able to funnel orders for insurance policies, appraisals, title searches, and legal filings to companies that they own.

Some mortgage servicing companies have established their own Title companies, just because of the huge profits involved. They are allowed to charge for title work when the home is transferred to the lender, then when it is transferred to the new buyer, and finally they are able to sell the Title Insurance to the new buyer.

The Federal Government may want loans modified to help troubled homeowners. The Mortgage Loan Servicers may have a completely different agenda.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

If you’re paying high interest on credit card balances, you could be a target for the “Rate-reduction” scam artists. These are the folks who call and promise to get your credit card interest rates lowered – for a fee, of course.

One of the most prevalent goes by the name “Easy Financial,” and they’ve been actively marketing their program to unsuspecting consumers.

The calls may come from a live person, or could be automated, but the message is the same. For a payment of $600 to $1,500 – on your credit card – they promise to negotiate with your credit card companies and get your rate reduced.

Unless a consumer is carrying huge debt, the amount paid for the “service” will not be recouped through the rate reduction, making this scam even worse. At any rate, it’s money paid now, rather than over time. And to add insult to injury, you’ll pay interest on it.

In truth, they will either advise you to transfer your balance to a different card with a lower rate, or will simply make the same phone call to your card issuer that you could make yourself. In fact, they’ll get the phone number from you by asking you to read the customer service number from the back of the card.

Then they’ll set up a conference call with you and your card issuer, and they will simply ask for the reduction. There is no negotiation. And this is something that any consumer can do without any help from a third party.

While they do promise a money back guarantee, the “money back” has not been forthcoming, and the Better Business Bureau has been hearing from unhappy consumers. Few complaints have been resolved.

Section 5 of the Federal Trade Commission Act prohibits unfair and deceptive practices, and this practice does appear to be both unfair and deceptive. In addition, this company may be violating the Telemarketing Sales Rule and the Do Not Call list.

Authorities are warning consumers NOT to give any information to these callers. If you hand over your credit card information, they’re free to charge your account, even if you haven’t agreed to their services. This is just another form of identity theft.

If you’ve already fallen prey to one of these callers and have not received the promised rate reductions, call your credit card issuer and dispute the charge. Be sure to follow up in writing.

You can also report the scam to the Better Business Bureau, the Federal Trade Commission, and the Federal Communications Commission.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

Assumable loans used to be common, but most are not legally assumable today.

Some FHA loans are assumable if they’re several years old, and VA loans originated before March 1, 1988 are generally assumable without approval from either the VA or the lender.

Different loans carry different fine print, but many homeowners have found themselves in trouble when the person who assumed their loan didn’t make the payments. Although they no longer had title, they did still have the financial obligation.

This can happen when people are well-meaning but get into trouble, or can be the result of a scam. Homeowners should think twice about signing over the deed to someone who offers to take over their payments and pay them their equity when they refinance. In a scam known as “Deed theft,” these new “buyers” get their own loan, which may include cash out, and simply walk away. The sellers have no legal claim because they have signed over the deed.

One very real concern in deeding property to someone and letting them take over payments is that newer mortgage loans usually contain a “due on sale” clause. The lender can call the loan due and payable, and it doesn’t matter that you’ve signed over the deed. It’s still your name on the financial obligation. If the lender calls the loan and neither of you is in a position to pay it off, the house could be subject to foreclosure.

Generally, if all payments are made on time, the lender won’t object – but that’s not a guarantee. Both you and your buyers could face difficulties if the loan is called.

A safer way to transfer ownership and get out from under a hefty loan payment is to enter into a lease-purchase agreement. Under this plan the owner keeps title to the house, the buyer makes payments, and a pre-set portion of that payment is applied to the down payment when the new buyer is able to secure a loan.

This arrangement can and should be done through a third-party, such as an escrow agency. The third party keeps records of all payments and can even forward the mortgage payment to the lender.

The contract between buyer and seller should contain safety measures for each, spelling out what will occur should the buyer cease to make payments. Under certain circumstances, the seller could be expected to reimburse the buyer for repairs and improvements to the property.

For the safety of all concerned, competent legal advice should be sought before entering into such an agreement. The actual contract should be drawn by a real estate attorney.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

You knew that when credit card issuers were given rules to follow, they’d find some new way to increase profits. Issuing cards with variable rates is one of those ways.

At least 4 of our major credit card banking giants have already switched part of their accounts to variable rates, and more are expected to follow. Variable rates are generally offered at a set margin over and above the U.S. Prime Rate, which will allow card issuers to float their rates up and down in keeping with prime.

Surprisingly, we learned that about 66% of all credit cards are already on a variable rate schedule, with that number expected to reach 75%.

What does this mean to you as a consumer? It means that your credit card issuer will be free to step around the new rules and raise your interest rates with no notice. Under the new laws, the old “rule” that required 15 days’ notice was changed to 45 days. But because it’s tied to Prime, a variable rate can change at any time without notice.

The new law that changed notice time from 15 to 45 days is scheduled to go into effect on August 20, along with a provision that restricts interest rate increases during the first year of card ownership. That provision also goes out the window when the card is offered at a variable rate.

The only exception is if you get in on a Promotional Rate. Those still come under a rule that says promotional rates must last for at least 6 months.

Read all the fine print in offers, and look for cards that still offer fixed rate options. Some will, because they’ll see it as a marketing tool to set them apart from the competition.

Financial analysts expect interest rates across the board to continue on their upward spiral. Your credit card issuer may give you 45 days’ notice instead of 15, but if you carry a large balance and do not have the means to pay it off or move it within the 45 days, you’ll still be stuck with the high interest.

The best advice they give is to pay down accounts as fast as you can, before your interest rates rise, causing the bulk of your payment to go to interest rather than principal reduction.

The Administration may want people to spend more in order to “stimulate” the economy, but the best individual course of action right now is to spend less and pay off debt.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

You know about the safeguards that credit card issuers try to implement to keep unauthorized people from using your cards. Well, now some smart identity thieves have figured a couple of ways around them.

The first deals with actually stealing your cards from your mailbox before you ever see them. Card issuers thought they could eliminate the danger for you by requiring you to call from your home phone to activate your cards.

That worked until a new website came along that enables you to place a call from any phone and make it appear to be coming from a different number. All a thief has to do once your card is in his possession is check the local phone directory for your number.

So if you’re expecting a new card in the mail and it doesn’t arrive, do call your credit card issuer to see if it has been activated.

A second scam is done over the telephone. The thief already has your credit card numbers, your address, and your phone number. All he’s missing is that 3-digit code from the back of the card.

The person who calls will give their name and state that they are from the Security and Fraud department at your card issuer’s company, calling because they’ve noticed unusual spending and wanting to verify that you did indeed make some recent purchases.

You may have gotten such a call in the past when you’ve used your card in an unusual manner or in a different location from usual. Some card issuers do call to check that the card is being used by an authorized person.

This call, however, is a classic “phishing” scheme. The caller will identify the bank that issued your card and ask if you made a certain purchase or purchases. Of course you’ll say no, because there was no such purchase. They’ll then tell you they’re starting a fraud investigation and that they’ll credit your account and send verification to your address. They’ll state your address and all you’ll do is verify.

Then comes the theft. The caller will say that he or she needs to verify that the card is in your possession, and will ask you to read the security numbers from the back. When you do, the caller will say “Yes, that’s correct.” It all sounds very legitimate.

This is just one version. In other versions of the scam, the caller will ask for the expiration date on the card, your billing address, or even your social security number.

The thing to remember is NOT to give out any personal information to anyone who calls you. If you’re worried that some unusual activity did take place, hang up and place a call to the credit card company yourself. Don’t use a number that the caller gave you – go on line to get it or call information for the number.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

Rates are down and the mortgage market has loosened up a bit lately, so if you can qualify, now is a good time to buy a home or refinance. The catch is that qualifying for that loan is much more difficult than it was a year or two ago.

First, you need good credit and a down payment. Lenders (and the Federal Government) have figured out that people are more likely to work to keep their loans current when they have something to lose, so the days of “zero down” are gone.

FHA loans require 3.5% down and non-FHA loans require 10%. The good news is that if you qualify for a mortgage insured by the Federal Housing Administration (FHA) that down payment money can come from a family member, an employer, or a charitable organization as a gift.

“Gift” is the operative word here and you must be able to document the fact that you won’t be expected to repay the money. You need a letter that clearly states that the money is a gift. Also, be sure to keep documentation when you deposit the money in your account.

Next is your FICO score. Check your own credit report before you approach a lender and see if there are items you can “clean up” in advance. If you have any late payments, get them up to date. Then pay off or pay down any outstanding debt. Be sure to check for errors on your credit report and have them corrected.

Gathering your paperwork is the next step. Today’s lenders want to know everything and they want it documented. So gather up your bank statements, your W-2 wage and tax statements, and your pay stubs. If you’re currently renting, take your rent receipts. If part of your income comes from overtime, take documentation showing that the overtime is a normal part of your income, not a “once-in-a-while” occurrence.

If you receive income from Social Security or Disability, take copies of your award letters.

If you want to refinance, equity will be the key. Lenders no longer want to lend 100% of the value, although if financial troubles are your reason for refinance, you may qualify for help under the Making Home Affordable plan.

In some cases you can refinance, and in others you can work out a loan modification, which changes the terms of your mortgage so you can afford the payments.

Before you consider a refinance, sit down with a mortgage lender and go over the numbers carefully. A typical refinance costs $3,000 to $5,000, so the reduction in interest rate must justify that expenditure. Usually, if you plan to sell within 5 years, you’re better off sticking with your current loan.

Author:Marte Cliff
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.

Consumers and the media have been talking about provisions of the new Credit CARD Act of 2009 since some time last winter. After much worry and debate over whether it would make it through Congress, it was finally signed into law by President Obama on May 22.

Because banks insisted that it would take months for them to change their methods of billing, advertising, and marketing, most provisions won’t go into effect until February 2010. However, one small section of the bill will become effective on August 20.

Lawmakers felt that this section of the bill needed to be on a fast track in order to help families who are struggling to pay credit card debt.

Knowing that they had no time to lose, many credit card issuers have responded by raising interest rates and slashing credit lines at a fast pace to get it done before the changes become law. The banks who followed this path have come under fire from lawmakers and others who see the interest rate hikes as a “money grab” by the banks.

The banks defend themselves by saying they’re just reacting to the bad economy and the increased risk they face by giving credit to people who may already be struggling.

The result: Families who were struggling to pay $150 per month on a credit card balance are faced with a higher interest rate and a higher minimum payment. Now they can struggle even harder to pay $200 per month while not making any more progress at paying the principal balance.

Will this move result in more profits for the banks, or will the grab for higher profits result in more charge-offs as consumers “give up” on trying to keep up with ever-increasing payments? Are the banks contributing to a worsening of the “bad economy?”

The three provisions that will become effective in August won’t stop the card issuers from raising rates or slashing credit lines, but they will give consumers advance notice. They are:
1. Replace 15 days written notice with 45 days written notice of interest rate increases and other significant changes to a consumer’s account.
2. Inform consumers that they have a right to NOT accept the higher interest. They may instead cancel their accounts – and apparently will be allowed to pay off balances at previous rates. Right now this option is offered by some card issuers, but is not a law.
3. Mailing monthly statements to consumers 21 days prior to the due date – allowing time for consumers to receive the statement, pay it, and mail back the payment in time for it to arrive by the due date. This provision should at least help consumers avoid paying late fees.

Author: Mike Clover
CreditScoreQuick.com your resource for free credit reports, credit cards, loans, and ground breaking credit news.