Last week, at DEMO Fall2010, a company named Dynamics Inc. unveiled the first “smart” credit card – powered by an internal computer. And, in keeping with software labeling, this is being called Card 2.0.

Don’t get too excited, because it’s not yet available, but developers are predicting that it won’t be long.

This credit card, which is the same size as any other credit card in your wallet, holds 70 electronic components in just 1 tenth of a cubic inch. In order to protect these components, the card is covered in plastic, so it is scratch-proof and waterproof. It’s also flexible – indicating that it will take a lot to damage or destroy this little wallet-sized computer.

This card comes in two versions: MultiAccount and Hidden Account.

The multi account card can be populated with two or more accounts from the same credit card issuer. So if you have a business and a personal account, you can choose which you will use for a given purchase.

Each time you use the card, you push a button to select the account you wish to use, and the computer inside will populate the magnetic strip on the back.

The Hidden Account card, which is being touted as an anti-theft card, requires an access code for use. This card has 5 buttons with which to enter your PIN. The face of the card shows all but one section of your credit card account number all the time – but when you’ve correctly entered your PIN, the remaining numbers show on the screen. This facilitates use of the card for on-line and telephone purchases.

At the same time, the smart card populates the magnetic strip for swiping.

When you’ve finished using the card, it automatically turns off – so your account number is no longer visible and the magnetic strip no longer works. Obviously, this card could frustrate a thief, since he or she wouldn’t know the PIN to turn the card on.

Author: Marte

CreditScoreQuick.com

What ever happened to buying something for what it’s actually worth?  If you have something for sale and you know what its worth, will you let it go for a lot less than market value? For example, your home is worth $300,000. A buyer offers you $250,000 for your home. You say to yourself, you have got to be kidding me! Does this buyer actually think I will sell my house for $50,000 less than market value?

Well this seems to be the case now in today’s housing market. For some reason buyers are going around and offering ridiculous offers on homes. Reverse the roles and it’s a different story. They would more than likely be out raged….

The media and internet advertise that we are in a buyers market. Basically that means there are more homes for sale than there are buyers. This typically drives down the price of homes a bit to sell, but it does not warrant a seller to lower their sales price by $20,000 to $50,000 under market value.

In some cases when a bank accepts and offer for a home under market value this affects values in the area. The value of a home is dictated by homes sales over the last 6 months in a particular area. When that area has a high number of foreclosures, the values typically fall. This takes place due to buyers making low ball offers on foreclosed homes. Banks have the tendency to accept low offers when there is not a bidding war to drive up the offer price. A bank will dump a home to get it off their books.

This type of scenario affects the value of homes. Maybe you got a good deal on the home you bought, but the current homeowners just got their values lowed because of your good deal.

We all want the best deal possible. But sometimes greed will cause issues. I believe low rates and good deals on homes bring out the worst in people.

In the long run this type of market affects all of us in a negative way.

Maybe we all should consider “Practicing the Golden Rule.”

Author: Mike Clover

CreditScoreQuick.com

If you’re struggling to pay down your credit card debt, but the bulk of your payment is going to interest, you probably need to look at making a change.

But first, remember that all credit card issuers are charging more than we like now. According to Bankrate.com the average purchase APR on fixed rate cards was 13.79% and was 14.35% on variable rate cards as of the week of September 16.

So if you’re paying less than that, consider yourself fortunate. If you’re paying more, or if you believe your high credit scores should entitle you to a lower rate, you can do one of two things:

- Negotiate a better rate with your credit card issuer

- Get a new card with a better rate and transfer the balance

Of course, the very best plan is to pay more each month and just get rid of that debt.

If your rate used to be lower and was increased after January 1, 2009, your credit card issuer is supposed to review your account every 6 months and reduce the rate if the reason for the increase has changed for the better. This was mandated by the terms of the Credit CARD Act. In addition, if your rate was increased due to a 60-day delinquency, the increase is supposed to terminate within 6 months if you make every subsequent payment on time and for at least the minimum due.

We all know that “supposed to” doesn’t always happen, so it’s worth looking into.

When you call to negotiate a rate reduction, you do run the risk that your credit card issuer will review both your account and your credit scores and decide to reduce your credit line and/or raise your rate on future purchase.

So before you make that call, be sure to check your own credit scores and know that you aren’t going to make things worse instead of better.

If you decide to go forward and get no satisfaction from the representative you speak with, ask to talk with a supervisor. Be polite, and outline the reasons why you are a valued customer who deserves a better rate. Cite your number of years with the company, your good payment history, or a frequency of use that puts money in the card issuers pocket. (They get paid on every transaction, remember.) If they aren’t interested in those reasons, then mention that you plan to transfer your balance to a different issuer.

Before you decide to jump ship, do your research into the credit card offerings and choose a new card with terms you like. Check for annual fees. Check the interest rate on purchases (just in case.) Look at the balance transfer fee and the interest rate on balance transfers. See if that’s a fixed or variable rate, and if it is promotional, how long it lasts.

Think about how long it will take you to pay off this balance before you decide to go with a “Zero interest” introductory rate. The rate you’ll pay later may more than offset your savings during the zero interest period, unless you can increase your payments and get that balance significantly lowered.

In other words, do the research and do the math before you make a decision.

Author: Mike Clover

CreditScoreQuick.com

More finger-pointing has led to yet another mandate from the Federal Reserve that will cost homebuyers money.

First they pointed their fingers at appraisers – blaming them for inflated values that led to the collapse of the housing sector. The result was the addition of a 3^rd party to come between appraisers and lenders, real estate agents, and consumers.

Of course that 3^rd party had to be paid, so it increased costs to home buyers. But that wasn’t the worst of it. They began hiring low-cost appraisers who didn’t even know the local markets – which made a complete mess of appraisals. Fortunately, they’ve realized that didn’t work so well.

So now they’re focusing on mortgage lenders – blaming them for the collapse.

Has everyone forgotten that it was government programs that resulted in the creative financing that put low income borrowers into homes they could not afford when their adjustable rate mortgages reset?

At any rate, the newest regulations coming from the Federal Reserve – called the “Final Rules” – are set to drive costs up for home buyers. By dictating how a mortgage lender can be paid, they are effectively removing competition from the marketplace.

And as we all know, competition is the lifeblood of free enterprise.

The rule change is intended to prevent loan originators from damaging consumers by  receiving too much compensation for their services. Lenders will continue to receive fees based on a percentage of the loan amount, but will be prohibited from collecting a YSP – or yield spread premium.

This was a fee paid to mortgage loan originators for directing borrowers to a higher percentage loan. And some mortgage lenders did keep that fee for themselves.

However, what they fail to mention is that in a competitive free enterprise market, many lenders were using this YSP to offset their buyer’s closing costs. This is how lenders were able to offer no-cost mortgage loans to borrowers who were short on cash.

Yes, many failed to disclose this. But many others did not. They explained to their buyers that by paying a slightly higher interest rate, they could get their closing costs reduced or eliminated.

Left alone, the free market naturally drives more business to lenders who “disclose and share” than to those who don’t. That’s how competition works.

But… under the new “Final Rules” there will be no such thing.

The new rules also state the government will provide a “safe harbor” for borrowers to ensure that they are not “steered” toward unfavorable loans in order to financially benefit the loan originator. We aren’t sure how this will work, but it looks like they’ll be adding another set of government employees for taxpayers to support.

Under these rules lenders will be required to present facts and figures for each type of loan – such as fixed rate, adjustable, or reverse mortgages. Those options must include the lowest interest rate for which the consumer qualifies, the lowest points and origination fees, and disclosure of the lowest rates available for loans that don’t have risky features.

Risky features are defined as those with prepayment penalties, negative amortization or balloon payments within the first 7 years.

These rules go into effect on April 1, 2011, so more details will likely be revealed in the coming months.

But this isn’t all… The Dodd-Frank Wall Street Reform and Consumer Protection Act also promises to restrict compensation to mortgage lenders. We have yet to see what their rules will entail.

The best we can hope for right now is a new Congress – one that believes in a reduction in government interference in the free enterprise system.

Author: Mike Clover

CreditScoreQuick.com

Rising unemployment, bad debts, and actions taken by credit card issuers have now put more than ¼ of American consumers into a credit score category that makes it nearly impossible to get a loan. A new report shows that 25.5% of Americans now have a FICO score under 600.

You may have read that new guidelines from Washington say that consumers with scores as low as 580 can get FHA loans with only 3 ½% down – and that those with scores between 500 and 580 can get in with 10% down.

Well, yes, banks are allowed to make those loans. But they aren’t likely to do it. In real life, a FICO score under 600 almost guarantees that you’ll be turned down. And even with a score of 600 to 700, being approved is iffy.

At 700 to 750 you’ll probably be approved, but not with the very best rates. If you want to be assured of getting a loan with the most favorable interest rate, your score needs to be 750 or above. But don’t count on this to be true in the future. According to a FICO survey, 46% of bank risk managers believe that lending requirements are going to get tougher in the coming years. That could mean even higher scores will be necessary.

If you don’t know your own score, you really should check it.

Even consumers who are diligent about bill paying can have low scores due to identity theft or the fact that when the credit crisis hit, many credit card issuers lowered credit lines even for their best customers.

How can you learn your scores?

You can obtain your credit report by making a home loan application, but it isn’t wise to wait until you want a loan to check your scores. A few banks or credit unions will provide your scores for free as a customer service; you can get a free credit report with scores from this site; or you can purchase your scores directly from the three major credit bureaus. And yes, it is worth it to pay a small fee for the information, because knowing it and taking steps to improve it if necessary will save you thousands in interest on future loans.

If your scores are low, take these steps to raise them:

First, if your report contains errors or shows negative information that is more than 7 years old, follow the directions and get those items removed.

Lower your debt. Your “credit utilization ratio”- which compares your debt to your available credit – makes up 30% of your credit score, so this is critical. The combined balances on all your credit cards and lines of credit should be no more than 30% of the credit available to you. For the highest ratings, use no more than 10% of your available credit.

Keep all old credit card accounts open, but don’t apply for new ones. Remember, you want more credit available than you use, so even if you have to pay a small annual fee, keep those old accounts open.

At the same time, credit inquiries bring your scores down, so don’t apply for any new credit unless you actually need it. Ignore those department store offers no matter how tempting they are.

One thing to note: Multiple inquiries that are obviously for the same purchase count as one when made within a narrow time frame – so it won’t hurt to shop around for a loan.

Pay your bills on time. If you have past due accounts, get them paid, and then create a new track record of paying on time, every time. This counts for 35% of your FICO score.

One more thing to notice…

A few lenders are now using the VantageScore – which differs from the FICO score in both the scoring method and the points. VantageScores go as high as 990 – so a 750 score with this method is not favorable. When checking your score, be sure to find out if it’s FICO or Vantage.

Author: Mike Clover

CreditScoreQuick.com

A home could cost you…..

Over the years conventional wisdom told us homes build wealth. We have also been told its better to own .vs rent. But according to financial advisers and the New York Times this may not always be the case currently.

In a recent article in the New York Times, Dean Baker, co-director of the Center for Economic and Policy Research, estimated that it will take 20 years to recoup $6 trillion in housing wealth lost since 2005. We all know that Home Valuation Code of Conduct (HVCC )has caused issues with getting values across the country currently. But on the other hand look what happened to the value of homes that were dictated by lenders, builders, Realtor and appraisers. We squeezed the value out of homes until it exploded…… I admit I was guilty of this… We were stretching values to “the brink of destruction’ to get a deal done. Now we are feeling the after affects of buyers whom paid above market prices for their homes around the country.

Here is an analogy from a financial adviser with LPL Financial. He claims homes are a bad investment, especially in this market. I found this comment interesting and wanted him to explain this…. Here is what he said… If you take a $275,000 dollar home with a 5% interest rate and 5% down….

Scenario for Primary Residence Buyers:

A $12,250 per year loss is a not the investment I am looking for. Let’s not kid our selves, owning a home is for personal gratification. I do however believe it’s more beneficial to own .vs rent, but if you are looking for big investment returns, you better look elsewhere.

The scenario above did not include the cost of interest paid on the principal balance. Even though interest and taxes are deductible, not everyone’s deductions are the same. Your deductions depend on your tax bracket. So this was not included in the scenario… but is however another cost.

A home being a good investment is debatable. This really depends on the scenario, but I believe in most cases a home is a bad investment. One might consider a home just an “American dream” and a luxury.

Author: Mike Clover

CreditScoreQuick.com

What Kind of Credit Card is Best for Bad Credit?

By Odysseas Papadimitriou, CEO of CardHub.com

If you have bad credit and are in the market for a credit card, you have two general options: secured credit cards and unsecured credit cards for people with bad credit. An unsecured credit card is what most people would consider a regular credit card. A secured credit card, on the other hand, works just like a regular credit card with one major difference: a fully refundable security deposit is required to open the account and your credit limit matches the amount of the deposit you put down.

Before deciding between these two options for bad credit credit cards, you should consider the reason you need a credit card. If you need a credit card solely to rebuild your credit, then a secured credit card is your least expensive option to do so. Although a secured credit card does not offer you an additional line of credit in excess of the amount of your deposit, it does have a fee structure that is less expensive to the cardholder than unsecured credit cards for people with bad credit. A secured credit card also allows you to get the full amount of your deposit back once you close your credit card in good standing.

If the reason you need a credit card is because you need to both rebuild your credit and because you need an additional line of credit (i.e. you need a small loan), then you should compare unsecured credit cards for people with bad credit. Although the fees for this type of credit card are high, they are much lower since the new credit card law (Credit CARD Act) came into effect earlier this year and put stricter limits on fees.

In the past, a credit card company would typically offer an unsecured credit card for bad credit with a limit of $250. Unfortunately, by the time the cardholder was able to use the card, there was already $200 worth of fees charged to it. Essentially, a consumer with bad credit had to pay $200 in order to get access to $50 worth of credit.

Now, on the other hand, a credit card company will typically offer these types of credit cards with a limit of $300. In accordance with the CARD Act, the credit card company may not charge more than 25 percent of the credit limit in fees during the first year a credit card account is open. Typical fees for these types of credit cards include an annual fee of around $75. In addition, you now have to pay a processing fee between $25-$45 that you must pay before the account is even open. Essentially, you pay a little over $100 dollars in order to have access to $200 worth of credit – a big improvement on the previous fee structure.

Since both types of cards now require that you put money down before you can open an account (a processing fee in the case of unsecured credit cards and a deposit in the case of secured credit cards), secured credit cards are more popular than they were before the CARD Act. As proof of this, more companies are starting to come out with secured credit card offers. Capital One, for example, recently released the Capital One Secured MasterCard.

Whether you choose an unsecured or secured credit card to jump back into the credit market, it is important to remember to leave bad habits behind you. Even with a secured credit card, failure to make timely payments will severely damage your credit score. If your sole purpose is to rebuild your credit, you should know that you do not even have to use a credit card for it to help your credit score. As long as the account is open and in good standing (which it will be if your balance is $0), you will be reported to the credit bureaus as current each month.

A credit counselor who is trying to help you get out of debt might tell you to close your credit card accounts. If you absolutely can’t prevent yourself from running up your balances, then perhaps you should. But if you want to keep your FICO® scores high, that’s the wrong advice. Instead, you should keep the accounts open and keep the balances low.

The more credit you have available that you aren’t using, the higher your credit scores will be.
You’d think that the opposite would be true – that creditors would look at all the credit you have available and think you’re a poor risk because you could suddenly decide to use all of it. But that’s not the way they look at it.

And the way they look at it is important to your credit scores. To keep your scores high, FICO® wants to see a “credit utilization ratio” that’s low. That means you need to be using only a small percentage of the credit available to you. The “magic” utilization ratio seems to be 30%.

When you close even one account, your credit utilization ratio will go up, even if you don’t make any new purchases.

If you have several cards, they probably have a variety of credit limits. But to keep the explanation simple, lets say you have 3 credit cards, each with a $2,500 limit. You’re carrying a balance of approximately $1,000 on each of two cards, and have a zero balance on the third.

3 cards X $2,500 = $7,500 credit available. Your debt, 2 balances of $1,000 each, is only $2,000.

$2,000 is only 26.6% of your available credit – so you’re comfortably below the 30% limit and your credit card use is beneficial to your credit scores.

But if you cancel one card, now you only have $5,000 in available credit, and your $2,000 debt equals 40% of your available credit.

Now, even though you haven’t spent another dime, your credit utilization ratio is well  above the “magic 30%” limit and your credit scores are automatically lower.

This is the reason why so many responsible, bill-paying consumers saw their credit scores fall a couple of years ago when credit card issuers began raising interest rates and lowering credit limits.

Banks are still trying to lower their costs, along with their risks. And, since the bookkeeping involved with carrying an account does cost the banks something each month, unused accounts can be subject to an annual fee or  closed for non-use.

To avoid losing your available credit in this manner, be sure to use each of your cards at least once every few months. Charge some purchase you would make anyway, then pay the balance when the statement arrives. You’ll keep your accounts open without paying interest charges.

It really is important that you keep these accounts open, because 30% of your credit score is based on that credit utilization ratio. The only category that holds more weight is how you pay your bills, which contributes 35% to your overall score.

Author: Mike  Clover

CreditScoreQuick.com

Prepaid Credit Cards, why you  might need one…

Why would anyone want a prepaid credit card? Isn’t the point of a credit card having the ability to buy something when you’re short on cash?

Yes, that’s one reason why people carry credit cards, and it’s also one of the reasons why so many are in debt over their heads today. Those credit cards made it just too easy to over-spend.

Now that the country is in the midst of an economic crisis, some consumers have lost the ability to carry a standard credit card, while others have decided that not owning access to quick and easy credit will force them to stay within their budgets.

That’s fine, but we’ve turned into a country that functions on credit. If you don’t have a credit card, there are many things you just can’t do.

Have you ever tried to purchase something on line without a credit card? If all you have is cash you’re completely out of luck. If you have a checking account you can purchase from some sites, but not others. And when you do use a checking account, the merchant will wait until your check clears the bank before shipping your merchandise. That can take up to a week.

How about buying gasoline after hours? You can pull into a convenience store or filling station that’s closed and still use the pumps – but only if you can pay with a credit card.

A credit card also allows you to reserve a rental car, an airline flight, or a room at a hotel.

But personal convenience isn’t the only valid use for a prepaid card.

Parents and business owners are also finding prepaid cards to be useful tools in money management.

Sending your child off to school or on vacation with a pre-paid card gives them a budget while offering both convenience and safety. Lost or stolen cash is just gone. A lost or stolen credit card can be quickly cancelled and the money saved.

And, in case of a financial emergency, you can easily add more money from your checking account or even from one of your own credit cards.

Business owners who furnish travel or entertainment funds to employees enjoy two benefits: Security and record-keeping.  When carrying a prepaid card the employee can’t over-spend company funds. And, most cards offer free online access to transaction information so that business owners can see exactly when and where funds were spent. This is a valuable tool both for keeping track of employee activity and for keeping accurate records for tax purposes.

Author: Mike Clover

CreditScoreQuick.com

FHA Mortgage Insurance Premium Update

Recently the President signed into public law 111-229, which provides the Secretary of Housing and Urban Development (HUD) with additional flexibility regarding the amount of the premiums charged for Federal Housing Administration ( FHA) single family mortgage insurance programs. This new law permits HUD to increase the annual mortgage insurance premium charged. The insurance premium is based on loan to value (LTV).

Although the law allows HUD to increase to these new amounts, they have chosen not to do so at this time. HUD has decided to raise the annual insurance premium while lowering the upfront premium. FHA states that it is in a position to meet the demands of the market place while retuning the Mutual Mortgage Insurance (MMI) fund to its congressionally mandated levels without disturbing the current housing market. These levels are low because of all the foreclosures. This new FHA update will take place for loans closed on or after October 4^th, 2010.

Here are the new changes HUD will implement on MIP and upfront mortgage insurance.

Upfront Premiums

Annual Premiums

The annual premium for amortization terms equal to or less than 15 years remains unchanged and is collected to example below.

CreditScoreQuick.com