Video prepared by Greg Fisher at www.creditscoring.com a consumer watchdog……..
Debunking the myth that employers check your credit scores.
You’ve probably heard that you could be hired or fired based on your credit scores. This is a myth – one that has been perpetuated even in interviews with people who should know better.
The truth is, when an employer asks a credit bureau for information about you, the credit bureaus do not provide your credit scores, nor do they provide your date of birth. They provide a report showing your credit payment history and other facts about your use of credit. From that information, the employer can draw his or her own conclusions.
Since small, insignificant mistakes in credit usage can bring your scores down, this fact should be good news to job seekers.
Your employer or potential employer must obtain your permission before asking for this credit report, and if you are denied employment as a result, you must be given a copy of the report. This falls under Federal Trade Commission regulations. You can see details of the required steps at: www.ftc.gov/bcp/edu/pubs/business/credit/bus08.shtm
Employment inquiries are not treated as credit inquiries in compiling your scores. So don’t worry if you’ve made application at several businesses, all of which have gotten permission to see your credit report. These inquiries don’t have an adverse effect.
Your credit report could be just one section of a more complete background check. But again, before purchasing any background information about you from a third party, your potential employer must have your permission.
This background check can be extensive – including everything from your medical history to incarceration records to workman’s compensation claims. Background researchers can even interview a job applicant’s neighbors in an effort to determine their character.
Some of this comes under Federal law, and some under State laws. You can get a complete overview of Federal regulations, along with advice on how to prepare for a background check, by visiting The Privacy Rights Clearinghouse http://www.privacyrights.org/fs/fs16-bck.htm#5
Why do employers conduct background checks?
In some cases, because they’re required. For instance, most states require criminal background checks for anyone who works with children, the elderly, or the disabled. Federal law requires background checks for certain Federal positions that require security clearances.
In other cases, the employer simply wants to be assured that he or she is hiring a person who can be trusted with money, or who is likely to be a stable employee. Others want to avoid the kind of employee who is habitually “hurt on the job” – filing claims for disability compensation.
Note that employees who are denied employment or fired due to background checks do have a right to see the reports that resulted in adverse action. However, employers sometimes avoid this requirement by claiming different reasons for not hiring someone. Especially in today’s climate, there are many applicants for the same job. They can merely say that someone else had better qualifications.
This disclosure is required under the federal Fair Credit Reporting Act (FCRA), which sets national standards for employment screening. However, the only background checks covered under the FCRA are those for which an employer has paid a third party.
Now that information is readily available on the Internet, some employers conduct their own informal research, and they aren’t required to get your permission.
Websites such as Facebook and MySpace are of interest to employers. A survey done in 2007 revealed that 44% of employers checked these social sites prior to hiring new employees and 39% used them to check up on current employees.
Job applicants should remember that everything they post on line is there for all to see, and doesn’t go away. It’s a bad practice to gossip about work or to make negative remarks about an employer – and a foolish mistake to post photos you wouldn’t want them to see.
It’s not just “formal” employers who check. I read recently about a real estate agent who was passed over for a house listing because the homeowner checked her Facebook page and determined that she “was a drunk.” Apparently, all the photos she had posted showed her with a drink in her hand.
Sales of new single-family houses in July 2010 were seasonally adjusted annual rate of 276,000, according to estimates released jointly today yesterday by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.4 percent below the revised June rate of 315,000 and is 32.4 percent below the July 2009 estimate of 408,000
The median sales price of homes sold in July 2010 was $204,000; the average sales price was $235,300. The seasonal adjusted estimate of new houses for sale at the end of July was 210,000. This represents a current rate of 9.1 months at the current sales rate.
One might be wondering what in the world is going on? Well, there are a few big factors that are affecting our potential buyers currently. The first factor is uncertainty in the market place. When consumers are not sure whether their job will be around next month, this has a profound affect on buyers moving forward with home purchases.
The second factor is rate movement. I personally believe that some are on the fence waiting for rates to drop even more. Let’s face the facts here, if you are getting a rate of 4.25%, the last time you saw rates this low was 60 years ago. This was before I was even born…..
So what is next….? We have an election coming up which affects rates. Interest rates being this low are typically connected to the 10-year Treasury bond, also known as mortgage backed securities. This typical indicator for mortgage rates has really not been the best indicator for rates this year, especially currently.
With all the uncertainty, the outcome of this upcoming election will affect mortgage rates. Just keep in mind that rates typically drop before any big election and will rise after the election.
I would tell your potential buyers that the low interest rate party could be over. History will show rate trends, and we are seeing a little of bit of history repeating itself.
There’s no doubt about it – late, overlimit, and overdraft fees are an expense nobody needs. The final provisions of the Credit CARD Act means those fees are going to be lower – if you’re late with a $15 minimum payment on your credit card, they can only slap you with a $15 fee. And in most cases, credit card companies and banks will both be limited to charging $25 per incident. Still… they’re still a money drain you can do without.
Why do they happen in the first place? Because sometimes paychecks are a bit short, or they arrive on the wrong day of the month to pay those bills on time.
What you need is a cushion, so when the due date arrives before the paycheck, you can still pay your debts on time.
A 30-day money diet can give you that cushion.
You may not enjoy it, but anyone can do without a few things for 30 days. And, it may be hard to admit, but almost everyone spends money on things they don’t actually need.
For instance: Beverages. How often do you stop for a coffee, or grab a soft drink from a machine at work? Maybe you have a hot dusty job and stop for a beer on your way home from work. Do you deserve it? Yes, you probably do, but to get off the merry-go-round you can do without for a few days. Even at $1 per working day, saying “no” means saving $20.
Tobacco is another huge drain on a budget… and I’m not going to tell you to quit if you don’t want to. But cut back. See if you can change a pack-a-day habit to a 5-packs-a-week habit. You’ll save about $40 a month.
Do you treat yourself for a hard week at work by going out to dinner or a movie – or dancing at a night club? You may deserve it, but stop for 4 weeks. Instead, plan something fun to do at home, or get together with friends.
Next, look at your grocery budget. If you’re buying any kind of snack foods or soft drinks, you’ve got a place to cut. Buying one less bag of chips a week would save about $20. While you’re at it, why not plan one or two “meatless” meals per week?
What about gasoline? That stuff is like liquid gold, and yet most of us waste it without a second thought.
For one month, plan your errands to avoid unnecessary trips. Go over that grocery list before you leave home, and then check it twice before you leave the store so you won’t have to go back because you forgot the bread.
See how many things you can accomplish while you’re out instead of making one trip for groceries, one to drop off the dry cleaning, and another one to pick up the kids from school. If there’s an errand you can put off until the next time you’re going that way – put it off. The bonus: more time for you.
Clothing is one item you can cut completely for 30-days. Unless a big hole just popped in your last pair of sox, you probably have plenty of clothes to keep you covered for 30 days. If you have kids, they probably do too. So just because those tank tops are on sale for $3 doesn’t mean you need one. Even if you can just put it on your credit card, walk on by.
Now plug another huge hole: Impulse purchases. When you go to a store, go with a list in your hand, and don’t buy anything that isn’t on that list. Unless, of course, you forgot to write down milk and your family can’t do without it.
Retailers are expert at placing impulse items in strategic spots. But you don’t need that candy bar or that magazine. You’ll get along fine without that little mini-lint roller or the cute lighter shaped like a fishing pole. Honest.
Keep track of your savings each day and week – then tally it up at the end of the month. And don’t forget to give yourself credit for any fees you used to pay. Then give yourself some kind of (inexpensive) reward for getting off the merry-go-round.
You might just find that it’s so much fun to have money left at the end of the month that you’ll want to keep at it until you have a whole month’s worth of money ahead… wouldn’t that feel good?
Jerry had reached the bottom of the barrel when it came to credit. He wasn’t even trying to make it better, because he thought it was no use.
He had late payments, collections, and even a car repossession on his record. So he just accepted the fact that he had no credit and got along the best he could.
But then a few friends started encouraging him to try to get his credit scores rebuilt. After all, he was still a young man and someday he would want to buy a home. He might even want to own a car that was too expensive to buy with cash. He needed to get with building a new credit reputation.
So Jerry took their advice. The first step was to get a copy of his credit report with scores. He saw that the collections were nearing the 7 year mark, when they should automatically fall off his report.
They did, and when he saw the boost it gave his scores, he was encouraged. He got a “bad credit credit card” and began using it wisely, and after a few months he saw another little jump in his credit scores. Now he was cooking!
The next thing was to get another car loan. He was careful… he chose a low priced used car with a payment he knew he could afford, even though he was paying a pretty high rate of interest.
The next time he checked his credit scores he expected to see an even better number.
But… instead it was lower.
Jerry was in shock. Here he’d been working so hard to raise his credit scores and be a responsible consumer, and his scores just fell! What went wrong?
What went wrong was that Jerry had been moved to a different risk category.
Credit scoring models place each consumer in a risk category with others who have a similar credit history. Jerry started out in a category that included late payments, collections, and a car repossession. His scores were determined by comparing him to others with a similar history.
When those collections “aged out” of his credit report and he began using credit responsibly, his scores improved. But then, when he added the car loan and began making payments on time, he got moved to a “better” risk category, where he compared less favorably to others in his category. And… his scores decreased.
So, while most of us believe that all consumers are scored by the same standards, it isn’t so. We’re each scored by comparison to others in our risk category. And interestingly, a late payment will have less effect on a person in a high-risk category much less than it will on a person in a low-risk category. When low-risk consumers make a credit mistake, their scores tumble quickly.
Jerry got over his shock and kept working to improve his financial picture – and he’s well on his way to a place in a low-risk category. But seeing his scores drop when he was working hard to establish credit nearly caused him to give up the goal.
An attorney can be a life saver and at the same time they can cause havoc. I recently received a call today from someone wanting to buy a house. This individual, we will call him Bob, was advised by a judge back in 2009 to stop all payments on a house to force a short sale. This was all the result of a divorce. This may sound crazy, but the soon to be ex-wife did not want any part of the obligations involved with the property during this divorce. So the Judge forced a court ordered short sale on the home.
Bob was advised by the attorney that this process would not affect his credit. Well the part they forgot to mention was the creditor does not care what that court orders states. Bob is still obligated to pay that mortgage until the house is sold or refinanced out of his name.
I have also received calls from past clients that thought a divorce decree protected their credit report from previous obligations. They were told this information by the attorney representing them. For example, the divorce decree stated that Bob’s wife was responsible for the car note and some credit cards. A few months later Bob get a call from a collection company that he owes them money for a car that was repossessed. To Bobs surprise even though the divorce decree stated his ex-wife was responsible for the car note; his credit report now shows 90 day late payments. Bob is now getting hounded by collections companies.
Attorney’s not giving good advice when it comes to credit has been a huge problem. I have come to the conclusion that divorce attorneys know nothing about credit laws.
So if divorce is on the horizon, anything that is awarded to your spouse, make sure that debt is out of your legal name. A good attorney will force the other party that is responsible for the obligations to get all those obligations out of your legal name. This is really the only legal way to get your credit off the hook.
Remember, a divorce decree or court order does not remove your social security number from a creditor’s database. As long as your social is attached to any particular obligation, you are responsible for that obligation regardless of what an attorney says.
Jumbo loans, which all but disappeared when the credit crunch began in 2007, are making a comeback. Not only that, jumbo mortgage rates have hit a new low of just over 5 1/4%.
Traditionally, jumbo mortgages have been offered at a considerably higher rate than conventional loans. That’s because these loans cannot be sold to Fannie Mae or Freddie Mac and must be held in the bank’s portfolio. Until recently, banks were holding off on making these loans available.
A jumbo loan is a mortgage loan in an amount that exceeds conventional conforming loan limits – which are set by Fannie Mae and Freddie Mac. That limit in 2010 is $417,000 – with a limit of $625,500 in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.
Banks are being careful, even though they consider those wealthy enough to purchase high end homes to be a better credit risk. They’re demanding at least 20% as a down payment, and are putting borrowers through full documentation underwriting procedures.
This return to stricter standards also applies to homes under $417,000 – making it more difficult for buyers in every price range to obtain a home loan, and leading to speculation about the future of home ownership in America. Those who fear that home ownership will be only for the wealthy are forgetting that “average” citizens purchased homes back in the 80’s – when 20% down and strict documentation were the norm, and obtaining a 10% mortgage interest rate was cause to celebrate..
In spite of the return to rigid requirements, applications for jumbo mortgage loans are on the rise. Bank of America, for instance, reported a 10% increase in jumbo loan applications from May to June of this year.
Million dollar homes account for less than 1 ¾ % of the overall market, but sales in this category were up 77% in May 2010 over May of 2009.
Interestingly, the home-buyer tax credit appears to have been partially responsible for the bump in the number of jumbo loan applications. Buyers in this category necessarily had incomes beyond the limits to receive the credit. But because of the credit, more were able to sell their previous homes and “move up” to the jumbo loan price category.
The other reason cited for the rise in jumbo loan applications is pent-up demand for exclusive homes. After many months of being denied the opportunity to buy because jumbo loans weren’t being made, those who can afford million dollar homes are now ready to buy.
The record low interest rates are simply frosting on the cake.
A friend called the other day to tell me that their loan modification had been rejected. After several months of paperwork and the destruction of their credit scores, the bank decided that they couldn’t afford the lower payment.
What? Until they got involved with loan modification they had been keeping up with the higher payment. They didn’t get a black mark on their credit report until the loss mitigation people instructed them to miss a payment.
They, like so many others, simply got involved in loan modification because their diminished income was making it hard. They work in real estate sales, and the market in their area has been dismal. They hoped that a lower payment for 5 years would ease the strain until the economy finally turns around.
Now, after a few months of making the modified payment, their credit report shows 30, 60, and 90 day late payments – because the amount they’d been paying was less than their original contractual agreement.
Congresswoman Jackie Speier thinks this needs to change. On July 15 she introduced a bill entitled the “Protecting Homeowner’s Credit History Act.”
This bill, HR 5743, calls for an amendment to the Fair Credit Reporting Act. If passed, it would prohibit lenders from furnishing negative loan modification information to the credit reporting agencies, and would prohibit that information from being used to compute a consumer’s credit score.
But does the fault lie with the reporting agencies?
No, it lies with the HAMP system and what they choose to report.
If loan modifications were being processed in a timely fashion – such as 30 days – there would be no impact on the borrower’s credit scores. Instead, lenders are taking as long as 9 months to process loan modifications and make their decisions.
Plus, if the bank makes a temporary agreement with the homeowner during the modification trial period, that should be the agreement on which the report is based. Paying as agreed on the temporary agreement should show on a credit report as “paid as agreed.”
Some experts say that loan modification should affect a borrower’s credit scores. Their premise is that people who modify their loans are more likely to default in the future. Of course, this hasn’t been going on long enough to have any solid research to back that presumption.
People who are determined to keep their homes do what they need to do to hang on. Therefore, many are making payments that an underwriter would say they “can’t afford.” To take it to the next step and deny modification by deciding that the homeowner who has been making a $3,000 payment without fail suddenly won’t qualify to make an $1,800 payment is nothing short of ridiculous.
Two things need to happen to the HAMP program, which has helped only about 10% of the homeowners it was supposed to have helped by last June. First, lenders must be required to process applications within 30 days Then they need to start using common sense in making their decisions.
Government regulation is ramped in our country currently. I think most Americans are under the assumption that greed caused our current turmoil. As this is partially true, the majority of the issues were stemmed from government intervention. How can regulation on such magnitude be written and approved in such a short time without repercussions? It only makes sense that businesses are built on the quality of service they provide to their customers. Logic would only show that those whom allow greed to take place will result in the failure of that particular company. The media, politicians, and government regulators would like you to believe regulation is the solution to the current economic downfall which they claim was the result of greed. Why all the sudden is greed only in one sector, the credit sector?
Here is the problem with government regulation that is really not necessary. Recently there was a bill passed that will dictate how much a mortgage originator can make on a loan. This bill is 74 FR 43232. In a nut shell this is government saying hey, we don’t want you to make what you were making anymore. You can now make only x amount of dollars per transaction.
Example of what this bills says.
The final rules, which apply to closed-end loans secured by a consumer’s dwelling, will:
Prohibit payments to the loan originator that are based on the loan’s interest rate or other terms. Compensation that is based on a fixed percentage of the loan amount is permitted.
Prohibit a mortgage broker or loan officer from receiving payments directly from a consumer while also receiving compensation from the creditor or another person.
Prohibit a mortgage broker or loan officer from “steering” a consumer to a lender offering less favorable terms in order to increase the broker’s or loan officer’s compensation.
Provide a safe harbor to facilitate compliance with the anti-steering rule.
In the past a lender could make money on the interest rate sold and fee’s charged on the good faith estimate. If the customer did not like the fees being charged, they could shop for a better deal. Does that sound so bad? Well that is what we call a free market where companies can set there own fees based on what the market will allow. Since the government has recently got involved, the free market for lending has been trampled on. This intrusion will result in the borrowers paying higher rates so the banks, mortgage brokers, and loan officers can make money.
So in a nutshell when the government interferes with the profits of a company, the cost is passed on to the consumer in some other form or fashion.
I thought this was a good video on how important it is to know what is going on with your credit.
If you have not pulled your free credit report from www.annualcreditreport.com I would recommend doing so. You cannot afford to be in the dark about your creditworthiness. You may also pull your 3 bureau credit report with our site if you have already exercised your free report with annualcreditreport.com. You can set up monitoring as well through our site.
As the U.S. economy struggles and the housing market flounders, the cost of closing a home loan continues to rise.
In fact, according to an August 16 article in the Dallas Morning News, 2010 closing costs nation-wide are up 36% from 2009. These costs are a combination of appraisal fees, title insurance, loan origination, document fees, courier fees, etc. – all of which have risen.
Bankrate.com recently conducted a survey to find the average cost of closing a loan for a good-credit buyer on a $200,000 purchase with 20% down. They found New York to have the highest costs at $5,623 – with Texas following at $4,708. At the other end of the spectrum, Arkansas was the least expensive at $3,007, followed by North Carolina at $3,255. The U.S. average was $3,741.
In Texas, where residents already pay some of the highest home insurance and property tax rates in the nation, closing costs are up 18% from their 2008 levels.
A primary reason for the jump in costs is the GFE – the mandatory good faith estimate. Lenders must now be more accurate – or they must make their estimates higher in order to avoid liability for a shortfall. Some items cannot change at all from the GFE, while others cannot vary by more than 10%.
Another reason could be the Home Valuation Code of Conduct. This regulation put a 3rd party vendor between the lender and the appraiser – and that 3rd party naturally has to be paid for its services. The result – lower fees to appraisers and higher costs to consumers.
Why have bank fees also increased? Probably because of the CARD Act and the limits it put on bank profits.
Meanwhile, as costs to buyers rise, FHA has decided there will be less risk to them if sellers are more limited in the amount they can contribute toward their buyer’s costs. Thus, the seller concession limit will likely drop from 6% to 3%.
Home buyers remain in a state of confusion as new regulations, new bank policies, and seemingly constant changes to those policies are the norm rather than the exception. Worse, every new regulation seems to add cost – but not value – to the purchase of a home.
For instance: The changes to FHA loans. When the mortgage crisis first hit, “low and no” down loans went away entirely. For a while it looked as if we would go back to the lending practices of 80’s, when you either had 20% down for a conventional loan or 5% down for a FHA loan – and you had to have a good credit score.
Now FHA is once again offering loans at 3 ½% down, and has eased the credit score requirements – but the cost of mortgage insurance has risen to help cover the risk.
Fannie Mae has also brought back 100% loans – but only if you purchase a Fannie Mae-owned home. That’s one way to get your lender-owned homes sold faster than consumer owned homes!
Meanwhile, in spite of government programs that promise to help homebuyers, banks are making it more and more difficult to obtain a home mortgage – even for people with high credit scores.
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.
